Transcript Blog- The Global Impact of the Coronavirus Pandemic on Mining Industry
Josephine Monberg interviews mining industry experts, Shabir Ahmed and Anton Kroger, in this episode of Industry Insights by SAP. For more episodes on Industries, please subscribe to “Industry Insights by SAP” Podcast Series.
Welcome to the industry insights by SAP podcast series. My name is Josephine Monberg and I am your host. You are now listening to the COVID 19 special edition of our show. Welcome to our podcast.
Hi everyone and welcome to this episode of our podcast. We are taking a closer look at different industries and how they are being impacted by our current global pandemic COVID 19. And today we are taking a closer look at the mining industry. And to do this, I am joined by two guests both in their virtual home studios Anton Kroger who’s in Australia and Shabir Ahmed, who’s in South Africa and they’re both mining industry experts from SAP. So super excited to have you both in the studio. So before we get started and talk more about mining specifically and COVID 19, maybe starting with you, Anton, what is your role at SAP? What do you typically do?
So I described myself as the, uh, the translator between what technology offers and I guess what business needs is I’ve come out of the business world, um, but sometimes translate into technologies challenging. And that’s very part of my role. So I look after all natural resources in Australia. So I described that as anything that comes out of the ground apart from potatoes and asparagus.
Thank you. And over to you Shabier, or what is your role? I’m assuming it might be similar to Anton’s.
Yes, it’s a, it’s very much similar also focusing on the, on the same industries, extractive industries if you want to call it that. But uh, um, similar to what Anton just said, uh, is trying to bridge the gap between business and technology
and Shabir you are in South Africa. What’s it like being trapped in your home in South Africa?
Yeah, we’ve been uh, uh, you know, under lockdown for several weeks now. Initially at 21 day locked down. It’s been extended until the end of, um, at least until the 1st of May. So it has been difficult. Um, you know, we uh, are generally, um, you know, very used to visiting customers and getting in front of customers, but not being able to do that does pose a challenge. But we are trying to go as best we can under the circumstances. I think the priority is to, to save lives and, uh, you know, to, uh, try and contain the pandemic as much as we can.
And Anton you are in Australia. What’s the situation there? Um, you know, dealing with COVID 19.
Yeah, thanks. So I think, I think we’ve been very fortunate in Australia and that, um, we reacted fairly quickly. Uh, certainly in Western Australia they close the borders fairly early on, uh, and a lot of changes we’re putting in place. Um, so I think that has really limited the impact. So while we are still, I guess practicing social distance, we certainly not as constrained as other countries like South Africa. Uh, we can still get out, go to the beach and do some of the things that we enjoy. Uh, and certainly from a mining perspective that that has had some impact, although it has not stopped operations. So the message we’re getting from the industry is that we’re still very much open for business in Australia, which is quite different to the situation in other countries.
Yeah. And that’s, and you’ve hit on a key point there, cause we do want to talk about the impact that we’re seeing on mining right now and of course you’re going to be able to provide different perspectives in terms of where you are located. But if we look at it from maybe a global perspective to start with, what’s the impact that you’re seeing on mining right now, maybe starting with you, Anton?
So I think mining, if you look across all the major commodities, um, generally speaking, mining is okay. So there’s certainly been a little bit of softening. Uh, particularly the base metals we’ve seen that come down 20, 30%, uh, off the back of, you know, decline in global demand. But some of the heavier bulk commodities have generally held out fairly well. Iron ore is sort of holding up. Uh, the price is still up there. It’s not, hasn’t drastically declined coal come down a little bit. Um, you know, especially on the, um, the coking side where we sort of seen that decline just basically as a, as a function of the slowdown in China. Um, but other commodities like gold, you know, they, they’re on the up. So it’s sort of, it depends a little bit on the commodity that we’re talking about. Uh, so generally speaking, the industry is, is seeing this as a sort of a short term position, although I guess there is a big question Mark is do you know how long the recovery will take in, in China and Asia, which is our major trading partner and what that impact will then be depending on really how long it’s going to take.
thank you for providing that kind of global overview. Shabir if we zoom in on South Africa specifically, what are you seeing in terms of the impact there?
Yeah, so in South Africa, uh, again, we have, um, certain commodities that have been impacted, you know, much more than others. Um, these are primarily in the PGMs or the platinum group metals. You know, we have platinum, palladium, rhodium, those types of metals have been infected, uh, affected rather in the earlier days. You know, those, uh, the value of those stock prices were eroded by as much as 30%, uh, gold, uh, much of the same as, um, the global trend. Uh, prices are still high. And I think those, uh, companies, uh, you know, are more, you know, I would say they prepared to withstand, you know, much longer period if it does go on to that. Yeah.
Hmm. And Anton zooming in on Australia, what’s going on specifically there?
Yeah, so look, I think, um, you know, you’ve got to break it down into two perspectives. So there’s, there’s very much the response phase. Um, and I think we’re probably delighted to agree over the response phase. And if I look at what happened in the response phase, big changes in, in, in roster schedules. So, you know, we’ve gone from one on two off, two to two on, two off the top rosters. So essentially what a lot of the companies have tried to do is minimize the number of swings. So that’s the rotations. Um, and that that’s meant longer rosters. So a lot of those changes have happened. Um, the biggest challenge has been the, the flying fire community. Um, because a lot of those people sort of live in, in different countries and obviously with border closures that become a challenge. So we are seeing, um, a number of those rosters operating below full capacity, so that, that’s probably be the major change, um, where people have focused then obviously at the camps themselves.
Um, big changes in terms of just the canteen set up, you know, people not being able to do the same time sort of being forced to go back to their, their, their bunkers or their bungalows and eat in their room on their own, you know, so that those, those changes have been put in place. Um, some of the sites that are less remote, um, have also pushed the law that the COVID social distancing rules with regular police inspections. So, so the compliance component has been a big focus. So you know, some of the other types of activity, you know, big shift towards moving to work from home, uh, for, you know, non, I guess direct labor top roles. Um, that’s been a big challenge for a lot of companies cause culturally this is just not something they used to. Um, so a few of them have sort of really been scrambling to get laptops into, you know, the hands of employees that normally have desktops and then now you take your home office home so that those are sort of being the big, the big initial steps. the emerging risks now and the conversation’s shifting towards fatigue is a big consequence of changing. A lot of that work style behaviors meant that guys longer rosters are remote for longer periods of time and they don’t have that social interactions. So that’s starting to play on their minds. And likewise at home people are generally finding working longer hours and still having to juggle kids at home and everything else. So fatigue is certainly the, the topic at the moment that I think we’re facing within the industry.
Hmm. And Shabir are you, do you have any examples of any mining companies that are doing certain things to better cope and respond to COVID?
Yeah, absolutely. I think one of the things which enter on as touched on already is ensuring that the nonessential staff work, work from home personally. Uh, you know, the priority is obviously to, to try and limit the, uh, the spread of the virus in the workspace itself. So most of the minds are, um, you know, focusing on trying to limit the number of workers in very confined spaces. I mean in mining those spaces are generally backed. Um, they’re not very conducive to a practice in social distancing. Uh, in general specific example I could go is that, um, you know, when the miners do actually go down underground minus, particular in the gold sector, they don’t send down as many as they would be during a normal shop under normal circumstances. So they reduce that by effect or at least 50%. Um, so those are types of measures, you know, that they are doing. I think also another one is that, uh, the mindset, uh, they do have clinics, uh, generally as far as the infrastructure, but they are basically reconfigured and, uh, you know, set up those clinics to be able to cope with cases where there are reported infections and so on.
Hmm. So let’s talk a little bit about that actually like more specifically some of the challenges and opportunities if you could. I mean, you do advise of course, mining companies. So what will you say that is the best strategy to, of course respond, but also in a more longterm, um, you know, more longterm view to better come out of this crisis. What would you say to those mining companies maybe starting off with you, Anton?
It’s certainly in my part of the world, we haven’t had a major outbreak in a mining camp yet. So there isn’t really a precedent certainly in Australia that I’m aware of in terms of how you deal with it, contain it as quickly as possible and then, and then try and isolate as minimize the impact that way. It is definitely a major risk, um, that we are seeing. Um, what’s also quite interesting at the back of that conversations, we’ve started to see the acceleration of a lot of business cases towards more automation. Um, so Australia, again, we’re quite lucky in the sense that we’re very advanced in, in automation. So, you know, companies rely on the fact that you can drive a truck from 2000 kilometers away, um, as a, as a big differentiator. But in these times, you know, that that becomes a bigger conversation on what else can we automate.
So that then starts to spread that workforce out as well. Uh, and serves as another way to kind of isolate and contain. But yeah, it’s, it’s an emerging topic. Um, as I said, it’s challenge. We, we haven’t seen some mine sites implementing, um, infrared scanners to try and detect, uh, cases early. Um, so detection I guess is the other, the other piece. And then another, the other strategy you’ve seen the, the, some of the companies implemented obviously big, big focus on health. Um, so a lot of focus on getting an sanitizer into those locations. Um, to the point where, you know, we’ve had a lot of discussions, shortages in those sorts of things. Um, and so that, that actually becomes an interesting discussion because as you know, most miners will look at critical spares being the bits of kit that are hard to find or have a long lead times, whereas that is not so shifting towards, you can I get enough hand sanitizer on site. So, so the definition of what’s now critical spares is also changing, which is quite interesting.
Shabir anything from your perspective, maybe also specifically for South Africa?
Um, what we are seeing is, um, focus on, uh, trying to leverage, uh, any opportunities to, you know, to protect the workforce. We, I’ve seen apps or applications being deployed to an answer process of contact tracing, uh, and tracking the movement of people. One of the unique challenges we have in South Africa is that the mining industries largely dependent on migrant workforce. Uh, you know, our mine operations are spread across enabling countries such as, uh, Lisutu, uh, and Mozambique and even Zimbabwe. So, you know, we do have an influx and a flow of people across these borders and that is a big concern. Um, for most of our mining bosses, controlling the flow of these people across borders is quite a challenge place, uh, and track the movement of these people. Then what we also see is, um, drive towards automation, probably not as, um, advanced as what we see in Western Australia.
In some parts of Africa. We do have cases where mines are already leveraging, uh, you know, that, uh, automation, we have cases in Mali for example in the CMR mine. Uh, and they, we have a, you know, almost a fully automated, uh, underground mine that basically automates all the processes from, you know, from, uh, drilling and blasting and hauling and across the board. And while we certainly, I mean, in my view, I would certainly see an update in, in those types of technologies moving forward. But yeah, generally the uptake has been extremely slow, uh, because of poor economic climate, that mindset to sustain over the last few years.
So you do see that COVID 19 is accelerating digital transformation. And in this case more specifically, um, automation.
What I also am finding, uh, the mining companies like other companies, um, you know, a little bit more cautious in approaching, uh, digital transformation for example. What they are doing is, uh, kind of, uh, you know, taking a phased approach. So they are looking at the immediate priority obviously is to protect, uh, the operations and the work staff. Um, so they focusing digital transformation on, you know, uh, topics that will announce protection for examples, uh, protection, uh, you know, against, uh, cyber cybersecurity. Uh, they could be vulnerable to cyber attacks in this, in this period. Uh, also, uh, you know, reputation management mines act irresponsibly in this time. It could have severe consequences for that. The next phase is to try to optimize. And that is where the big opportunity comes with automation. So we talk about, uh, technologies like robotics process automation to automate and optimize, uh, you know, uh, some of the manual, uh, types of processes are very common there. And then lastly, I think where we, uh, the real, uh, opportunity for transformation is coming. We see does this, where the minds are really embracing full scale digital transformation and this is where they start, uh, you know, reconfiguring their businesses to grow the business, uh, moving forwards.
Hmm. And Anton, do you have anything to add to that?
Yeah, look, I think it’s, it’s been very, very exciting over here as well. One of the, one of the things that a lot of my customers have talked about is the fact that they actually use this as an opportunity to accelerate projects and it’s sort of highlighted how quickly things can get done when you need to get done. Um, so, you know, I’ve got a small minor up in Queensland, you know, developed a couple of apps within literally days that were deployed to help push communication out. Um, they’ve been very active around re-engaging, so you know, switching a lot of their messaging to SMS for example. You know, those projects are just flying through the laptops. One that I talked about, you know, sounds ridiculous, but you know, these guys mobilize 143 laptops in under a week. Um, so that, that is no small feat.
We had another coal miner, you know, put in, in infrared sensors also within the matter of a matter of days. So it’s, it’s, it’s really, I think for a lot of people highlighted just how quickly you can move in the tech space if you really want to. Um, and that’s quite significant. Um, a couple of other miners, you know, they’ve started to use Qualtrics to, to, to roll out, understand some of the fatigue issues, you know, and that’s literally happening within the matter of hours. So, you know, within a matter of hours you can have this survey setup, you can have the distribution channels in place and get the, get the information out and start getting back some of those insights. So, so these guys are moving very, very quickly in that space supply chain side. As I mentioned, you know, one of, one of my customers has started to use the Ariba discovery tool to look for spare parts and things that they didn’t realize they even needed. So, you know, one of the interesting ones is, as I mentioned, the hand sanitizers become a challenge, but, um, they were able to buy hand sanitizer in bulk. Um, but now the challenge is finding enough bottles, put it in a so they can distribute it on site. So again, using the tool, uh, to, to find those sorts of things. So it’s certainly where it’s happening is happening very, very quickly. And I think that surprised a lot of people and kind of really talks to what is possible that tech space today.
And to talk a little bit more about how SAP is helping, cause you’ve touched on Qualtrics now in a Rebbe also, we do offer these free solutions. So Shabir have you seen anything in terms of, um, how has piece helping your customers in, in South Africa
we have, um, uh, instances where our, uh, our customers not only in mining, uh, you know, across other industries as well have leverage that, uh, tapping into the network, uh, because you know, the supply chains have been disrupted. Um, so, you know, the primary objective there has been to try, um, you know, and uh, ensure that they can source, uh, you know, the critical space and, uh, you know, the critical materials that they need to keep those operations going. So other areas, uh, that we have seen, uh, as well also in the area of Qualtrics. So similar to what Anton um, you know, as mentioned, we have, uh, some mines that have, uh, taken, taken up generally of laboratory capability as well
for any final remarks, maybe also looking far ahead, maybe even predicting what’s going to happen. Do you have anything to say to, you know, if you could say anything to your mining customers what they should be looking at in the very long term, maybe starting with you, Anton?
Yeah, so I think one of the things I spend a lot of time doing is actually studying some of the previous recessions that we’ve gone through. And you know, mining has the advantage that is quite used to a cyclical business. So it kind of comes and goes. But certainly if you, if you go back to the GFC and some of the previous decisions and one thing that’s come out, a lot of literatures, the companies that made the investments and the right investments in technology have definitely come out way ahead. So to the tune of, you know, 10 or 13% profit points over those that didn’t, in fact, those that didn’t, you know, came out very, very flat and a lot of them disappeared. So the big thing about major resets or recessions like this is it opens the door wide open to the new players coming into the industry.
And I think for a lot of our minors that they need to look at that carefully and think about what the potential impact is. Um, so certainly, you know, it’s exciting watching the conversation unfold. And, and w we sort of touched on your supply chain is one of the emerging areas, but we had a very interesting conversation the other night talking about the threats and challenges with returning to work, for example. So, you know, all of the miners now interested in, in what does that look like? And what became apparent is that, you know, one of the miners said, well actually we’re not returning to work. Um, so they are already starting to think about how do they use this change in culture and change your way of thinking to actually reset their business. Um, so they focus as well let’s get people working from home.
Um, they, they’ll drive up in inherent productivity, but it also gives them a lot of flexibility because they don’t have to be in remote towns that could be anywhere. So then their, their ability to access talent all of a sudden exponentially grows. So, so there’s some really progressive thinking that, you know, has the fundamental to start disrupting the way people go about hiring talent. So these are typical things that, you know, successful companies that have gone through sessions in the past have focused on, um, you know, liquidity will become another issue. So really getting a good handle on where your costs are. Um, we see that as a, as a big focus area. How do we help customers get that visibility? And really as a system of record, a lot of that information is sitting in there. Um, but you know, part of what we do now is help them extract that so they can make some informed decisions around where those costs are and where they’re going to cut it. And then I think the last big point that they need to focus on is the scenario planning component, which is really then starting to predict out, you know, if we, if we’re talking about a short cycle, you know, there’s a scenario if this continues as another scenario. So obviously tools like analytics cloud and integrated business planning are really the tools that then start to change the game in terms of how you model those scenarios and they will have different business outcomes.
Do you have anything to add to that? Maybe you could also provide a perspective from South Africa.
What I think, um, COVID 19 has done, uh, is that it has really forced mining companies to actually rethink their strategies. You know, mining companies are not immune to volatile commodity cycles and so on. And they deal with that on a day to day basis, but they, they’re not necessarily, uh, being prepared to deal with COVID 19. Um, you know, it was, is one, um, you know, Enedis, uh, described it, uh, it is a black Swan event. Companies, you know, I’ve been found scrambling, um, the response to the crisis. So the first thing, uh, and I think moving forward, um, is that companies will put a lot more thought and effort into ensuring that they can sustain a crisis of, of this nature if it does come in the future.
Um, and you know, uh, mining Indaba in Johannesburg, out in February, the, the CEO of Ivanhoe mining, you know, actually made a statement, which I think it scared a lot of, uh, people that were there in the audience, but it was also kind of a wake up call. You know, you said that, uh, you know, uh, COVID 19, uh, will not be the last of, you know, a virus or pandemic of this type. Um, and we need to be prepared for waves, uh, and waves of more of these types of bandana. So better preparedness. Uh, obviously leads to people, to companies thinking about, you know, how they can do this scenario planning to become more predictable in how they will, uh, you know, implies using, uh, the types of tools that we provide to do this. Um, uh, so that you can have a view of your entire operation, uh, you know, from exploration right across, through to processing to logistics, transportation and sales and marketing, uh, so that you have your finger on the pulse, um, you know, per se.
Uh, and then the other area obviously is an area which mine is, have been focusing on for some time now, but they’re just going to become more better at it and leveraging technology to a great extent. And that is to, uh, ensure that, uh, they are in a, in, um, in a healthy financial position to be able to sustain that. Um, we have a large number of junior minors, um, in South Africa. Uh, and, uh, you know, they, they were, um, you know, totally unprepared. In fact, we’ve had, uh, already two of the first victims. Uh, you know, we have now to add to file for bankruptcy, um, because you know, the balance sheets, we’re not in a, in a, in a very healthy position. So the financial scenario planning, uh, ensuring that you can leverage your balance sheet, making sure that you have adequate liquidity in place.
Uh, and all of these, you know, require the types of technologies that we generally provide to, uh, you know, to uh, to our minds. So those are the, you know, those are the key areas. And then of course, uh, as I’ve said before, um, I think there’s going to be a serious conservation being given into, uh, a greater level of automation minds have been generally very conservative. Again, South Africa to invest in those types of, uh, you know, uh, technologies and initiatives. But, uh, COVID 19, uh, in I would say is going to, um, encourage a great investment, uh, into automation, um, uh, digital transformation.
Yeah. So it’s about being a business that can look ahead using technology to both automate but also to simulate scenarios to be prepared for a potential next crisis. Cause. I do think that is very possible. Shapira and Anton, thank you so much for joining me on this episode of our podcast and making us a lot more smarter about what’s going on in your industry. So thank you for that.
Well, thank you. Pleasure to join you.
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