The iron ore sector illustrates the profound impact technology and innovation can have on ‘old’ industries.
THIS week’s changing of the guard at Fortescue Metals Group got me thinking abut the factors that drive commercial success in modern Australia.
Fortescue came from nothing eight years ago, when Andrew Forrest had an audacious vision to create a third force in iron ore mining in the Pilbara.
He defied the numerous sceptics to establish a business that is now well established as one of Australia’s top-15 listed companies, with a market value of $20 billion.
A big part of FMG’s success stemmed from an early mover advantage. Mr Forrest, who is moving from chief executive to chairman of the company, spotted China’s growth trend earlier than most others, and moved quickly to take advantage.
But Fortescue was not alone in spotting the opportunity. It has succeeded where many others tried, and one of the reasons is that the company did things differently.
It employed technology that had not previously been used in the Pilbara, most notably the surface miners that have proved an efficient way to mine its ore.
Surface miners have been used for many years in industries such as coal and salt mining, and in FMG’s case have been a big success in iron ore.
They marked a big change from the traditional drill, blast and shovel-mining technique employed by the incumbents Rio Tinto and BHP Billiton.
BHP and Rio have both trialled surface miners but have stayed with their established approach.
FMG is also investing in innovative machinery that will make it more efficient to remove the overburden at its mine sites, in a project with Danish company FLSmidth.
It also has invested in custom-designed infrastructure at its mine and port operations, to support its ambitious goal of being the lowest-cost iron ore producer in the Pilbara.
In pursuing its innovative strategy, FMG had some advantages on its side, none more so than the start-up nature of its business.
Changing a large, established business is a much more challenging task.
Yet that is what Rio is doing, with its groundbreaking investment in remote operations.
The concept of controlling mining and haulage operations at multiple sites in the Pilbara from a control centre in Perth is hard to grasp.
For those who have had an opportunity to tour Rio’s $60 million operations centre near Perth airport, it starts to make sense. The 400 Rio workers wear the same clobber as their mine site colleagues, yet their work involves sitting in front of banks of computer screens and control booths that track every truck, train and loader in the Pilbara.
The Rio facility illustrates the integrated nature of its Pilbara operations, linking ore from multiple mines to ships bound for steel mill customers across Asia.
Rio says there is no other mining operation anywhere in the world attempting remote operations on the same scale.
It says driverless trucks, remotely operated drill and blasting, automated train systems and remote train loading functions are just the start of a revolution in its operations.
Rio’s facility is arguably the most impressive computing centre in the state, and – helped by its enormous scale – is certainly more impressive than anything at Technology Park in Bentley.
There is a lesson there. Advanced technology isn’t just for ‘tech’ companies. It’s for every business in every industry, looking for a competitive edge.
Think about metal fabrication workshops in the Kwinana industrial strip. They battle to compete with giant fabrication yards in Asia but have still invested in robotics and other advanced technology to lift efficiency.
Another example is brickworks; a very traditional industry, but one where robotics is also used to boost efficiency.
One of the consequences of technology innovation is that there really is no such thing as an ‘old’ industry.
Rio and FMG may be innovation leaders, but they are not alone in the resource sector.
Companies like Alcoa, which has a world-leading research centre in Perth, and industry-backed research groups like the Parker Centre, are also driving innovation.
Collectively, they are modernising an established sector, and in the process demonstrating the long-term role that mining and resources can play as the economic base of Western Australia.