Canada Mining Innovation Council Value Proposition: Towards Zero Waste Mining. August 4, 2015

Transcription

1 Canada Mining Innovation Counci Vaue Proposition: Towards Zero Waste Mining August 4, 2015

2 Preambe Document context Background The mining industry generay agrees that it is behind the innovation curve and that a focused effort is required to create a profitabe and responsibe ong term industry The Canada Mining Innovation Counci (CMIC) is focusing its efforts through the Towards Zero Waste Mining strategy which wi eiminate mine waste by faciitating coaboration across partners within the business ecosystem to coectivey transform the industry Document Purpose Define and further refine CMIC s Towards Zero Waste Mining strategy to the mining industry Emphasize the importance of this project and the necessity for step change through CMIC via its open innovation approach Crystaize the definition of Towards Zero Waste Mining and identify the key focus areas Define how CMIC wi coaborate and partner across stakehoders, reconcie potentia Inteectua Property (IP) issues, finance ong term initiatives, and govern / report activities and outcomes Serve as an interna guiding document / strategy to aign key stakehoders and potentiay serve as materia for the Business Case to attract partners in the mining ecosystem (e.g., industry payers, academia and government) Source Data This document contains information from a number of different sources (CMIC representatives, externa service providers, mining companies, government repositories, and anayst insights). This vaue proposition attempts to consoidate a of these within an interna strategy for CMIC The partnership between CMIC and Monitor Deoitte is defined in accordance with the terms of an agreement between the parties 2

3 Tabe of contents Contents Mining in Canada - Current State of Mining - Current State of Mining Innovation Page 4 CMIC Overview 9 Strategic Choice Cascading Framework - Summary - Goas and Aspirations - Where Wi CMIC Pay - How Wi CMIC Win - How Wi CMIC Configure - Priority Initiatives CMIC Portfoio Impementation Approach Appendix - List of Abbreviations 24 3

4 Mining in Canada > Current State of Mining Increased goba compexity requires sector adaptation to new reaities Labour Productivity is Decining whie Labour Costs are Rising Quarrying, and Oi & Gas Extraction Decining Productivity Structured abour market forces, decining resource quaity, and a egacy of inefficient capita aocation have ed to decining productivity Labour Productivity Index Year Houry Compensation ($CAD) Tota compensation per hour worked Labour productivity Increasing Costs High energy consumption, eevated operatimg costs (e.g., energy, infrastructure, abour, royaties, permitting fees, and compiance), have resuted in decreasing margins for existing operations and diminishing economic feasibiity of new mine deveopments Cents/KWh Bended RPP Ontario Hydro Rates have far outpaced Annua Infation over the years 2 Year RPP Price Infation Source: (1) Statistics Canada, CANSIM tabe , 2007 to 2014; (2) Ontario Hydro Ontario s Historica RPP Rates 4

5 Mining in Canada > Current State of Mining especiay compexities associated with the icense to operate and the decine of commodity prices Increasingy Compex License to Operate Concerns from mutipe stakehoders incuding conservation and the potentia environmenta impacts of minera deveopment and mine cosure have resuted in increasing government reguation and demand for heightened corporate socia responsibiity and stakehoder engagement Operating with Uncertainty Voatie commodity prices have resuted in unpredictabe margins, forcing companies to pan for the unforeseeabe, and decreasing financing capita avaiabiity In order to make a significant shift towards improvement, the industry must coectivey chaenge existing ways of thinking by revisiting ong-standing practices and processes 5

6 Mining in Canada > Current State of Mining Current commodity markets are not conducive to industry sustainabiity Resource quaity is decreasing Between 2001 and 2012, the weighted average resource grade of nicke, copper, and god reduced by roughy 40%, 30%, and 10% respectivey 1 ~ Energy prices are increasing Energy costs continue to rise in Canada and are projected to be 20% higher in 2035 compared with Commodity prices are voatie The price of god dropped by roughy 33% between 2011 and Commodity Price Index Bank of Canada Commodity Price Index Year Source: (1) Deoitte Mining Spotight on: Siding Productivity and Spiraing Costs, 2014; (2) Nationa Energy Board, Canada s Energy Future Energy Suppy and Demand Projections to 2035, 2013; (3) Bank of Canada, Commodity Price Index - Monthy 6

7 Mining in Canada > Current State of Mining and is decreasing the viabiity of mining in Canada as an economic force Decining Profitabiity Based on current trends and future projections, costs wi ikey continue to increase over time. Historica cost cutting exercises (e.g., ayoffs) are not sustainabe and without a significant shift, margins may decrease to a point where mining operations are no onger profitabe $US God Industry Margins Are Decreasing (a-in sustaining cost $US/oz) 1 Mining and Processing G&A and Exporation Net Interest Exp. Year Sustaining Capita Avg God Price ($/oz) Underperforming Sharehoder Return With mining s tota return to sharehoders underperforming other sectors, companies are under mounting pressure to boost short-term profits, often at the expense of ong-term panning. Passing on ong-term, possibe high return investments, resuts in further decreasing ong term returns Tota Return to Mining Sharehoders is Underperforming Other Goba Industries 2 Mining Industrias Heathcare Year Teecoms Technoogy Aerospace & Defense Consumer Goods Banks Future of Mining Projects Increasingy Under Risk Significant price risk exposure due to voatie commodity prices has resuted in decining equity financing and scaed back exporation activity by juniors and majors. As a resut, the ong-term future suppy pipeine ooks increasing under risk 2 The Number and Vaue of Equity Issues in Goba Mining & Metas is Decreasing in Recent Years 2 Number of Issues Year Proceeds ($M US) Source: (1) Société Généra, 2013; (2) Deoitte tracking the trends 2015 the top 10 issues mining companies wi face this year 7

8 Mining in Canada > Current State of Mining Innovation Stagnant investment in Canadian mining innovation has resuted in decreased goba market share Mining Industry Investment Gap Austraian mining firms have invested more than four times as much in research and deveopment as Canadian firms 1. Canadian mining firms invest more in Austraian-ed innovation than in Canada due to strong cooperative governmentindustry strategic panning and financing Canadian Government Support The mining industry is undervaued and receives itte direct strategic financia support towards innovation from the Canadian government despite the industry s importance in impementing government Economic and Northern priorities. Exampes of Canadian Government Support for Industry-ed Research, Deveopment & Innovation 1 Manufacturing: $200M via. Advanced Manufacturing Fund (AMF) 3 2 Forestry : $100 via. Forest Investment in Forest Industry Transformation (IFIT) 3 3 Automotive: $750M via. Automotive Investment Fund (AIF) 3 Source: (1) OECD StatExtracts data; (2) Canada s Economic Action Pan; (3) Natura Resources Canada Data 8 4 Aerospace: $1.15B via. Strategic Aerospace and Defence Initiative (SADI) 3 Whie the Canadian government has showed initia signs of commitment to the mining industry through NRCan s Geoscience for Energy and Mineras, Targeted Geoscience and Critica Metas initiatives, these ony support a subset of mining chaenges. There is sti need to deveop a broader strategic partnership buiding a more sustainabe mining vaue chain with a much smaer environmenta footprint through CMIC s Towards Zero Waste in Mining roadmap

9 CMIC Overview CMIC faciitates and focuses the mining innovation ecosystem to coaborativey address pressing mining business chaenges About CMIC Why CMIC was created: formed to provide innovation eadership to the Canadian mining industry What CMIC does: faciitates an industry-academic-government innovation ecosystem to focus joint efforts on addressing Canadian mining continued icense to operate profitaby chaenges in support of pubic poicy CMIC s mission: enhance the competitiveness and sustainabiity of the Canadian mining industry by ensuring exceence in research, innovation, and commerciaization with the objective of Towards Zero Waste in Mining CMIC s vision: re-aunch Canada as a goba eader in increasing a responsibe mining industry s socia icense to operate, thereby remaining a strong piar in the Canadian ong term economic andscape 9

10 CMIC Overview The CMIC Innovation Ecosystem Nodes represent different parties in the innovation ecosystem who a contribute in different ways to mining innovation. For exampe: Exporation and Mining industry: share expertise and resources Government: share ambitions for increased mining productivity and more jobs Coeges / universities: research and ideate new mining techniques Research and deveopment centres: research and ideate new mining techniques Cean-tech / ICT / space / defense / other sectors: share simiar chaenges and technoogy Associations: provide community and shared goas Service providers: share common goas and interests in mining innovation Startups: provide a resource for coaboration and are a source of new ideas and technoogy Institutiona funders / venture capitaists / foundation funds: provide funds and expertise to support innovation deveopment 10

11 Strategic Choice Cascading Framework > How Wi CMIC Configure CMIC business ecosystem framework CMIC Board of Directors Executive Director & CEO CMIC Office Technica Working Groups on Zero Waste Mining Focus Areas CMIC Membership Genera Partners: CMIC member company representatives who: Determine and agree upon any pre-competitive issues Define and prioritize business issues / chaenges and associated programs for CMIC Technica Working Groups Are privy to IP in one way or form derived from project activities, athough not immediatey Project Partners: CMIC member companies who: Provide in-kind support in the form of access to mining faciities and equipment for the testing and impementing of techniques or technoogies Are invoved as either Project Test Site Leaders, Technica Expert Groups, or occasionay in the Project Management Office, and contribute to activities of project impementation and testing, ensuring adherence with the project roadmap and government reguations 11

12 Strategic Choice Cascading Framework > Summary CMIC s workfow represents a set of choices aong a cascading framework What are our goas and aspirations? Portfoio of businesses Reative weight of investment Corporate Strategy Purpose Financia objectives Non-financia objectives Business Unit Strategy Where wi we pay? Customers Products Geography Vertica stages How wi we win in chosen markets? Vaue proposition to customers Sources of defensibe advantage Profit mode(s) Partnerships Constituent engagement Method of increasing the competitiveness of individua businesses Sharing of activities Transfer of skis How wi we configure? Distinctive capabiities Enabing organizationa system Initiatives Investments Change program What priority initiatives? 12

13 Strategic Choice Cascading Framework > Wherein Wi CMIC Pay Towards Zero Waste Mining wi focus on soving common industry issues Articuated as core precompetitive chaenges identified by senior executives from mining companies across Canada Defined as portfoios that address key objectives to accompish a more efficient future mining state Zero Waste Mining Issues Exporation Underground Mining Energy / Processing Environmenta Management Better Chemistry Increasing Mining Intensity Future State Mining Objectives Decreasing Energy Intensity Increasing Labour Productivity Decreasing Capita Intensity Safety, CSR & Environmenta Priority portfoios CMIC wi address as part of the TZWM strategy Equipment Mine Panning Other 13

14 CMICs Portfoio Impementation Approach Towards Zero Waste Mining portfoios deveop technoogy roadmaps with a phased and staged approach A new: Net zero waste Stage 3 STAGES: The deveopment or evoution of a method or technoogy that faciitates a significant shift towards improving daiy mining operations Stage 2 Stage 1 Optimized and advanced: Industry cost-drivers Safe and reiabe: Environmenta impact reduction The overa objective is to ensure the gradua progression (Phase 1 3) and adoption of innovative technoogies (Stages 1 3) which aow for more efficient and sustainabe operations whie promoting sharehoder vaue Phase 1 (Years 0-3) PHASES: Cear and reaistic impementation timeines which depict the sequencing of projects across a 10 year time horizon 14 Phase 2 (Years 3-5) Phase 3 (Years 5-10)

15 CMICs Portfoio Impementation Approach CMIC wi cosey monitor the trajectory of each portfoio, against the roadmap timeines and stage gates Stage 3 A new: Net Zero Waste Stage 2 Optimized and advanced: Industry cost-drivers Stage 1 Safe and reiabe: Environmenta impact reduction Energy / Processing is a historica pain point with mining companies, Stage 3 is possibe though if the industry tackes the mutipe issues facing processing in a parae manner Progress through innovation wi move industry towards Stage 2; however it wi continue to be a chaenge to find deeper deposits and Stage 3 might not occur Legend: Exporation Environmenta Stewardship Likey to make significant strides in stages with the smart mine and efficiency deveopments Phase 1 (Years 0-3) Environmenta sustainabiity wi constanty shift as the industry addresses reguatory / compiance issues, thus Stage 3 might not occur Phase 2 (Years 3-5) Phase 3 (Years 5-10) Energy / Processing Underground Mining 15

16 Appendix q List of Abbreviations

17 Appendix > List of Abbreviations List of Abbreviations AIF: Automotive Investment Fund AMF: Advanced Manufacturing Fund CMIC: Canada Mining Innovation Counci IBM: Internationa Business Machines Corporation ICT: Information, Communication and Technoogy IFIT: Investment in Forest Industry Transformation IP: Inteectua Property KPI: Key Performance Indicators M: Miion NRCan: Natura Resources Canada Oz: Ounce R&D: Research and Deveopment ROI: Return on Investment SADI: Strategic Aerospace and Defence Initiative $CAD: Canadian doars $US: American doars $US/oz: American doars per ounce 17

18 Strategic Choice Cascading Framework > Goas and Aspirations CMIC aims to revive Canada s status as a goba mining eader by stimuating innovation, improving technoogy adoption, and promoting cutura change What are our goas and aspirations? Where wi we pay? How wi we win in chosen markets? How wi we configure? What priority initiatives? Revive Canada s status as a goba mining eader Drive the Towards Zero Waste Mining strategy - Stimuate mining technoogy innovation in Canada to achieve zero waste in mining and minera processing within years, with a focus on the environment, energy, and productivity by: Foster coaboration among industry, academia, government, and research faciities, everaging expertise and funding to arrive at impemented soutions faster and more cost effective Bridge gap between industry compexities and capabiities, focusing on chaenges that are common to mining companies Decrease barriers to technoogy adoption within the mining industry: Provide shared costs / benefits to project participants, through sharing of generated data, free icenses for software deveoped, and non-commercia access to deveoped IP / patents Faciitate deveopment of detaied technoogy roadmaps and assist industry in understanding the positive financia impact and return on invested capita Promote cutura change in the mining industry toward onger term decision horizons: Shift mindset from annua Key Performance Indicators (KPIs) to 5-10 year timeframes whie providing incrementa vaue on an annua basis Foster a mining industry innovation business ecosystem based on the principes of: Simpe, open, fair, and transparent Encourage sustainabe mining practices to improve the sector s icense to operate 18

19 Strategic Choice Cascading Framework > Where Wi CMIC Pay CMIC is faciitating an industry ed Towards Zero Waste Mining strategy focused on tacking common issues across mining companies What are our goas and aspirations? Where wi we pay? How wi we win in chosen markets? How wi we configure? What priority initiatives? Coordinate and deveop industry ed projects focused on shared mining business chaenges reated to the Towards Zero Waste Mining specificay in the areas of: Decining productivity: increase productivity throughout the ifecyce of a mine (e.g., efficiency in minera extraction) Increasing costs: reduce energy consumption and other mining costs Increasingy compex icense to operate: reduce environmenta impact of minera deveopment and mine cosure (e.g., processing waste such as taiings) Operating with uncertainty: reduce risk and barriers to adoption associated with ong-term investment decisions Buid the program nationay with the financia and resource support of a current and prospective CMIC members in the Canadian mining ecosystem, with particuar invovement from: Initiay, major, mid-tier and junior Canadian meta mining companies and mining suppiers who have demonstrated strong initia interest and can derive benefit for both domestic and internationa operations Federa government who can benefit from the jobs created and GDP increase due to project innovations 19

20 Strategic Choice Cascading Framework > How Wi CMIC Win CMIC s approach is differentiated because it is a faciitated open innovation and industry ed mode What are our goas and aspirations? Where wi we pay? How wi we win in chosen markets? How wi we configure? What priority initiatives? How Wi CMIC Win How Wi Industry Win Foster coaborative, industry generated innovative Zero Waste mining soutions through a reiabe and agie open innovation mode faciitated by CMIC: Reaize financia (e.g., ROI and payback period) and nonfinancia vaue (e.g., increased icense to operate) from projects administered by CMIC, incuding: Focus on common high priority chaenges to deiver resuts which wi have the greatest impact Shared cost and risk associated with new technoogy adoption / impementation for participating companies Aggregate financia and best in cass non-financia resources (e.g., cross industry experts) and aow industry members to decide on best use aocation Increased productivity and / or decreased operating costs resuting in increased margins and feasibiity of mine deveopment Reduce financia and time risk through coaboration, permitting continued focus on day-to-day priorities Deiver faster industry enhancing inteectua property Reduced cycica nature of mining research and deveopment through shared costs and government funding to permit ong-term project deveopment New sustainabe mining practices resuting in improved industry icense to operate CMIC s success is a function of the financia and non-financia vaue reaized by Industry 20

21 Strategic Choice Cascading Framework > How Wi CMIC Configure CMIC has a transparent, industry ed governance structure with supporting mechanisms to promote innovation What are our goas and aspirations? Where wi we pay? How wi we win in chosen markets? How wi we configure? What priority initiatives? Governance: Deveoping a transparent, industry ed patform that wi foster open innovation in the areas of highest priority Making inkages to other parties within the mining partner ecosystem to connect ideas and resources Estabishing a decision making structure that is driven by industry payers in both a top down (e.g., Board of Directors is comprised of industry executives) and bottom up (e.g., Members are comprised of nominated representatives who activey participate in CMIC to make decisions regarding project panning, prioritization, execution, IP sharing, etc. on behaf of their company) approaches Providing support to the industry ed decision making structure through a streamined CMIC Project Management Office As the Towards Zero Waste Strategy expands expands, encourage broader participation of different mining payers by offering tiered investment opportunities for companies of different investment capacity and interest (currenty there are 2 eves but a third ower eve may be considered) Supporting mechanisms: Defined project end goas and staged targets (e.g., ROI) Opportunities for IP / patent ownership for Genera Partners and Project Partners Repositories of shared data and fu non-commercia access to a IP / Patents deveoped for CMIC members 21

22 Strategic Choice Cascading Framework > Priority Initiatives CMIC wi prioritize investigation into key chaenges that are common across mining companies What are our goas and aspirations? Where wi we pay? How wi we win in chosen markets? How wi we configure? What priority initiatives? CMIC Project Portfoio Priority Projects Exporation Acceerated targeting undercover Near-time data retrieva and anaysis Underground Mining Rea time continuous underground mining Energy / Processing Low grade waste energy recovery in comminution New comminution technoogy demonstration Environmenta Stewardship Mining Industry Knowedge Hub Water sensors Cosure criteria Data management 22

23 CMICs Portfoio Impementation Approach The staged project objectives aow CMIC to track the maturity of technoogy adoption whie promoting a significant shift in mining industry Stage Gates Expained Iustrative: Water Sensor Project Staged Targets Stage 3 (A new: Net zero waste) A objectives outined in the roadmaps have been achieved Technoogies have reached impementation maturity and are being depoyed across industries participants Deveop new sensors for heavy metas and continued patform integration Utimatey, the goa is to commerciaize sensor packages for industry use Stage 2 (Optimized and advanced: Industry costdrivers) Provide industry members with insights on how to customize the technoogy to suit their operations, as aigned to roadmap targets Begin to adapt existing technoogies for remote, rea-time appications Stage 1 (Safe and reiabe: Environmenta impact reduction) Progression to the next stage is dependent upon the attainment of the current stage s objectives. For exampe, if not met, the possibiity exists to sti be busy with Stage 1 in Phase 3 A specified objective (e.g., technoogy) is worked on, for exampe: Technoogy conceptuaization and testing To begin addressing the chaenge of remote, rea-time sensor water quaity monitoring, the 3 year target of Stage 1 is to estabish innovation research and deveop networks, direction, and initiatives with service providers and research faciities 23

24 CMICs Portfoio Impementation Approach these priorities wi be phased aong the foowing timeines, with some reaching their roadmap targets sooner than others Phase 1 (Years 0-3) Phase 2 (Years 3-5) Phase 3 (Years 5-10) CMIC has prioritized areas that are highest impact to industry by istening to industry participants in the Technica Working Groups. These participants have determined where they woud ike the innovation focus to be and this is infuencing the sequencing of events The projects CMIC has chosen first aso wi show quick wins of the open innovation mode. This wi hep buid brand and create a compeing case for additiona funding. This brand buiding effort is important as CMIC has undergone organizationa changes (e.g., purey research based projects to industry chosen ones). This effort wi re-invigorate credibiity and confidence by industry and government CMIC has chosen to start with initiatives in Phase 1 and as part of the initia funding request, companies wi be asked to aocate funds to the foowing Project Portfoios: Exporation Environmenta Stewardship Processing Underground Mining Project Portfoio initiatives which coud be deat with in the next phase incude: Better Chemistry, Equipment, and Mine Panning The panning for these initiatives wi begin years prior to the start of this phase CMIC wi drive the advancement of innovative technoogies, through industry adoption, to their natura end points The focus during this phase wi be to ensure the maturity of impementation As with other phases, this one wi consider the next panning cyces and what industry priorities wi need to be addressed during the next phase 24

25 CMICs Portfoio Impementation Approach CMIC incorporates mutipe, agie project deivery modes 1. CMIC managed research consortia: Our current exporation project is the argest geoscience consortia in North America, addressing expicit research needs for the industry. 2. Project integration/coordination: This custers existing new mining projects, adds potentia new project eements and accounts for muti-miion investments being made by companies. This wi be one component of our underground mining program. 3. Technoogy Demonstration: This accounts for new technoogy that is not deveoped far enough and is typicay too costy for a singe company to test. In the case of energy efficient processing we are examining 3-5 new technoogies in this genre. Exporation Underground Mining 4. CMIC Directed, Partner Deivered: These projects typicay occur on the initia stages of arger, consortia-based project to prove an idea or provide a baseine of data, information and modes on which we need to proceed. 5. CMIC Instigated with Ecosystem Participation: These are either very difficut technica chaenges that have broad appicabiity and interest or where there are significant groups working on eements yet need to be stimuated to move in the right direction. environmenta monitoring technoogies. Low grade waste energy recovery is one exampe. 6. Mini-Consortia: Evove around needs of a seect group of companies and incude two nascent projects in genomic based sensors for environmenta monitoring and hybrid air vehices for aternative transportation. Processing Environmenta Stewardship 25