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Meeting the Fast-Changing Challenges of the Mining Industry

An environment that is constantly undergoing transformation introduces new exposures for mining companies.
By: | March 13, 2018 • 8 min read

The mining industry is in the midst of transformation.

Demand for mineral resources continues to climb as the population grows, and globalization is driving the need for more materials. Nonetheless, a confluence of challenges is making it harder and harder to satisfy that demand, forcing miners to reevaluate their processes.

One of the fundamental challenges being faced is that mining companies are increasingly forced to mine lower grade, complex ore bodies at greater depths or in more remote locations than ever before.

“We’ve been mining for thousands of years, so as miners continue to produce for a diverse and growing demand for mineral resources, they are mining increasingly complex ore bodies in difficult locations,” said Alun Morris, Mining Focus Group Leader at TÜV SÜD Global Risk Consultants.

In addition, in many remote locations, a lack of resources critical to mining operations presents even more obstacles. Mines are often plagued by lack of water, energy, other critical utilities and locally sourced skilled-labor in remote territories.

“As existing mines continue operating, they are mining and processing much lower grade ores. Where a gold mine might have previously mined ore with a grade of 5 g/ton, it is now mining and processing a grade of, for example, 2.5g/ton.” Morris said. “This has driven innovation, in terms of advances in processing technology, and has also resulted in greater volumes of waste material been produced. The storage of waste material, primarily in Tailings Storage Facilities (TSF), presents significant risks to our clients.”

The mining industry has always faced the challenge of boom and bust pricing cycles. Building economies of scale was the traditional approach to overcoming the rise and fall so miners could maximize returns while the going was good. However, this approach is no longer sustainable and requires a new methodology —prioritizing operational efficiency.

“For example, mining companies know they need to improve the focus on asset management and reliability to not only reduce risk, but to improve operational efficiencies,” explained Morris. “At TÜV SÜD GRC, we are branching out from a traditional insurance support function and providing a more, non-insurance related, consultative engineering service, using our expertise to partner with our clients’ operational functions to help them build up those efficiencies.”

Additionally, the mining industry has realized it needs to be more socially responsible in managing mine development, emissions and waste disposal, as well as the long-term planning for rehabilitation when the life of mine (LOM) expires. Events, such as the Bento Rodrigues disaster due to a TSF failure in Brazil in 2015, bring home the need for much greater due diligence in managing the risks that mining can introduce to external communities.

Preventive Maintenance and Process Control

Alun Morris
Mining Focus Group Leader

One way to improve operational efficiency is to mitigate and, if possible, avoid altogether any production shutdowns caused by poor equipment reliability and failures.

“Companies have been pushing mining equipment harder to produce higher and higher volumes, so the stress on various pieces of critical equipment keeps building,” Morris conveyed. “When something breaks down, the old approach was simply to go in and fix it, but that might result in the whole plant being shut down while that repair is taking place. Now, the strategy is shifting to one of process and equipment health monitoring that allows us to make informed maintenance decisions.”

In the new age of digitalization, mining companies can now increasingly monitor the performance of their equipment in real time through a system of interconnected sensors and informed condition monitoring techniques. This moves asset management strategies into a much more proactive domain and helps identify deteriorating performance much earlier than was previously possible. Done well, this allows world class operators to predict failures, maximize the operational efficiency of key assets and assists the asset management teams in determining appropriate timelines for proactive intervention (i.e. equipment maintenance and/or replacement). The end result is increased up-time and productivity, fewer unplanned outages and a lower, overall cost of maintenance over time.

“Driving down unplanned breakdowns ensures more stability in the production system, less business interruption and improved process control from an operational perspective,” Morris said. “There’s more focus, now, on getting the best productivity from well-designed, well-maintained and efficient processes rather than just scaling everything up.”

Furthermore, remotely-operated equipment improves safety and overcomes the limitations of old equipment. A large mining company recently announced it had hauled 1 billion tons of ore with 80 driverless trucks using autonomous technology overseen from a control center 1,500 kilometers away from the site. Needless to say, technology and innovation are shaping the future of a process dating back thousands of years.

This changing environment will, of course, also introduce potential new challenges. The skillsets of the operations and maintenance teams are ever-changing, and the days of the hands-on technicians with intimate knowledge and intuition of equipment health from smell, touch and sound is unfortunately fading.

“As mining becomes more digitized and we collect more data from connected sensors or operate equipment remotely or autonomously, the industrial control systems managing this data become more susceptible to security threats”, Morris explains. “These threats need to be understood and managed.”

Industry Focus Groups

As part of its continuous effort to add value to clients in key industries, TÜV SÜD Global Risk Consultants established its Focus Group initiative. Presently, there are 5 Focus Groups, which include:

  • Mining (including Mineral Processing and Metallurgical Refining)
  • Power Generation
  • Oil and Chemical
  • Pulp and Paper
  • Food and Grain

Of the 50 TÜV SÜD GRC engineers who visit mining, mineral processing or metallurgical refining locations worldwide, 16 of these engineers form just part of the Mining Focus Group, which includes individuals from around the globe, representing South Africa, Australia, Brazil, the UK, Canada, the Netherlands, France, Italy and the US.

The Group meets periodically, and the members are actively involved in attending various mining conferences and seminars to keep updated with the latest innovations and developments in the mining sector. This allows the organization to continually reevaluate its approach and helps it to continue to provide first class risk management advice to clients.

Although highly specialized in its respective industry, the Mining Focus Group is able to draw upon the expertise of the other Focus Groups where necessary to best serve client needs.

“Most of our consultants work across multiple industries; the Power Generation, Pharmaceutical and Chemicals industries have previously undergone similar changes and have long been leveraging advanced technology to achieve efficiency, so we’re able to bring that expertise from other industries including Process Safety Management, Process Control, Condition Monitoring and Preventative/Predictive Maintenance, to our mining clients and help them through this current period of change,” Morris said.

TÜV SÜD GRC puts its expertise to work producing resources like technical bulletins to help both its engineers and clients stay up-to-speed on the changing risks and solutions available to the industry. These bulletins address everything from the risk associated with technologically-advanced equipment to solvent extraction and Tailing Storage Facilities.

In 2015, the Mining Focus Group developed an analysis tool to assess the risk associated with Tailing Storage Facilities. Mining lower ore grades generates more waste, and many decades-old tailing storage facilities are ill-equipped to handle the burden. Failure of one of these facilities can result in loss of life, widespread property damage and severe environmental impact.

“This tool helps mining companies decide where they should focus their resources,” Morris explained. “If a company has 50 tailing storage facilities, we will review the risks associated with each one and help our clients create a priority list. We can then hand that list over to our geotechnical experts within our parent company, TÜV SÜD, to conduct a more in-depth analysis and provide physical recommendations to our clients.”

Local Expertise, Global Reach

Making risk engineers available wherever clients operate is part of TÜV SÜD GRC’s effort to be true operational partners for mining companies.

“Having local expertise is important because different geographical regions face different challenges. A mine in Chile, for example, is more vulnerable to earthquakes, while mines in South Africa are the deepest in the world, in some cases almost 4km below the Earth’s surface, which results in significant challenges. Flooding is a significant risk in some regions, while in other regions the greater risk might be water scarcity. Transportation systems to get the mined ore to port are not as developed in some areas and travel distance on poor quality rail or road networks might span up to a thousand kilometers,” Morris elaborated.

Deploying its experts around the global is made possible by TÜV SÜD GRC’s relationship with its parent company, TÜV SÜD.

“Separate divisions within TÜV SÜD focus on Geotechnical Engineering, Process Safety Management, Equipment Failure Analysis and Non-destructive Testing, to name a few . When we need to bring in someone with an advanced skillset, outside of what our practice group can offer, we rely on the resources of TÜV SÜD. They bring a 150-year legacy of high quality and trust,” Morris said.

“Through that partnership and the depth of knowledge we bring across a range of industries, we are continuing to expand on the existing partnerships we have with our clients. More than risk management and insurance information, we can now provide full operational support, even as our clients innovate and introduce new technologies. We have the capabilities to assist them through changing market demands.”

To learn more, visit https://www.globalriskconsultants.com/.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with TÜV SÜD Global Risk Consultants. The editorial staff of Risk & Insurance had no role in its preparation.




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Insurtech

Kiss Your Annual Renewal Goodbye; On-Demand Insurance Challenges the Traditional Policy

Gig workers' unique insurance needs drive delivery of on-demand coverage.
By: | September 14, 2018 • 6 min read

The gig economy is growing. Nearly six million Americans, or 3.8 percent of the U.S. workforce, now have “contingent” work arrangements, with a further 10.6 million in categories such as independent contractors, on-call workers or temporary help agency staff and for-contract firms, often with well-known names such as Uber, Lyft and Airbnb.

Scott Walchek, founding chairman and CEO, Trōv

The number of Americans owning a drone is also increasing — one recent survey suggested as much as one in 12 of the population — sparking vigorous debate on how regulation should apply to where and when the devices operate.

Add to this other 21st century societal changes, such as consumers’ appetite for other electronic gadgets and the advent of autonomous vehicles. It’s clear that the cover offered by the annually renewable traditional insurance policy is often not fit for purpose. Helped by the sophistication of insurance technology, the response has been an expanding range of ‘on-demand’ covers.

The term ‘on-demand’ is open to various interpretations. For Scott Walchek, founding chairman and CEO of pioneering on-demand insurance platform Trōv, it’s about “giving people agency over the items they own and enabling them to turn on insurance cover whenever they want for whatever they want — often for just a single item.”

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“On-demand represents a whole new behavior and attitude towards insurance, which for years has very much been a case of ‘get it and forget it,’ ” said Walchek.

Trōv’s mobile app enables users to insure just a single item, such as a laptop, whenever they wish and to also select the period of cover required. When ready to buy insurance, they then snap a picture of the sales receipt or product code of the item they want covered.

Welcoming Trōv: A New On-Demand Arrival

While Walchek, who set up Trōv in 2012, stressed it’s a technology company and not an insurance company, it has attracted industry giants such as AXA and Munich Re as partners. Trōv began the U.S. roll-out of its on-demand personal property products this summer by launching in Arizona, having already established itself in Australia and the United Kingdom.

“Australia and the UK were great testing grounds, thanks to their single regulatory authorities,” said Walchek. “Trōv is already approved in 45 states, and we expect to complete the process in all by November.

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group.” – Scott Walchek, founding chairman and CEO, Trōv

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group,” he added.

“But a mass of tectonic societal shifts is also impacting older generations — on-demand cover fits the new ways in which they work, particularly the ‘untethered’ who aren’t always in the same workplace or using the same device. So we see on-demand going into societal lifestyle changes.”

Wooing Baby Boomers

In addition to its backing for Trōv, across the Atlantic, AXA has partnered with Insurtech start-up By Miles, launching a pay-as-you-go car insurance policy in the UK. The product is promoted as low-cost car insurance for drivers who travel no more than 140 miles per week, or 7,000 miles annually.

“Due to the growing need for these products, companies such as Marmalade — cover for learner drivers — and Cuvva — cover for part-time drivers — have also increased in popularity, and we expect to see more enter the market in the near future,” said AXA UK’s head of telematics, Katy Simpson.

Simpson confirmed that the new products’ initial appeal is to younger motorists, who are more regular users of new technology, while older drivers are warier about sharing too much personal information. However, she expects this to change as on-demand products become more prevalent.

“Looking at mileage-based insurance, such as By Miles specifically, it’s actually older generations who are most likely to save money, as the use of their vehicles tends to decline. Our job is therefore to not only create more customer-centric products but also highlight their benefits to everyone.”

Another Insurtech ready to partner with long-established names is New York-based Slice Labs, which in the UK is working with Legal & General to enter the homeshare insurance market, recently announcing that XL Catlin will use its insurance cloud services platform to create the world’s first on-demand cyber insurance solution.

“For our cyber product, we were looking for a partner on the fintech side, which dovetailed perfectly with what Slice was trying to do,” said John Coletti, head of XL Catlin’s cyber insurance team.

“The premise of selling cyber insurance to small businesses needs a platform such as that provided by Slice — we can get to customers in a discrete, seamless manner, and the partnership offers potential to open up other products.”

Slice Labs’ CEO Tim Attia added: “You can roll up on-demand cover in many different areas, ranging from contract workers to vacation rentals.

“The next leap forward will be provided by the new economy, which will create a range of new risks for on-demand insurance to respond to. McKinsey forecasts that by 2025, ecosystems will account for 30 percent of global premium revenue.

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“When you’re a start-up, you can innovate and question long-held assumptions, but you don’t have the scale that an insurer can provide,” said Attia. “Our platform works well in getting new products out to the market and is scalable.”

Slice Labs is now reviewing the emerging markets, which aren’t hampered by “old, outdated infrastructures,” and plans to test the water via a hackathon in southeast Asia.

Collaboration Vs Competition

Insurtech-insurer collaborations suggest that the industry noted the banking sector’s experience, which names the tech disruptors before deciding partnerships, made greater sense commercially.

“It’s an interesting correlation,” said Slice’s managing director for marketing, Emily Kosick.

“I believe the trend worth calling out is that the window for insurers to innovate is much shorter, thanks to the banking sector’s efforts to offer omni-channel banking, incorporating mobile devices and, more recently, intelligent assistants like Alexa for personal banking.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.”

As with fintechs in banking, Insurtechs initially focused on the retail segment, with 75 percent of business in personal lines and the remainder in the commercial segment.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.” — Emily Kosick, managing director, marketing, Slice

Those proportions may be set to change, with innovations such as digital commercial insurance brokerage Embroker’s recent launch of the first digital D&O liability insurance policy, designed for venture capital-backed tech start-ups and reinsured by Munich Re.

Embroker said coverage that formerly took weeks to obtain is now available instantly.

“We focus on three main issues in developing new digital business — what is the customer’s pain point, what is the expense ratio and does it lend itself to algorithmic underwriting?” said CEO Matt Miller. “Workers’ compensation is another obvious class of insurance that can benefit from this approach.”

Jason Griswold, co-founder and chief operating officer of Insurtech REIN, highlighted further opportunities: “I’d add a third category to personal and business lines and that’s business-to-business-to-consumer. It’s there we see the biggest opportunities for partnering with major ecosystems generating large numbers of insureds and also big volumes of data.”

For now, insurers are accommodating Insurtech disruption. Will that change?

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“Insurtechs have focused on products that regulators can understand easily and for which there is clear existing legislation, with consumer protection and insurer solvency the two issues of paramount importance,” noted Shawn Hanson, litigation partner at law firm Akin Gump.

“In time, we could see the disruptors partner with reinsurers rather than primary carriers. Another possibility is the likes of Amazon, Alphabet, Facebook and Apple, with their massive balance sheets, deciding to link up with a reinsurer,” he said.

“You can imagine one of them finding a good Insurtech and buying it, much as Amazon’s purchase of Whole Foods gave it entry into the retail sector.” &

Graham Buck is a UK-based writer and has contributed to Risk & Insurance® since 1998. He can be reached at riskletters.com.