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Sponsored: TÜV SÜD Global Risk Consultants

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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Pharma Under Fire

Opioids Give Rise to Liability Epidemic

Opioids were supposed to help. Instead, their addictive power harmed many, and calls for accountability are broadening.
By: | May 1, 2018 • 8 min read

The opioid epidemic devastated families and flattened entire communities.

The Yale School of Medicine estimates that deaths are nearly doubling annually: “Between 2015 and 2016, drug overdose deaths went from 33,095 to 59,000, the largest annual jump ever recorded in the United States. That number is expected to continue unabated for the next   several years.”

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That’s roughly 160 deaths every day — and it’s a count that’s increasing daily.

In addition to deaths, the number of Americans struggling with an opioid disorder disease (the official name for opioid addiction) is staggering.

The National Institute on Drug Abuse (NIDA) estimates that 2 million people in the United States suffer from substance use disorders related to prescription opioid pain relievers, and roughly one-third of those people will “graduate” to heroin addiction.

Conversely, 80 percent of heroin addicts became addicted to opioids after being prescribed opioids.

As if the human toll wasn’t devastating enough, NIDA estimates that addiction costs reach “$78.5 billion a year, including the costs of health care, lost productivity, addiction treatment, and criminal justice involvement.”

Shep Tapasak, managing principal, Integro Insurance Brokers

With numbers like that, families are not the only ones left picking up the pieces. Municipalities, states, and the federal government are strained with heavy demand for social services and crushing expenditures related to opioid addiction.

Despite the amount of money being spent, services are inadequate and too short in duration. Wait times are so long that some people literally die waiting.

Public sector leaders saw firsthand the range and potency of the epidemic, and were among the first to seek a legal reckoning with the manufacturers of  synthetic painkillers.

Seeking redress for their financial burden, some municipalities, states and the federal government filed lawsuits against big pharmaceutical companies and manufacturers. To date, there are more than 100 lawsuits on court dockets.

States such as Ohio, West Virginia, New Jersey, Pennsylvania and Arkansas have been hit hard by the epidemic. In Arkansas alone, 72 counties, 15 cities, and the state filed suit, naming 65 defendants. In Pennsylvania, 16 counties, Philadelphia, and Commonwealth officials have filed lawsuits.

Forty one states also have banded together to subpoena information from some drug manufacturers.

Pennsylvania’s Attorney General, Josh Shapiro, recently told reporters that the banded effort seeks to “change corporate behavior, so that the industry can no longer do what I think it’s been doing, which is turning a blind eye to the effects of dumping these drugs in the communities.”

The volume of legal actions is growing, and some of the Federal cases have been bound together in what is called multidistrict litigation (MDL). These cases will be heard by a judge in Ohio. Plaintiffs hope for a settlement that will provide funding to be used to help thwart the opioid epidemic.

“From a societal perspective, this is obviously a big and impactful issue,”  said Jim George,  a managing director and global claims head with Swiss Re Corporate Solutions. “A lot of people are suffering in connection with this, and it won’t go away anytime soon.

“Insurance, especially those in liability, will be addressing this for a long time. This has been building over five or six years, and we are just now seeing the beginning stages of liability suits.” 

Basis for Lawsuits

The lawsuits filed to date are based on allegations concerning: What pharma knew or didn’t know; what it should have known; failure to monitor size and frequency of opioid orders, misrepresentation in marketing about the addictive nature of opioids; and false financial disclosures.

Opioid manufacturers, distributors and large drugstore chains together represent a $13 billion-a-year industry, meaning the stakes are high, and the pockets deep. Many have compared these lawsuits to the tobacco suits of the ’90s.

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But even that comparison may pale. As difficult as it is to quit smoking, that process is less arduous than the excruciating and often impossible-to-overcome opioid addiction.

Francis Collins, a physician-geneticist who heads the National Institutes of Health, said in a recorded session with the Washington Post: “One really needs to understand the diabolical way that this particular set of compounds rewires the brain in order to appreciate how those who become addicted really are in a circumstance where they can no more [by their own free will] get rid of the addiction than they can get free of needing to eat or drink.”

“Pharma and its supply chain need to know that this is here now. It’s not emerging, it’s here, and it’s being tried. It is a present risk.” — Nancy Bewlay, global chief underwriting officer for casualty, XL Catlin

The addiction creates an absolutely compelling drive that will cause people to do things against any measure of good judgment, said Collins, but the need to do them is “overwhelming.”

Documented knowledge of that chemistry could be devastating to insureds.

“It’s about what big pharma knew — or should have known.  A key allegation is that opioids were aggressively marketed as the clear answer or miracle cure for pain,” said Shep Tapasak, managing principal, Integro Insurance Brokers.

These cases, Tapasak said, have the potential to be severe. “This type of litigation boils down to a “profits over people” strategy, which historically has resonated with juries.”

Broadening Liability

As suits progress, all sides will be waiting and watching to see what case law stems from them. In the meantime, insurance watchers are predicting that the scope of these suits will broaden to include other players in the supply chain including manufacturers, distribution services, retail pharmacies, hospitals, physician practices, clinics, clinical laboratories and marketing agencies.

Litigation is, to some extent, about who can pay. In these cases, there are several places along the distribution chain where plaintiffs will seek relief.

Nancy Bewlay, global chief underwriting officer for casualty, XL Catlin

Nancy Bewlay, XL Catlin’s global chief underwriting officer for casualty, said that insurers and their insureds need to pay close attention to this trend.

“Pharma and its supply chain need to know that this is here now. It’s not emerging, it’s here, and it’s being tried. It is a present risk,” she said.

“We, as insurers who identify emerging risks, have to communicate to clients. We like to be on the forefront and, if we can, positively influence the outcome for our clients in terms of getting ahead of their risks.”

In addition to all aspects of the distribution chain, plaintiffs could launch suits against directors and officers based on allegations that they are ultimately responsible for what the company knew or should have known, or that they misrepresented their products or signed off on misleading financial statements.

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Shareholders, too, could take aim at directors and officers for loss of profits or misleading statements related to litigation.

Civil litigation could pave the way, in some specific instances, for criminal charges. Mississippi Attorney General Jim Hood, who in 2015 became the first state attorney general to file suit against a prescription drug maker, has been quoted as saying that if evidence in civil suits points to criminal behavior, he won’t hesitate to file those charges as well.

Governing, a publication for municipalities and states, quoted Hood in late 2017 as saying, “If we get into those emails, and executives are in the chain knowing what they’ve unleashed on the American public, I’m going to kick it over to a criminal lawsuit. I’ve been to too many funerals.”

Insurers and insureds can act now to get ahead of this rising wave of liability.

It may be appropriate to conduct a review of policy underwriting and pricing. XL Catlin’s Bewlay said, “We are not writing as if everyone is a pharma manufacturer. Our perception of what is happening is that everyone is being held accountable as if they are the manufacturer.

“The reality is that when insurers look at the pharma industry and each part of the supply chain, including the pharma companies, those in the chain of distribution, transportation, sales, marketing and retail, there are different considerations and different liabilities for each. This could change the underwriting and affect pricing.”

Bewlay also suggests focusing on communications between claims teams and underwriters and keeping a strong line of communication open with insureds, too.

“We are here to partner with insureds, and we talk to them and advise them about this crisis. We encourage them to talk about it with their risk managers.”

Tapasak from Integro encourages insureds to educate themselves and be a part of the solution. “The laws are evolving,” he said. “Make absolutely certain you know your respective state laws. It’s not enough to know about the crisis, you must know the trends. Be part of the solution and get as much education as possible.

“Most states have ASHRM chapters that are helping their members to stay current on both passed and pending legislation. Health care facilities and providers want to do the right thing and get educated. And at the same time, there will likely be an uptick in frivolous claims, so it’s important to defend the claims that are defensible.”

Social Service Risk

In addition to supply chain concerns, insurers and insureds are concerned that even those whose mission it is to help could be at risk.

Hailed as a lifesaver, and approved by the Food and Drug Administration (FDA), the drug Naloxone, can be administered to someone who is overdosing on opioids.  Naloxone prevents overdose by blocking opioid receptor sites and reversing the effects of the overdose.

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Some industry experts are concerned that police and emergency responders could incur liability after administering Naloxone.

But according to the U.S. Department of Justice, “From a legal standpoint, it would be extremely difficult to win a lawsuit against an officer who administers Naloxone in good faith and in the course of employment. … Such immunity applies to … other professional responders.”

Especially hard hit are foster care agencies, both by increased child placements and stretched budgets. More details in our related coverage.

While the number of suits is growing and their aim broadening, experts think that some good will come of the litigation. Settlements will fund services for the addicted and opioid risk awareness is higher than ever. &

Mercedes Ott is managing editor of Risk & Insurance. She can be reached at [email protected]