By Peter Caporn, Principal

Are Advances in Autonomous Mining Technology to Blame for Australia’s Failure to Capture the Benefit of the Mining Boom?

The International Institute for Sustainable Development’s (IISD) recent report, “Mining a Mirage? Reassessing the shared-value paradigm in light of the technological advances in the mining sector” (the Report), co-produced with the Columbia Center for Sustainable Investment and released in October 2016, looks at the impact on local employment and procurement, if technological change radically alters the amount of money mining firms are spending on hiring and procurement. The full report can be found here.

Established in Canada in 1990, the IISD is an independent, non-profit organisation that provides practical solutions to the challenge of integrating environmental and social priorities with economic development. They report on international negotiations, conduct rigorous research, and engage citizens, businesses and policy-makers on the shared goal of developing sustainably.

I’ve written about some of the developments in autonomous vehicles and the patenting activity around these innovative practises earlier this year. Any discussion of how innovative mining and METS companies are will generally include some reference to the growth in autonomous mining technologies, across vehicles, trains, ship loaders, drilling, milling and crushing, as examples.

Mining Innovation and Impact on Local Spending and Employment

The obvious question, already raised by many working in the various impacted industries, is what impact will this have on local spending and employment? The answer to date is typically that workers will need to be reskilled, or that manual jobs will be lost to new jobs, in control rooms or the like. The Report from the IISD has sought to test the economic impact on host states and what this means for the miner’s social licence to operate.

As the Report makes clear, the “social licence to operate – that is to say the legitimacy and trust required to gain and maintain the support of local stakeholders—is grounded in the notion of shared value. The basic concept is for the mine to create social and economic development benefits for local communities and host states while also promoting the core business of the mine operators.”

But doesn’t the host country or state extract their value through taxes and royalties? This is a particularly appropriate topic for discussions in Western Australia at present, ahead of a State election early next year and moves by the local National Party to introduce increased levies on the largest miners in the State. Importantly, taxes and royalties is typically a much smaller proportion of a miner’s total expenditures than is outgoings to suppliers and employees. As such, the potential impact of increased automation on the balance of the ‘shared value’ equation is huge.

Contribution to Host Economies Slashed by Increased Automation

The Report details findings that a reduction of up to 19% in the miner’s contribution to the host economy can result from automation of mining related activities. Whilst this number may be smaller for an emerging economy, the overall impact on the GDP of that emerging economy was found to be significant.

A shifting of the Balance in Shared Value

No, the luddites won’t win. The dam can’t be plugged. The progress in autonomous technology will continue. There are too many clear benefits from improved efficiencies in mining operations. Rather, the emphasis in the equation of shared value is expected to change. If local employment and local purchasing drop, as we’ve seen in Western Australia with the end of the construction driven mining boom, then governments will naturally look to taxes, royalties, and other downstream benefits in an attempt to extract value and deliver benefits having handed over access to the State’s natural resources.

It is interesting, and informative, to see these conclusions come from a Report from a group like the IISD that sits above local issues and interests. It is remarkable that they ring so true currently, particularly in Western Australia for the reasons discussed above, but also across the remainder of Australia.

For Australia to continue to reap the rewards of our limited natural resources there’ll need to be a continued shifting of the balance in the shared value equation in the face of the on-going innovation in mining technologies. At present any reference to this is met by a somewhat predictably confected outrage. Governments will perhaps need to be more nuanced in how they go about pressure testing potential moves to address the changes in the balance of shared value.