Page 66 - The Economist

66 Business The Economist December 9th 2017
Rio Tinto three driver-changes in each 40-hour per-
Ghost in the machine iod. This may sound small, but it adds up.
Trains will also run closer together, adding
more to the system at any one time.
Although Rio introduced its first driver-
less trucks almost a decade ago, the move
to autonomy has been slow, involving fin-
ickyfine-tuningwith suppliers. MrJacques
NEWMAN, WESTERN AUSTRALIA says technological improvements will pro-
One ofthe world’s biggestmining firms puts its faith in 300-tonne robots
vide only a third of the $5bn in additional
OR millennia, man has broken rocks. free cashflow, chiefly from its iron-ore and
FWhether with pickaxe or dynamite, Dug out of a hole aluminium operations, which Rio intends
theirown oranimal muscle, in a digger ora Rio Tinto return on equity, % to generate over the next five years. But
diesel truck, thick-necked miners have from 2021 onwards he expects new tech-
been at the centre of an industry that sup- 50 nologies, and autonomyin particular, to be
pliesthe rawmaterialsforalmostall indus- a bigger driver of returns. By then Rio in-
40
trial activity. Making mining more profit- tends to start iron-ore production at Koo-
able has longinvolved squeezingout more 30 daideri in the Pilbara, which it says will be
tonnes of metal per ounce of brawn. Now the first mine designed to be “intelligent”,
20
robots, not man, are settling themselves at a cost of$2.2bn.
into the drivingseat. 10 Rio also intends to squeeze out higher
Rio Tinto, one of the world’s largest + returns with more disciplined spending
mining firms, is leading that transforma- 0 – and improved quality. Forinvestorsa focus
tion in its vast iron-ore operations in the 10 on the bottom line is reassuring—especial-
Pilbara region of Western Australia. It is 1995 2000 05 10 16 ly as much of Rio’s spare cash is being re-
putting its faith in driverless trucks and un- Source: Bloomberg turned to shareholders in the form of divi-
manned drillingrigsand trains, overseeing dends, or being used to de-leverage the
them from the office equivalent of arm- bound employees operating two of Rio’s balance-sheet. It also makes a change. Un-
chairs about 1,000km (625 miles) south, in six autonomous rigs digging into the Pil- der previous management, Rio’s splurges
Perth. Jean-Sébastien Jacques, Rio’s chief bara rock. Rio’sbossofiron ore, Chris Salis- on overpriced assets, such as Alcan, a Ca-
executive, says it is ten years ahead ofmin- bury, says that autonomy enables drilling nadian aluminium company, in 2007 dur-
ing rivals in autonomous technology. For to run for almost a third longer on average ingthe China supercycle, and Riversdale, a
him and for Simon Thompson, a new than with manned rigs, and to churn coal mine in Mozambique, in 2011, clob-
chairman appointed on December4th, the through 10% more metres per hour. The ex- bered returns (see chart).
question is how much such technology tra data collected helps the firm to evaluate In a sign of their concern, some big
can tame another ancient feature of min- the quality ofthe ore forfurtherdigging. shareholders railed against the possibility
ing: the boom-and-bust cycle. Next year Rio hopes to win regulatory thatSirMickDavis, a dealmakingsupremo
On a visit to Rio’s Hope Downs 4 mine approval to run the world’s first driverless who once led Xstrata, another mining
in the Pilbara, it is eerie at first to watch trainsalong1,700km oftrackbetween its 16 company(and who isnowthe chiefexecu-
300-tonne trucks speeding uphill in a iron-ore mines and four ports in the Pil- tive ofBritain’sConservative Party), would
cloud of red dust with no one in the cab. bara. It completed a 100km test run in Sep- be named aschairman. MrThompson, a fi-
Then it becomes endearing, as you watch tember. Accordingto MrSalisbury, autono- nancier and former executive at Anglo-
supersized robotic mammoths so safety- my can provide a 6% improvement in American, another mining rival, is seen as
obsessed that when sagebrush blows in average speed, and the elimination of a more conservative choice.
theirway, they judderto a halt. His first big task will be to deal with the
As for the mine’s managers, they are legacy of Rio’s spendthrift era. In October
struck by the silence; there is no longer a America’s Securities and Exchange Com-
steady stream of banter across drivers’ mission charged the firm, its former boss,
two-way radios. They also welcome the Tom Albanese, and another former execu-
productivity gains. Over a 12-hour period, tive with fraud. It alleged that they failed to
they say, manned trucks are competitive, disclose the loss of value of the Mozam-
but over 24 hours and longer, the absence bique transaction to Rio’sboard, itsauditor
ofcoffee breaks, fatigue and driverchange- or investors, and also released misleading
overs begins to tell. The autonomous financial statements shortly before raising
trucks stop only once a day for refuelling. debt in America. (Rio and its ex-employees
“Then you pat them on the bum and out deny the charges.)
they go again,” one says. He adds that the These headaches aside, the firm’s core
workforce at the mine is already about mining business is in comparatively good
one-third lower as a result of automation. shape. China’s demand for the high-grade
The 76 autonomous vehicles in Rio’s 400- iron ore that is a speciality of Rio’s Pilbara
strong truck fleet in the Pilbara are an esti- operations is buoyant; iron ore accounts
mated 15% cheaperto run than the rest. forabout two-thirds ofits earnings. Alumi-
Two hours’ flight away, at Rio’s opera- nium demand is also likely to grow briskly,
tions centre in Perth, engineers remotely thanks in part to demand for lighter cars.
control the equipment with screens and Mr Jacques insists that Rio will not make
computers. “You have to blow dust in their overpriced acquisitions even to secure
faces to make them feel like they’re in the prized battery minerals such as lithium.
Pilbara, otherwise it’s too comfortable,” The future may be driverless, but steadier
quips an executive, as he oversees desk- Data-mine ore hands appearto be on the wheel. 7