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How automation could save the mining industry

Mining is not an industry closely associated with advances in technology, especially compared to the likes of telecommunications or software industries. However it has come a long way since the days of busting rocks with picks and shovels.

The latest application of technology being used by both BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO) is the use of autonomous driverless trucks. Driverless trucks sound like a concept extracted out of the movie Avatar, but the technology has the potential to lower costs and increase efficiency for mining operators as they move towards full integration into their mining activities.

BHP has been working closely with machinery giant Caterpillar (NYSE: CAT) since 2008 to develop the autonomous driver technology. The company has been trialling use of the trucks at its Jimblebar iron ore mine in Western Australia’s Pilbara region, where BHP plans to utilize 12 to 15 of the trucks by late this year. Rio is also using the trucks in the region, operating 10 driverless trucks at its Junction South East mine, with plans to operate up to 19 trucks at the company’s Hope Downs 4 site. Rio’s trucks come from Japan mining equipment manufacturer Komatsu Limited (TYO: 6301), but heavy machinery manufacturers Volvo and Hitachi are also starting to develop the technology.

The autonomy brings numerous benefits for mining companies, the biggest being increased productivity and efficiency. The autonomous trucks operate more consistently and have a lower rate of error than manned trucks, using GPS systems to line them up within inches of a desired location. Driverless trucks can also be operated around-the-clock without stopping for shift change overs or breaks. One mining engineering professor from the University of British Columbia has said the benefits include 15-20% increase in output, 10-15% decrease in fuel consumption and an 8% lowering in maintenance.

The cost of automated equipment is undoubtedly higher than for driver operated trucks which can cost $6 million each, however with driver salaries up to $120,000 per year, plus ancillary costs of training, meals and flying workers into remote locations, total costs have been put as high as $1 million per driver. With four drivers required to operate a single truck around the clock the cost savings of automation quickly add up.

Foolish takeaway

Automation is becoming a standard practice in the iron ore industry and will continue to build momentum over the next few years, resulting in slashing of jobs.  Fortescue Metals Group (ASX: FMG) has orders with Caterpillar for 45 autonomous trucks by 2015, the equivalent of 180 driver jobs. However the technology could make a noticeable difference to the bottom line for mining project s where margins are tight and cost control is paramount.

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The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Regan Pearson does not own shares in any of the companies mentioned in this article.

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