1 Cross-Cutting
2 Engineering the Next Era of Responsible Mining
3 MINING AND OUR ROLE IN SOCIETY THE “MATERIALS SOLUTIONS” INDUSTRY *Mark Cutifani1 1Director/Advisor (*Presenting author: markcutifani0205@outlook.com) OPENING REMARKS On the 13th December 1976, I started as a Cadet Mining Engineer at Coal Cliff Colliery in New South Wales, Australia. At the same time, I had to inform Sydney University I would not be taking up their offer to do Law, starting in the following February. It literally took my father 30 years to forgive me for making such a “crazy” decision. At the time and at 18 years old, my arguments were personally compelling. Staying close to family and friends, surfing the beaches of Wollongong and being paid to attend University to complete a mining degree seemed like pretty good arguments for the Coal Cliff Mine option. At no point at that time did I consider mining as an option with a grander calling or plan in mind. In fact, the arguments at the time tended to pitch the other way. Being another “Legal Eagle” or doing a similar more flexible first degree that could open possibilities for a whole range of other career choices seemed to be a much better pitch in terms of the future for a Wollongong lad. What remains very clear in my memory – there was no one there to explain mining in the context of its role in society. There was no clear story or reference point that I could use to make myself feel better about the choice I had made. Somewhere along the road, over almost 50 years, I decided that I was working in an industry that deserved more recognition for what it did, and for what it could do. And consistent with that belief, I felt I had a responsibility to make a difference in terms of how we tell our story and how we might just dare to deliver on our full potential. Consistent with both of those points, I also recognized we needed to make ourselves more attractive to young people for us
4 to deliver on that potential on a long-term sustainable basis. My pitch today, to you, is how we might change our public discourse around our great industry. So, let’s talk about mining and the industry we are, the industry we need to be, and the industry we could be. 1. INTRODUCTION In talking about mining and what we do, for some reason we struggle to be clear on our primary role in society. So, let’s keep it simple. We produce the physical materials that support human life as we know it today. Of course, all species use the earth and materials around them to survive, to thrive and to grow. But no other species has the material impact we have on our habitats, nor do they have the potential to wreak as much havoc on a global scale as we can. However, I contend, through industrial scale and responsible mining, we are the most important industry in terms of our primary purpose to supply the materials that make the world work for some 8 billion humans. We provide the necessities of life to support social cohesion at its most basic level, while being the physical foundation upon which economic sustainability and longterm wealth creation are built, at scale. My second point builds from that first proposition, that we are the key to delivering the 3 pillars of Global Sustainability (economic, environment and social). The fact that we generally mine higher grades of desirable materials at industrial scale allows us to concentrate and minimize our physical footprints, while delivering sufficient materials to customers to satisfy society’s needs. That is, we ensure that the demand for materials is met at a reasonable price, for most people across the globe to be lifted from hunger and poverty, while being sheltered and protected in societies that generally try and deliver for the common good. While not perfect, the concept of comparative advantage and the trade of goods drive our ability to share across societies to minimize our human footprints as we mutually benefit from surpluses in one location for those in another. Our global progress is built on the thesis we can help each other build a better world. Mining’s role in our global economy is foundational to this thesis. And with my third point, consistent with why we come together to encourage each other to think about doing things smarter, we must also anticipate how our work needs to evolve to continue to provide the materials the world needs to support global growth and diversity of human and planetary prosperity. Of course, as we evolve and grow the demands we place on primary minerals and metals supply will also grow to the point where product thrifting, substitution, and progressive circularity will become more important conversations in the materials supply equation. To be architects in our own future we must introduce and integrate these material supply opportunities into our global operating systems and processes in a way that neither dislocates of corrupts the imperative to deliver materials to broader society on a consistent and affordable basis. If we fail that dual objective test for our customers, we will be replaced by those that can.
5 In my view, our continued transformation into the “Minerals Solutions Industry” is key to our playing our role in defining and delivering what a better future looks like for our children. I can only hope that the seeds of today’s discussion might push us a little harder towards the future of mining and the role we play in delivering the materials that support the world and how we might progress over the next 100 years and beyond. 2. DISCUSSION – MINING IN CONTEXT So, to build a conversation on where we are and where we need to go, let’s unpack these 3 concepts to put better shape around how we must continue to transform our industry in our future context. 2.1 Where does “Stuff” come from? In recent years, there have been numerous books written explaining how the world works. Vaclav Smil and others deserve great credit for helping us understand how all these moving parts fit together. Unfortunately, we are still struggling to see these educational pieces translated into social studies and broader education programs in our schools and universities. In setting context for any conversation on mining’s role in society I always start with a few points on “where does matter come from?”. Of course, Einstein gets an appropriate mention, but the conversation on the Ancient Greeks is always a lot more illustrative to most people, when I talk to their understanding of the world they experienced. In 4 words the Greeks captured the nature of physical materials and energy they experienced in 450BC. In the 4 words used by Empedocles at the time: • Air • Water • Earth • Fire In our modern world, with Einstein and others helping us navigate science and the world we live in, we now believe we have a better understanding of atomic and molecular structures. And so, our modern definitions of matter have reflected 3,000 years of research and learning. If we go back to those 4 words used by the Greeks, we could modernize those words based on what we know and believe today. Today, we might use the Greek points in daily conversations: • Air: being made up of specific gases, both life-supporting and life threatening,
6 • Water: reflecting a fluid state of another life supporting input – also containing some life-threatening impurities, • Minerals: come from Earth and are contained within gassy, fluid and solid states. • Energy: where fire is a manifestation of an energy release in a particular form. And while our articulation of where matter comes from might have been modernized, our definitions reflect centuries of learning and application of new tools and processes to understand and reflect a deeper knowledge of science and materials. In the end the concepts are not significantly different from how people think about the world and their experience of it, but I argue in our modern world our connection to these basic principles is far more remote than our ancient ancestors. In today’s modern world it seems to me that indigenous and other “nature-connected” societies (as opposed to modern scienceconnected urban inhabitants) have a deeper appreciation and understanding of how they use naturally occurring matter to help make their lives both manageable and sustainable. In our modern and more urbane existence, the physical separation we have from raw materials and the products we use in our daily lives tends to distance us from the experience and understanding of where “stuff” comes from. And how we transform raw materials into modern products for consumption is further disconnected from our experiences of how the world works. We need to help people understand the products of mining are core to our very existence – providing water, nourishment, shelter and warmth, the facilities to travel and to build a world beyond anything the Ancient Greeks could ever imagine. Just to make sure you didn’t miss it – my simple message to the world at large – for most practical purposes most “Stuff” comes from mining – in one form or another. So, in terms of telling a mining story this seems like a good place to start to explain how our world relies on mining to make life possible for 8 billion humans. Now, if we start with that proposition the next question that people may ask…but at what cost and why is large scale regulated mining better than 8 billion people digging their own holes to “scratch out” their own existence? So, let’s see if we can put some shape around that answer. 2.2 “Industrial Scale” Mining and Minimizing our Global Mining Footprint The mining of relatively large-scale, higher grade mineral deposits enables the concentration of mining activities in relatively small areas across the globe. Not surprisingly, smaller physical footprints yielding relatively higher production levels usually correspond to lower extraction costs and better returns on capital. Of course, when people mine resources that are not as well-endowed from an extraction economics perspective, they must be more innovative to compete on costs, margins and returns. In this context, our competitive imperative
7 serves an important purpose with respect to minimizing our global mining footprint. That is, our economic imperative is aligned with our environmental imperative – to minimize physical inputs also minimizes our physical environmental footprint. Based on satellite imagery, it is estimated that approximately 0.3% of the earth’s surface is dedicated to active mining operations. Compared to 40% for agriculture and 15% for urban developments, 0.30% is a relatively small number. If we take the use of fertilizers and modern mechanized agriculture, the use of mined products has reduced our agriculture footprint from an otherwise required 50% of the earth’s surface to 40%. And for urban footprints, the ability to build vertical living and activity spaces through high rise buildings, while concentrating associated infrastructure to roads, primary piped and cabled services and water supplies, a 25% footprint is reduced to around 15%. So, our 0.3% mining footprint looks pretty good in the context of reducing our combined 8 billion human footprint from 75% to 55% for food and shelter. That is, we use 0.3% for mining to reduce our global human footprint by ~30%. However, we need to remember we are talking about what it is today. When I talk about footprints, we also have legacy mining sites, and those mines that are operating today have finite lives, and new mines will be needed to support continuing life and lifestyles over the longer term. In addition to the larger scaled industrial sites, the smaller artisanal operations are growing, as demand and prices encourage smaller scale and unregulated operators into the market. It’s a simple story – the larger industrial establishments are generally subject to a range of environmental and administrative controls, where smaller scale artisanal operations are not. It is not meant to be a complaint, just an observation of what we see across the globe. So, if I make a few simple assumptions based on reasonable “rules of thumb”: • Average mine life is 20 years for the “formal and regulated mining sector”. • Effective rehabilitation and return to natural habitats are only 50% effective. • Our global population remains at around 8 billion people. In this case, our net footprint would increase over 100 years to around 0.75% (that is, 1.5% before 50% rehabilitation). Still a small number, but a number if left unchecked would become a lot more material over a much longer haul. Part of the current solution to this mathematical outcome is to use the 50% ineffective residual environment footprints as part of our developing urban landscapes, a concept that has been captured in the Eden Project experiences per the book, “101 things to do with a hole in the ground”. A great title that tells its own story about re-purposing land that has been materially transformed by centuries of mining activities. So, when we think about how we can do better, and create a more sustainable and net positive outcome for the long term, we see key actions that are both long-term environmentally sustainable and more likely value accretive in the short term.
8 However, our reality is much more difficult and technically complex. Metal mines mining vertically orientated orebodies are increasing at an average depth of 40 meters each year. Ore grades for base and precious metals are decreasing at an average of 1.5% each year. In both cases, increasing demand for products is working against our physical extraction trends that will naturally increase our physical footprints over time. The countervailing trend will be the tendency to go for more underground operations as open pit waste movements constrain extraction economics. The key actions we believe are consistent with managing mining footprints include: • Maintaining focus on mining higher grade and more concentrated orebodies to keep our physical footprints focused on the best outcomes in terms of land use and longterm value creation. While economic imperatives will tend to push us there in any case – the discipline of economic rationalism is both profitable from both and economic and environmental perspective. • Pushing innovation to reduce footprints is generally consistent with sustainable cost reductions and so facilitating innovation remains a key focal point for future mining, both in economic and environmental terms. • Increase primary recovery and recycling of metals and minerals – making sure waste streams are managed for effective recovery of contained products. The concept of finding uses for “mined waste” is equally beneficial to society as we can help reduce other physical footprints created in the absence of better use of “waste products” from mining. • Improvements in material sciences to reduce consumption of certain materials in large scale applications, that is, being more efficient in the use of what we have. This talks to our previous reference to thrifting. • Material substitution, particularly where materials are in short supply, with more abundant or easier to recycle alternatives being utilized in less-critical performance applications. • Improved mining efficiencies and rehabilitation outcomes – that is, broader application of modern and efficient industrial operating practices. Of course, there are many more things we can do but you get the sense of what we need to be working on. We believe these approaches could further reduce mining footprints over the long term, while also reducing costs and social disruption at the same time. The same logic is also very powerful when dealing with water consumption, energy consumption and associated carbon generation. And let’s not forget labor productivity when talking about efficiency in service of sustainable benefits to society.
9 A sustainably progressive and efficient industry is the key to continuing the improvement journey, in terms of its net positive contribution to a sustainable world. For those that closely followed Anglo American over the period 2013 to 2022, we built our mining strategy around minimizing physical footprints. Reducing water and energy consumption was a conversation that sat comfortably with our focus on labor productivity and capital intensity. These principles became our “raisons d'être” – the starting point for the articulation of our Purpose to “Reimagine Mining to Improve People’s Lives”. A very practical business point was also critical to our thinking. By minimizing all physical footprints, with water and energy consumption and increasing capital and people productivity we would also improve our long-term competitive cost, margins and capital returns. In taking that concept further, we demonstrated how important these key physical drivers are in terms of delivering sustainable cost reductions. If we unpack AA’s 9-year cost improvement performance, we can understand how the group drove real unit cost reductions of ~40%. The broad-based unit cost categories were all understood as components of an integrated improvement strategy. Our average unit cost components were broadly: • Labor 50%, inclusive of internal and contract staff. • Energy 25%, inclusive of mains supplied electrical energy and fuels for mobile equipment. • Consumabl es 10% across mining and processing. • Parts 15% across all areas. • Overheads 9% across all areas. Overheads and administration (non-production related) represented ~9% of costs spread across operating sites, regional offices and the center. On overheads, it should be noted we had people working at the center dedicated to new growth projects and broader innovation. We did not think of this work as overheads, but as discretionary innovation capital that would either be capitalized or expensed, depending on the outcomes achieved. This approach tied back to the Sustainable Free Cash Flow (SFCF) concept and was justified from the net cash number as a genuine new opportunity investment. Reflecting underlying efficiency improvements for each category, the relative contribution to the total 40% cost reductions achieved at AA were roughly. • Productivity Increased 100% Driving 25% total unit cost reduction. • Energy Reduced 20% Driving 5% total unit cost reduction.
10 • Consumables Reduced 15% Driving 2% total unit cost reduction. • Parts Reduced 20% Driving 3% total unit cost reduction. • Overheads Reduced 30% Driving 3% total unit cost reduction. While the mix at each site was variable, depending on mining methods and maturity of operations, the focus was always around the local drivers and how each asset could be optimized based on the resource and our view on long term value potential. Figure 1 – ANGLO AMERICAN – UNIT COSTS REDUCTIONS Actual unit cost reductions were more remarkable when you consider they were delivered without adjusting for “mining inflation”. We will discuss these points later in our notes, which will help explain why our real unit cost saving were closer to 60% over that same 9-year period. In this context, the power of portfolio management, dynamic mining strategies and continuing innovation were also key drivers in the AA transformation story. My point in reflecting on our physical footprint and connecting it to cost leadership – when you take mining’s direct impact on our human global land-based footprint, we are the single most important contributor to reducing our primary human footprint by somewhere in the range of ~30% of land on the planet. For those that do well, applying the principles across their business, the conversation around Sustainability merges with our Economic imperative, as expected by our shareholders. So, when I introduce myself to someone and I talk about what I do, I don’t start with mining. I start with my role in helping reduce our human footprint by 30%. Of course, when I do mention mining, it is a very different conversation to the one I would have been in if I started with my mining credentials. I suspect Greenpeace has never had such a great story to tell. This point of intersection YEAR I I I I I I I I I I I I I I I I I I I I I I I I 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 I I I $US COST INDEX % 10 20 30 40 50 60 70 80 90 100 x x x x x x x x x x Actual Unit Operating Costs 1.4% 1.6% 0.1% 1.2% 2.1% 2.4% 1.8% 1.2% 4.7% 8.0% 4.1% 3.2% x x x x x x 2012 Real Unit Operating Costs Annual $US Inflation
11 of interests brings me to my third point. 2.3 A “Minerals Solutions” Industry To summarize the story so far, we make life possible for 8 million people, while at the same time we help minimize our human impact and footprint on planet earth. When I think about the word Sustainability – I go back to the original concept that focused on 3 critical foundations to ensure the generations that follow us will have natural and physical resources to continue to improve the lives of people across the planet. A remarkable fact, as society we have collectively lifted 1 billion people out of poverty over the last 20 years. In my view, these achievements reflect the positive benefits of globalization, the relatively free flow of information facilitated by the internet and global travel, free trade and the cross-border cooperation of countries and multi-laterals on a range of fronts. While not a perfect system, the results cannot be disputed, despite the rhetoric from some that don’t feel their individual interests were fully served. Now, the 3 focal points for global sustainability are defined: • Environment • Social • Economic In terms of environment, there is no industry that does more for environmental protection than the Mines and Minerals industry. The reduction in our physical human footprint is a unique and material contribution to environmental protection and sustainability. If we add our role in purifying water for potable and other uses, the provision of materials supporting the great energy transition and other associated applications, it is a compelling story that we struggled to tell or explain in ways that people can process. However, on social matters, we need to work harder as we have tended to underappreciate the importance of our local communities. Something I learned very early in my career, while we are all stakeholders in some form, no-one likes to be called a “stakeholder”. In mining, like all real-world experiences, words matter. Shareholders correctly point out they are not stakeholders, they “own the business”, employees implore “we are the business” and local communities are quick to point out “our use of their land”. We must treat each of our key constituents as partners, in their individual and respective forms and we must be focused on their needs considering that characterization. I also make the point, there are many other interested parties connected to our business, like those who have a view on a range of matters across the business and they must be managed. But let’s not confuse those with an interest in our affairs with those that are committed and impacted directly by what we do. That is, let’s not confuse critical business partners with stakeholders or
12 interested parties. We need to be deliberate in our relationships as no one owes us a living!!! I characterize our industry as a “Materials Solutions Industry”, building off a conversation where a good friend, Jeremy Oppenheim used the term to play back to me a conversation where I was describing the essence of how we saw our roles as miners. That is who we are, and it also describes how we make our contribution to society. In any conversation about who you are and what you do – be clear on both. For me, clarity comes with Purpose. A reason for being. To use one example that has been well documented, at Anglo American we took 18 months to align 7 words, “To Reimagine Mining to Improve People’s Lives”. And while those 7 words were important, it was as much about how we got there as it was about what the words meant. Helping people understand mining’s role in society was as important as defining how we would go about our work. So, as an industry we need to have a clear view of the business we are in, and for whom we need to deliver outcomes that are valued in their specific context. So, for us to deliver on a Value Proposition that is grounded in the concept of being the world’s Materials Solutions Industry, we need to work across 3 domains: First, we need to do our job. Our ability to deliver the materials at a cost that remains economic and socially affordable to society requires us to reset our core business structures, our corporate strategies and our operating business models. • As mines develop, we are generally captive to at least 5 primary structural cost drivers. ➢ Exploration costs per unit of payable product – doubling in metals over 20 years. ➢ Increasing mine depths at a rate of around 40m per year. ➢ Lowering mined grades at 1.5% per year for the last 100 years. ➢ In mine development costs per stope or bulk mined tons extracted. ➢ Input costs rising above average inflation rates reflecting energy and labor intensities in more remote regions, compared to major population centers. • And what does all that mean – in most mining businesses, we need to improve 7% to 15% each year, just to stand still on unit costs. This point connects to my earlier Anglo American observation, where our 40% real cost reductions were more like 60%, when one considers increasing depths and our other structural cost drivers that were in play over that same 9 years of record performance improvement. • As we constrain mine development and approvals, we hasten our descent into
13 unaffordable social development models – with our structural cost offsets being more compelling by the day: ➢ Materials sciences identify opportunities for thrifting and commodity substitution. ➢ Circular economy developments where the cost of recycling becomes increasingly more attractive compared to primary mining. ➢ Structural mining innovation facilitated by new approaches, using AI and any other tools we can find to help modernize and legitimize mining as a “Materials Solutions Industry” that serves the greater needs of society. • In my view, the pace of progress on structural transformation is way too slow, leaving us at risk of failing society in the most fundamental way. We must balance short term returns with long term innovation and improvement – the balance in this commitment can be achieved and will likely have shorter term benefits that will surprise to the upside. • Consistent with us delivering on our core social contract, we also need to reinforce the importance of project approvals and permitting processes. There’s no value in being blessed with quality resources if they can’t be developed when demand and opportunity are presented. • If we don’t deliver on our basic responsibility to society, we will be judged harshly, and we will deserve that harsh judgement. Second, we need to listen to and work with our partners. People need to feel our story before we are so presumptuous to tell them what we think it is: • As we bring mining proposals to the local communities and approving authorities, we need to demonstrate we can be “community development partners”. We bring infrastructure, business opportunities and skills that can be leveraged to support targeted community developments. • In considering the configuration of mining operations, the relative environment, social and business impacts for local communities must be taken into proper account in designing, constructing and operating those assets. • On a broader basis, the concept of Collaborative Regional Development at Anglo American proved to be a gamechanger for states/provinces where mining companies have teamed with other businesses and the government to plan infrastructure developments that support both mining developments and community infrastructure for broader economic and social developments. • In 2012, Peter Bryant and I created the Development Partner Institute (DPI),
14 following our collaboration and work with Northwestern University in Chicago and the Kellogg Innovation Network. Our focus on broad-based community and stakeholder partnerships was about developing the science and practical applications for progressive and community sensitivity mining developments. The DPI continues to evolve and break new ground under the leadership of Florence Drummond and through new initiatives such as the Community Catalyst Workshops and communitybased programs. Third, in telling the story of mining we must keep it simple: • All things come from the earth, either direct or indirect. That is, if it isn’t grown it is mined. • The focus of mining around areas of higher concentrations of targeted minerals and metals minimizes the use and cost of key inputs (water, energy, land and labor) and cost of raw materials, while reducing our physical mining footprints. • The more we constrain mining the more we increase the costs of food, materials and the cost of doing all business to all citizens of the world. • In talking to Sustainability, I distill the conversation into those 3 key elements: ➢ To be economically sustainable, in mining we targeted +10% sustainable free cash flow (after investing in resource replacement, mine development and sustaining capital) on our Capital Employed. The efficiency measure that went with that primary business target, we needed to deliver better than 15% Return on Capital Employed (ROCE), demonstrating to shareholders we were using their capital efficiently in generating free cash flow. ➢ To be environmentally sustainable, we needed to be a net positive contributor to reducing our share of our human footprint on planet earth. ➢ To be socially sustainable, we need to eliminate serious accidents and health risks to employees and be true partners in development with our broader social constituents. I remind everyone, in the last 20 years, across the globe, we have collectively lifted 1 billion people out of poverty. In terms of mining’s direct and indirect contributions, I believe we can demonstrate mining has driven at least 45% of that remarkable outcome. In 2011, in my role as President of the ICMM and Chief Executive of AngloGold Ashanti, I sat with Geoff Immelt (CEO General Electric) as he asked me to help him understand what he should be thinking about in relation to mining and how it might impact his company in the future. In those conversations I explained how the convergence of physical constraints,
15 ignorance of mining’s critical development and environmental protection role in society and the weaknesses in our leadership in understanding how to develop workable responses to come to grips with these existential threats – he would not have the materials he needed to make products for our modern world. I said it wouldn’t be a cost issue in the first instance, it would literally be a lack of supply issue, which would then manifest in costs and less efficient workarounds. In that conversation I said I expected major industry sectors and governments will need to intervene to drive us towards building more progressive material supply solutions. In my view, the emergence of the Critical Minerals Debate is both a response to society’s existential growth in economic expectations and our struggle to deliver on society’s demand in this regard. We need to be honest with ourselves – the emergence of the Critical Minerals conversation is both a function of new world developments and a reflection of our lack of vision and determination to put ourselves in a position to deliver on society’s expectation of our industry. The other question to ask, from a business leadership to shareholder perspective, will the market reward this broader approach. Or will the word “Sustainability” make some shareholders think twice about what they may be investing in. The answer goes back to leadership and how we “join the dots” and talk to a modern materials story that reflects our role and the results we can deliver if we get the moving parts working in the most efficient and long term sustainably economic way. As of today, and in my experience, the world tends to measure success and whether there is a belief performance can be sustained and improved – the share price is probably as good as any measure on this continuum. And going back to my Anglo American experience on costs, Collaborative Regional Development and project delivery – the market does tend to reward performance. Figure 2 – ANGLO AMERICAN – SHARE PRICE PERFORMANCE YEAR I I I I I I I I I I I I I I I I I I I I I I I I 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 I 100 200 300 ANGLO AMERICAN – SHARE PRICE PERFORMANCE X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X At Retirement Anglo American Peer 3 Peer 1 Peer 4 Peer 2
16 Some have argued we rode a commodities wave in outperforming our peers from 2015 to 2022 by an average 100%. The answer to that of course we did – that was our job!!! But at the same time, we rode it better than anyone else, built on our doubling our productivity and reducing costs in our 2013 to 2016 restructuring to improve our competitive position from the 49th cost percentile to the 27th cost percentile over the same period. And from where we started in 2013 – we average a best in class 22% average annual average Total Return to Shareholders (TSR) for the same reason. 3. A FINAL MESSAGE A few years back, when living in London and being asked to be a member of the UK Government’s Anti-Slavery initiate, the Chairing Baroness was working her way around the room meeting the members, asking them what they did. I recall listening intently to everyone’s relatively colorful critique of their profession. A lawyer specializing in human rights, a banker funding wonderful emerging market development projects and a whole range of other impressive individuals doing important things. I had to think quick – to position my role in the context that the situation demanded. While clunky, my introduction got her attention, “My name is Mark Cutifani, I am an Australian working in an industry that has the most significantly environmentally net positive footprint on the planet. Would you like to take a guess at what I do?” She stopped, blinked a couple of times and said, “she had no idea what that industry could be.” When I explained I worked for the mining industry she simply observed, “that would not be the first industry that would come to mind in that context”. We then spent 15 minutes talking about how I made such a statement about our industry and how did I justify my bold claim regarding our environmental credentials. At the end of the conversation she said, “you have given me much pause for thought”. I can only hope my thoughts today leave you with as much pause for thought as the Baroness. And in leaving you with a final thought, Mark Zuckerberg recently observed, the highest risk position for any business is to not take risks to continuously drive improving business performance. In mining, the very nature of our industry, within our current social context, requires us to be bolder than we’ve ever been before. I’ll leave you all to reflect on whether you think we are collectively up to that task…and if you think we may not be…I can only hope you personally commit to helping the industry be what it can be. The future of our children is too important to be left to those that don’t care about how we shape our future, and/or those that don’t understand what we do. For those that understand what is possible and have the courage to make a difference. we need you and we
17 will make a role for you in our great mining industry. To my father and his view on my crazy decision to join the mining industry – it took him 30 years, but he finally acknowledged that maybe the choice of mining wasn’t that bad a choice after all. I can only hope it doesn’t take me another 30 years to convince a few more people on the merits of our wonderful industry. The evolution of the “Mining Industry” to being a “Minerals Solutions Industry” is as much about what we do, as it is about where we need to go. And if we want to take people with us, we need to help them understand the journey we are on. Leadership is about creating a clear view of a future we can all see and want – and being bold enough to make it our reality.
18 A SUSTAINABLE MODEL FOR INDUSTRY-ACADEMIA COLLABORATION IN MINING *A.M. Tobar Escudero1, J.M. Sánchez Blanes2, S.P. Nowosad3, R. Lain Huerta1, J. L. Parra y Alfaro1, F. J. Elorza Tenreiro1, J. E. Soto Yen4, M. F. Cedrón Lassus4 1ETSIME, Universidad Politécnica de Madrid, Spain, (*Presenting author: angel.tobar@epiroc.com) 2Business Area Tools & Attachments, Epiroc, USA 3Western Australia School of Mines, Curtin University, Australia 4EPIM FIGMMG, Universidad Nacional Mayor de San Marcos, Peru ABSTRACT Industry-academia collaboration is crucial for mining as it fosters innovation, bridges the gap between research and practical application, and ensures the development of a skilled workforce equipped to address the industry's evolving challenges. In 2018, Epiroc started an educational journey in association with the Universidad Politécnica de Madrid to strengthen the collaboration in mining engineering education and established the first Epiroc University-Company Chair. The experience in Spain led to new opportunities in other countries and the model was later adopted in Peru in 2021 at the Universidad Nacional Mayor de San Marcos. Proving great success in both countries, Epiroc developed a sustainable model to support rapid and collaborative expansion: The “Hub and Spokes” Model. This model is grounded in established project management principles, encompassing initiating, planning, stakeholder engagement, execution, and monitoring and controlling processes. Under this approach, the model guarantees the optimization of efforts for the company and allows them to allocate resources in an efficient way. A central hub university coordinates with various spoke universities, industry partners, and institutions, facilitating integrated lectures, master classes, regional networks, research collaborations, and continuous professional training. This structure enhances students' practical skills and strengthens relationships between academia and industry. The "Hub and Spokes" model serves as a viable way for fostering long-term partnerships between academia and industry in the mining sector. It offers a strategic roadmap that can be adapted and extended to other universities, companies, and industries seeking to enhance innovation through collaborative efforts.
19 KEYWORDS Industry-academy collaboration, mining technology, mining engineering education 1. INTRODUCTION In the rapidly evolving mining industry, fostering robust collaboration between academia and industry is essential for driving innovation and maintaining a competitive edge. This paper introduces a sustainable model, "Hub and Spokes", developed by Epiroc, a leading Original Equipment Manufacturer (OEM) in the mining sector. The model aims to bridge the gap between academic institutions and industry by integrating educational efforts with practical industrial needs, promoting continuous exchange of knowledge and expertise. The framework is grounded in established project management principles, encompassing initiating, planning, stakeholder engagement, execution, and monitoring and controlling processes. A central hub university coordinates with various spoke universities, industry partners, and institutions, facilitating integrated lectures, master classes, regional networks, research collaborations, and continuous professional training. This structure enhances students’ practical skills and strengthens relationships between academia and industry. The paper outlines the initial successful implementation of the model at the Universidad Politécnica de Madrid in Spain (UPM) and its expansion to the Universidad Nacional Mayor de San Marcos (UNMSM) in Peru. It addresses common challenges in industry-academia collaborations, such as misalignment of objectives, resource limitations, and personnel changes, by providing a replicable and sustainable approach. Key objectives and associated indicators for assessing the collaborations’ effectiveness during and after implementation are also presented. The "Hub and Spokes" model serves as a viable framework for fostering long-term, mutualistic partnerships between academia and industry in the mining sector. It offers a strategic roadmap that can be adapted and extended to other universities, companies, and industries seeking to enhance innovation through collaborative efforts. 2. INDUSTRY-ACADEMIA COLLABORATION The collaboration between industry and academia is not a new concept. Over the years, such partnerships have grown significantly, driven by mutual benefits and the evolving needs of both sectors. Furthermore, a partnership between industry and academia offers numerous benefits, including access to cutting-edge research, state-of-the-art of the technology, real-world applications for academic theories, and enhanced educational experiences. Such collaborations help bridge the gap between theoretical knowledge and practical application, preparing students for real-world challenges and providing industries with innovative solutions. Some of the prevalent collaboration practices include: • Strategic Partnerships: Long-term agreements between companies and universities to work on specific research projects, technology developments, or innovation hubs. These partnerships often include shared funding, resources, and
20 intellectual property rights. • Collaboration Agreement / Memorandum of Understanding (MoU): Formal agreements that outline the terms and scope of collaboration. These agreements can range from academic collaboration and research projects to student internships and exchange programs. • Industry-Funded Research: Companies provide funding for academic research projects that align with their strategic interests. This funding can support laboratories, scholarships, and specific research initiatives. • Real-Case Scenarios in Lectures: Integrating practical industry challenges into academic curricula. This practice helps students apply theoretical knowledge to real case problems and prepares them for industry demands. • Industry-Guided Thesis Work: Students undertake thesis projects under the guidance of industry experts, ensuring that their research has practical relevance and potential application in the industry. • Guest Lectures / Honorary Professors: Industry professionals are invited to give lectures or teach courses, providing students with insights into current industry practices and trends. Despite their benefits, contemporary collaboration practices face several challenges that impact their sustainability. Changes in company strategy, such as shifts in market focus, mergers, or leadership changes, can disrupt ongoing collaborations. High turnover in management positions within both industry and academia often leads to shifts in priorities and loss of continuity in collaborative efforts. Academic institutions may shift their research priorities based on funding availability, new faculty interests, or emerging scientific trends, which may not always align with industry needs. Differences in organizational cultures and objectives between academia and industry can lead to misalignment and conflicts. Personal changes, such as key personnel moving to different roles or organizations, cause a loss of knowledge and weaken the collaboration. Additionally, both sectors often face budget constraints and resource limitations, hindering the scope and progress of collaborative projects. Epiroc, a leading OEM in the mining industry, identified the need for a structured and sustainable collaboration model to maintain a competitive edge and drive innovation. The initiative aimed to integrate educational efforts with industrial needs, promoting a continuous exchange of knowledge and expertise since, despite the benefits, many contemporary collaboration practices face challenges that affect their sustainability over time. The initial collaboration model was functional and successful, run for seven years by the School of Mines and Energy at UPM, with a variety of activities and positive assessments of results. This model involved strategic partnerships, mine visits to associated operations, and real-case scenarios integrated into lectures, which significantly benefited both the academic institutions and the industry partners. The enhanced presence of academia representatives in the mining operations visited has led also to additional collaborations with other stakeholders of the mining ecosystem bridging the gap between academia and industry.
21 3. THE EPIROC UNIVERSITY-COMPANY CHAIR The mining sector is, from every point of view, a complex sector that faces constant challenges and changes at a global and local scale. Critical scenarios as the past Covid-19 pandemic have had a strong impact on the way we develop this important economic activity highlighting the need to accelerate the digital transformation and the adoption of new technologies, such as remote work, digitalization of processes, and interoperability and automation in the mines. As a result, professionals in this industry had to adapt, on many occasions on the fly, to the new needs of mining operations focusing on the productivity of operations and in the safety and well-being of people. In the same way that we are witnessing the continuous innovation and rapidity in the development of technologies in everyday objects such as smartphones, the processes of innovation and development of machinery in the mining sector are constantly increasing and almost immediately applicable to large-scale mining. For higher education institutions worldwide, these new processes and technologies represent a great challenge to be faced by adapting the training of future professionals to the constant changes and the new training profiles required. Likewise, it is relevant to motive new generations to develop an interest in mining as a viable career path. In most cases, higher education institutions manage to keep up with the innovations in the sector and adapt the training of professionals to the new demands of the market. However, in occasions, companies face the fact that recently graduated professionals have limited knowledge in specific areas related to modern technology or have not had access to the required training to successfully enter the work market. It is due to the need for constant updating in the educational training of students that companies must be active promoters of the approach to new trends and needs of the market, in order to achieve mutual benefit: for the higher education institutions, to train professionals with the required profile to enter the work market and, for companies, to be in a position to recruit the best talent in their operations and those of their customers. Basically, and more generally for both, the common benefit for the academia and the industry is to contribute to the development of people, to achieve a more sustainable mining sector for society. In various parts of the world, the University-Company Chair model is often a mode of collaboration to achieve mutual benefit. At UPM, this model has been implemented for more than 25 years along companies from different industrial sectors such as telecommunications, aeronautics, shipbuilding, agriculture, etc. A Chair is a long-term collaboration commitment of a company or entity with the university to promote training, research and knowledge transfer in a thematic area of common interest. In this sense and taking as reference the successful experience of implementing the Epiroc University-Company Chair with the School of Mines and Energy at UPM, the company Epiroc Peru and the Universidad Nacional Mayor de San Marcos in Peru carried out the implementation of the University-Company Chair at the Professional School of Mining Engineering of the Faculty of Geological, Mining, Metallurgical and Geographical Engineering (FIGMMG). The target group were students in the last semesters, fresh graduates, postgraduate students and teaching staff. The agreement to conduct the Epiroc UniversityCompany Chair at UNMSM had a validity period of 4 years and began operations in the second
22 academic semester of 2021 and stands for the first case of implementation outside of Spain. This initiative has represented a great advance and opportunity for the Peruvian higher education community, since the Chair has promoted a stronger relationship and constant communication with the industry and has already served as inspiration for parallel cooperation activities with other industry representatives. During the last four years, the Epiroc UniversityCompany Chair has delivered specialized conferences and seminars, machinery donations and study trips, for students, teachers and researchers reaching already over a thousand impacted professionals in the mining sector. On the other hand, the Chair has offered Epiroc Peru, along the dissemination of their technology, the opportunity to promote innovation in thematic areas necessary for the development of the mining industry. The opportunities developed around such collaboration go beyond an academic exchange. As an example, Peru is probably the best test bench to analyse and improve the performance of mining equipment at extreme altitude conditions, since this country has world-class mines, both open pit and underground, at altitudes that exceed 4,000 meters above sea level. In summary, the University-Company Chairs contribute to the development of training, dissemination, knowledge transfer, research and innovation activities and arise from the need to maximize the relationship between the university community and its future work environment. This model of collaboration is an excellent instrument to formalize and create long-term collaboration agreements, in one or more domains of knowledge, between higher education institutions and companies or entities with the major goal of fostering knowledge transfer from theory to the praxis, bridging the gap between the academic offer and the skills demanded withing the company's workforce. 4. THE HUB AND SPOKES APPROACH Building on the success of the initial model, Epiroc expanded the collaboration to Peru, conducting activities over three years. Later, as the network grew, the Ibero-American Hub and Spokes Approach was established to developed collaboration, covering four countries, Spain, Peru, Colombia and Ecuador. One of the major activities was the online lectures of the EpirocUniversity Chair in 2023, involving 24 Peruvian universities, 7 educational institutions, and 10 global mining companies. The network positively impacted 993 students across 7 LatinAmerican countries.
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