Drones and driverless trucks and LHDs - Automation is the future of Australian mining

Driverless trucks are already a feature of the Australian mining landscape. Rio Tinto has more than 30 automated trucks operating at its Yandicoogina, Nammuldi and Hope Downs 4 mine sites[1].

BHP will start using autonomous haulers this year at its Jimblebar iron ore mine in the Pilbara and Fortescue Metals plans to implement automated trucks at its Solomon mine in WA.

The automated future of mining is here. But as with all new innovations there are financial and commercial risks that must be considered before signing on the dotted line.

As the resources boom fades, falling commodity prices and high labour costs have forced resources companies to look at new technologies to boost productivity and keep costs under control.

Mining technology advances include:

• Autonomous load haul dump (LHD) and truck haulage systems in open pit and underground mines.  These vehicles have on-board intelligence and perception technologies and GPS which optimise fuel consumption, improve tyre life by consistent driving patterns and minimise collisions.  The outcome is a safer mine and a more efficient fleet of vehicles.
  
  
• Autonomous train transportation (which may be controlled remotely off-site).
  
  
• Automated underground mining systems which allow greater accuracy of cutting sequences in continuous longwall mining and haulage operations, reducing shift changes and operator fatigue.

Caterpillar the world's largest heavy equipment manufacturer, has a complete line of high-tech autonomous mining equipment, including driverless dozers and haulers.

Similar to technology for flying drones, a new generation of highly trained employees will operate the autonomous equipment off site.  This reduces demand for mine site infrastructure in remote areas and the need for fly in-fly out arrangements for large numbers of employees. 

The evolution towards autonomous mines is not a question of reducing the mine’s workforce but adapting the style of work and operations to achieve greater productivity.

For mine owners, investment decisions around automation will focus on the expected level of improvement in KPIs.  What are the promises regarding lower costs, improved quality and productivity, and increased performance targets?

The investment and procurement strategy for new technology must also consider the legal and commercial implications:

• Technology and intellectual property – the parties bring valuable IP to the project or develop new IP during their engagement. It is important to be clear who owns the IP rights and what rights other parties have to use those rights both inside and outside the commercial deal. Consideration needs to be given to the breadth of the licence having regard to the investment that the mining company has made.
  
  Any modifications or enhancements to the background IP must also be considered. In terms of newly developed IP, consider whether the parties should jointly own the IP. If there is joint ownership, there are a number of questions to work through. Should the invention be protected by filing patent applications? Can both parties use the invention outside the scope of the current project?
  
  
• Performance requirements and damages for failure to meet specified requirements – it is prudent to be clear about the performance standards that the equipment can deliver, and the enforceability of any abatement or buy-down structure for any shortfall in performance.  A recent High Court case, Andrews v ANZ, fundamentally affects the structure of performance based contracting and prudent drafting is essential.
  
  
• Confidentiality obligations – notwithstanding the structure of the IP provisions in a contract, it is prudent to include stringent confidentiality arrangements to minimise exploitation of the IP rights, reverse engineering and industrial espionage where the mining company has invested heavily in new technology development.
  
  
• Rights of first refusal – these are contractual rights where the right holder will be offered an initial deal by the manufacturer/supplier to purchase new product lines or additional capacity that may arise from the new invention at agreed prices. If the buyer rejects the deal, the manufacturer/supplier is free to offer those products to a third party. It is important to clarify when those rights are triggered or lapse or how they are to be made and accepted (such as the form of notice and terms of acceptance).
  
  
• Workplace health and safety requirements – any design must comply with the new requirements under the workplace health and safety legislation which applies to all forms of equipment.
  
  
• Equipment suppliers need to be careful about what representations they make regarding the performance standards for new technology – and in particular any liability for negligent misstatement and misleading and deceptive conduct under Australian Consumer Law.
  
  
• Tax concessions – the Enhanced Project By-Law Scheme provides tariff concessions on eligible goods (which are goods not produced in Australia or which are technologically superior to Australian produced goods) for major projects in the mining and resource processing sector.
  
  
• Dispute resolution – as most of the new technology equipment suppliers are overseas companies, it is prudent to consider the structure of the dispute resolution process and governing law.  If arbitration is adopted, issues dealing with the seat of arbitration, governing law, and arbitration rules are important considerations.

This article was originally co-authored by Andrew Chew.