BDO’S ENERGY 2020 VISION: THE NEAR FUTURE OF CONTENTS

EXECUTIVE SUMMARY...... 01

GLOBAL PREDICTIONS...... 02

THE NEAR FUTURE OF MINING IN ...... 08 01 EXECUTIVE SUMMARY

Driverless technology, deep-sea internal controls. If not, they risk SUMMARISING BDO’S 4. RENEWABLES: excavations and mining expeditions seeing their entire operation crippled ENERGY 2020 VISION FOR By 2020, renewables will account for on the moon were once just the ideas by a single attack. MINING: one-quarter of the world’s electricity of sci-fi movies. generation as dependence on Decreased coal consumption in 1. ROBOTS: wanes. Today, they’re realities or just around China—the world’s largest coal By 2020, robots will replace more the corner. And by 2020, we expect consumer—meanwhile, is slowing than 50 percent of miners, and mining 5. IoT IN MINING: (most of) them to be the norm. global demand for the commodity. As accidents will be cut by 75 percent. Global mining companies leveraging dependence on coal wanes, we expect Half of the miners will themselves Internet-connected sensors and As low commodity prices persist, renewables to account for one-quarter be retrained to run the technology automated drillers in mines will mining companies are under pressure of the world’s electricity generation controlling the robots. decrease their per ton digging costs by to reimagine their business models. by 2020. more than 30 percent. Those that have incorporated 2. EU CONFLICT MINERALS: technology into their operations have Reflecting on this period of transition, Supply chain transparency will take Agree or disagree with our CHARLES DEWHURST seen their revenue streams live on, BDO’s Global Natural Resources team the compliance spotlight for 2020 as predictions? We want to know—reach t: + 1 713-548-0855 while those that haven’t have fallen is looking towards the future to help companies gear up for the European out to us here. short. mining companies anticipate and plan Union’s Conflict Minerals Rule, e: [email protected] CHARLES DEWHURST for the challenges and opportunities effective in 2021. Mining is in the early stages of the Global Natural Resources ahead. We believe that to prepare for Fourth Industrial Revolution, or 3. CYBERSECURITY: Industry Practice Leader success in 2020 and beyond, mining Industry 4.0, and further digitisation By 2020, activist hackers will launch +1 713-548-0855 “We expect renewables companies must strive to become is on the horizon. The value of at least five cyberattacks on mines [email protected] to account for one-quarter “Lean, Green, Digital” machines. harnessing technology is obvious. around the world in Permanent Denial of the world’s electricity Driverless technology increases The global predictions presented in of Service (PDoS) attacks aimed at generation by 2020.” mining output by 15 to 20 percent this report are based on research and eliminating the environmental and while cutting fuel and maintenance collective input from BDO’s Natural social threats they pose. They’ll use costs by 10 to 15 percent and 8 Resources and Mining leaders. In workers’ connected devices to initiate percent, respectively. It also improves addition, the practice leaders from the attacks. mining safety exponentially. At five countries (Australia, Canada, the same time though, these South Africa, the United Kingdom, Internet-connected technologies and the United States) have provided open the mining industry up to predictions for the industry in their new cyberattack vectors that they local markets. must hedge against through proper 02 BDO’S ENERGY 2020 VISION: THE NEAR FUTURE OF MINING GLOBAL PREDICTIONS 03 WHEN ROBOTS RUN THE MINES PREDICTION 1

ROBOTS

BY 2020, ROBOTS WILL Robots will be at the forefront of The rise of the robot is not a death Digitisation also promises to reduce REPLACE MORE THAN 50 most mineral extraction by 2020, knell for the mining workforce but safety risks for miners. Not only will PERCENT OF MINERS, AND reducing safety risks for miners, will inevitably lead to a demand for robots assume the most dangerous MINING ACCIDENTS WILL maximising output, and streamlining reskilling. Traditional operational tasks, but they’ll also be key to BE CUT BY 75 PERCENT. costs. By 2020, we predict robots positions—drilling, blasting, and minimising damage if disaster strikes. will replace most miners. Most in driving—will be downsized, but Snake robots and the smart sensors HALF OF THE MINERS WILL the workforce will be retained, but replaced by demand for remote they’re equipped with will be further THEMSELVES BE RETRAINED advances in technology and remote operators and maintenance optimised to capture real-time TO RUN THE TECHNOLOGY mining equipment will transform personnel to create the new version data to predict or quickly identify CONTROLLING THE what that workforce looks like. of the miner. Emerging digital equipment malfunctions and closely ROBOTS. mining jobs—engineers, software track miners’ exact locations and The global mining industry is already developers, and data processing and vitals. With the aid of robots and new well-acquainted with autonomous data analytics specialists—are more technology, the number of mining technology. Self-driving trucks and likely to attract the technologically fatalities will be cut in half by 2020. autonomous drillers and muckers savvy millennial workforce. By are employed onsite at almost Mining is in the early stages of the 2020, mining automation and data every large multinational company’s Fourth Industrial Revolution, or analytics will be key components of mines. “Snake robots”—named Industry 4.0, and further digitisation the curriculum for mining engineers. for their agility—are equipped is just around the corner. with Internet-connected sensors and used to navigate narrow mine shafts and collect data. Drones are also beginning to play a role in mapping the topography of a mine and capturing aerial images of inaccessible areas of the mine to identify possible vulnerabilities and areas of tension. Remote vein miners (RVMs) are being developed to eliminate the need to drill and blast to excavate rock—potentially reducing rock stress that can lead to seismic events. 04 TRANSPARENCY COMBATS CONFLICT PREDICTION 2

EU CONFLICT MINERALS RULE

SUPPLY CHAIN The EU’s efforts to stem trade in • The Organisation for Economic TRANSPARENCY WILL minerals that finance armed conflicts Co-Operation and Development TAKE THE COMPLIANCE and terror groups will turn a spotlight (OECD) laid out a five-step SPOTLIGHT FOR 2020 AS on global mining companies’ supply framework for the due diligence COMPANIES GEAR UP FOR chains by 2020. requirements: THE EUROPEAN UNION’S The EU’s Conflict Minerals Regulation, -- Create strong company (EU) CONFLICT MINERALS effective in 2021, establishes supply management systems RULE, EFFECTIVE IN 2021. chain due diligence for imports of -- Identify and assess supply chain tin, tantalum, tungsten, and risk (3TG)—used to produce phones, cars, -- Implement a program to and jewellery. The rule aims to ensure respond to such risks European industries use responsibly- sourced minerals, stemming proceeds -- Conduct an independent third- that finance armed conflict in high- party audit of supply chain due risk areas. diligence What the rule means for the mining -- Submit annual reports on supply chain due diligence. industry: • EU-based 3TG importers and All upstream companies are subject their international supply chain to the due diligence requirements partners—smelters and refiners— when they import—the riskiest will need to update their supply area of the supply chain—as are chain due diligence downstream companies that import metal-stage products. This regulation • Additionally, 3TG importers in the EU will need to identify the will likely create a lowest common smelters and refiners in their denominator effect across the global supply chains, confirm their due mining industry—for EU-based 3TG diligence practices comply, and importers and their international report insufficient supply chain supply chain partners—requiring the due diligence entire industry to put supply chain due diligence at the forefront. 05 HACKTIVISTS TARGET MINES PREDICTION 3

CYBERSECURITY

BY 2020, ACTIVIST HACKERS The mining industry is no stranger PDoS attacks are the next generation operating controllers and connected WILL LAUNCH AT LEAST FIVE to environmental scrutiny. of Distributed Denial of Service devices. Damage and disruption to CYBERATTACKS ON MINES Advances in technology have (DDoS) attacks—which temporarily automated equipment could also AROUND THE WORLD IN introduced more sustainable mining disable operations—and aim for jeopardise the safety of workers in PERMANENT DENIAL OF methods, including the emerging permanent destruction. In a PDoS the mines—as many of the systems practice of bioleaching, in which attack, hackers’ goals include in place are designed to monitor and SERVICE (PDOS) ATTACKS companies extract minerals by destroying physical equipment and detect dangerous conditions. AIMED AT ELIMINATING using biological assets instead of structures, disabling services, and/ THE ENVIRONMENTAL AND harmful chemicals. Despite those or wiping out data. For global mining SOCIAL THREATS THEY POSE. advancements, environmental companies in the early stages of THEY’LL USE WORKERS’ concerns persist, including water harnessing big data, losing seismic CONNECTED DEVICES TO and soil contamination, carbon and reserves data would be damaging LAUNCH THE ATTACKS. emissions, and impact on animal life. to their ongoing operations. Pressure from environmentalists is While the rapid acceleration and set to increase by 2020. In fact, an adoption of new technology will be emerging type of environmentalist— instrumental in bolstering mining’s activist hackers (hacktivists)—will future, it will also be the sector’s soon have their targets locked on Achilles heel when it comes to the mining industry. By 2020, there cybersecurity. The industrial control will be at least five Permanent Denial system, the central hub controlling of Service (PDoS) cyberattacks on a mine’s automated operations, mines around the world, motivated could serve as the hacker’s point by eliminating the environmental and of entry into the mine’s remote social threats they pose. 06 COAL STRIPPED OF SOME POWER PREDICTION 4

RENEWABLES

BY 2020, RENEWABLES Decreased coal consumption in Mining plays an integral behind- In 2019, Nautilus Minerals, a WILL ACCOUNT FOR ONE- China—the world’s largest coal the-scenes role in developing Canadian mining firm, is set to QUARTER OF THE WORLD’S consumer—is slowing global demand renewable energy. Electric vehicles, launch one of the first large deep-sea ELECTRICITY GENERATION for the commodity. According to the wind turbines, and solar panels rely mining ventures in the Bismarck Sea AS DEPENDENCE ON COAL International Energy Agency, global on minerals like aluminium, , with the aid of remote-controlled WANES. coal consumption decreased about , and various emerging, rare robots. The excursion is forecast to 2 percent last year. In confluence metals. Powered by new technology, produce more than 72,500 metric with the rapid growth of renewables, deep-sea mining is allowing mining tons of copper and more than 4.5 the world’s energy mix is set for a companies to tap into previously metric tons of gold. The International shakeup. By 2020, we predict that inaccessible reserves of copper, Seabed Authority, a United Nations renewables will grow to account for , and , among others, regulatory body, has granted 25 one-quarter of the world’s electricity beneath the ocean floor to fuel contracts to nations including China, generation as dependence on coal increased demand for these minerals. India, Japan, and Brazil to embark on wanes. similar deep-sea mining projects. By 2020, further advancements will be made to overcome one of renewables’ largest hurdles: energy storage. The world’s largest lithium ion battery—built by Elon Musk in November 2017—is a 100-milliwatt (MW) battery storage farm located in Australia. Come 2020, the capacity of energy storage is likely to evolve well beyond 100MW, solidifying renewables’ role in the world’s energy mix. 07 AN ARSENAL OF AUTOMATION BOOSTS PROFITABILITY PREDICTION 5

IOT IN MINING

GLOBAL MINING COMPANIES In an environment of subdued Tapping into new technology is key These savings factor in reduced LEVERAGING INTERNET- commodity prices, the value of to streamlining operations, reducing labour costs, increased output, a CONNECTED SENSORS AND harnessing technology is clear. expenditure, and enabling companies decrease in the number of safety AUTOMATED DRILLERS IN Mining companies’ end consumers to keep their prices competitive. incidents, and companies’ ability to MINES WILL DECREASE THEIR closely monitor the price of The International Institute for enhance decision-making capabilities commodities and are sensitive to Sustainable Development estimates leveraging the vast amount of data PER TON DIGGING COSTS BY the slightest uptick. For automakers, driverless technology, for instance, collected by smart mines. MORE THAN 30 PERCENT. for example, steel is a significant increases mining output by 15 expense on their books. When to 20 percent, while decreasing multiplied by a few thousand metric fuel and maintenance costs by tons, a variance of a few cents 10 to 15 percent and 8 percent, on steel price could incentivise respectively. Self-driving trucks are automakers to find a new supplier. just the tip of the iceberg. Global Global demand is not expected mining companies that digitise to wane. In fact, steel and mining nearly all their drilling—relying on a company ArcelorMittal forecasts a combination of automated drillers 36 percent increase to automakers’ and Internet-connected sensors— global demand for steel by 2020. will recognise far more significant However, which global mining savings. By 2020, we predict global companies win that business is up mining companies’ per ton digging for debate. costs will decrease by more than 30 percent because of automation. 08 BDO’S ENERGY 2020 VISION: THE NEAR FUTURE OF MINING IN CANADA 09 DIGITAL: NO LONGER A BUZZ TERM PREDICTION 1

MINING DIGITIZATION

BY 2020, "DIGITAL" WILL NO Digitization may not necessarily be LONGER BE A BUZZ TERM, new to mining, but the industry is AND BLOCKCHAIN WILL just now figuring out how to get the BECOME A NECESSITY. most out of it. Companies like Goldcorp, CISCO, AWS, Microsoft, and Barrick Gold have sponsored numerous developer hackathons in recent years. The sector has seen multiple waves of digital transformation since the 1950s—from computer simulations to modern GPS-controlled heavy haulers. But how much has the industry benefited from previous digital waves, and how much will it benefit from the latest wave? We see blockchain as the next wave—becoming a necessity to Canadian mining companies by 2020. Think of blockchain as a version of the Internet that can carry out various transactions but is virtually impossible to hack. It has the potential to revolutionize financial services by making transactions cheaper, quicker, and more transparent and trustworthy. Blockchain in 2020 will change the mining and metals industry in Canada by lowering costs in mid and back offices. 10 DIVERSIFYING THE WORKFORCE PREDICTION 2

EXPANDED LABOR FORCE

BY 2020, NEW AND The mining industry, both in Canada At the end of 2017, in an effort to RECENT IMMIGRANTS, and abroad, faces many human combat this problem, the Canadian ABORIGINALS, AND resources challenges. We see government announced a 7 percent WOMEN WILL CONTINUE TO diversification as the answer. increase in its target for permanent resident admissions. Other proposed MAKE UP THE PERSONNEL Competition for skilled workers actions to address the mining SHORTFALL IN CANADA’S is fierce both within Canada and workforce shortage in Canada globally. In fact, companies in other GROWING MINING SECTOR. include: countries are actively recruiting Canadian graduates and workers, • Promoting the industry to youth, making retention challenging and aboriginal peoples, and non- recruitment highly competitive. traditional worker groups According to Natural Resources • Developing programs that bring Canada, the Canadian mining back retired workers, retain older industry will need to hire 106,000 workers, and increase mentoring new workers by 2025. • Improving educational programs and employer-provided training • Introducing standards for key occupations to facilitate domestic worker mobility and skills recognition. 11 BITCOIN OR GOLD: THAT IS THE QUESTION PREDICTION 3

FINANCIAL REGULATION

BY 2020, THE DEBATE OVER Bitcoin or gold—that is the question BITCOIN VERSUS GOLD for the mining industry in Canada. WILL ONLY INTENSIFY AS But the answer may be harder to FINANCIAL REGULATORS come by as financial regulators seek LOOK TO CONTROL greater control over the former. THIS NEW MEDIUM OF We see several factors—including EXCHANGE AND AVOID regulation, meteoric rises and falls in ANOTHER DOTCOM BUST. Bitcoin value, currency wars, crypto currency hacking, and another major recession—putting gold back in the top seat. Governor Stephen Poloz is sounding the alarm on Bitcoin, calling the purchase of the cryptocurrency “closer to gambling than investing.” In a December 2017 speech Poloz said Bitcoin is an unreliable store of value and does not constitute “money.” He added that buying the cryptocurrency “means buying risk” and urged those flocking to it to “read the fine print.” 12 INTEGRATING SUSTAINABLE STRATEGIES ACROSS SUPPLY CHAIN PREDICTION 4

CLEANTECH

BY 2020, 30 PERCENT OF In such critical times for the mining Driven by emerging economies, MINING INDUSTRY LEADERS industry, creating integrated demand for mineral resources WILL HAVE DEFINED AND environments across equipment, continues to rise, but mining IMPLEMENTED PLATFORM maintenance, planning and companies are under ever-increasing CLEANTECH STRATEGIES. scheduling, and execution is key to pressure from governments, addressing concerns around climate customers, and other stakeholders change. to operate in a sustainable manner. Many key industry players in the mining sector have developed energy saving strategies and are investing directly into renewable energy infrastructure. IAMGOLD, a Canadian firm, signed a $20 million, 15-year power agreement for a solar installation at its off-grid Essakane mine in Burkina Faso. India is having a clean energy renaissance, with key mining companies joining in. Chile, meanwhile, is seeing a huge clean energy boost from its red metal mines. In 2020, climate change concerns, greenhouse gases, and regulation will continue to be top of mind and a major issue for the mining and metals sector—a major consumer of energy and primary user of land. New initiatives to combat climate change will be introduced, and there will be an escalating need for companies to respond to increased regulation of emissions. 13 SHORING UP SPENDING ON DEFENSE PREDICTION 5

CYBERSECURITY

CYBERSECURITY The key to mitigating the cyber Cybersecurity risk mitigation plans SPENDING ACROSS IT threat will be information sharing. for mining organizations should focus on: AND OPERATIONS IN THE Companies like Goldcorp and a group MINING INDUSTRY WILL of Canadian miners have moved to • Operational technology: This INCREASE 20 PERCENT create a joint task force to increase function should work with YEAR-OVER-YEAR BY 2020. knowledge sharing specific to the real information technology to make and present cyber warfare dangers to sure the architecture around mining assets. remote access is well-secured. • Emerging technologies: Luis Canepari, vice president of IT Mobile technologies, machine at Goldcorp, sounded the alarm automation, and cloud integration bell in 2017 at a security are often adopted quickly, and conference after hackers penetrated before they can be tied into the company’s computer network cybersecurity systems. Beware: and stole troves of data including Their ease of use can provide a bank accounts, wire transfers, and window of opportunity for hackers. payroll records. • M&A: These generate a “This was a real eyeopener for us and huge amount of confidential we were quite frank about what had information. Security needs to be happened and what we needed to loopedin early in the process to do better,” he said. “You can’t wrap make sure that information is safe CONTACT yourself in a cocoon. Secrecy doesn’t and both companies involved are help anyone.” protected. Sean Bredin Today, virtually all parts of the • Third-party management: (National Mining Leader) mining supply chain are connected Different parts of the supply chain +1 647-795-8008 to the Internet. Ventilation and can have fewer security controls conveyor systems are managed and can put the whole ecosystem [email protected] at risk. Any data generated by supervisory control and data Bryndon Kydd (Partner) acquisition (SCADA) systems. Even between two companies needs to new hauling trucks come with 100 be protected, shared, and stored +1 604-443-4713 wireless sensors to be used. securely. [email protected] 14

This publication has been carefully prepared by BDO.

‘BDO’, ‘we’, ‘us’, and ‘our’ refer to one or more of BDO International Limited, its network of member firms (‘the BDO network’), and their related entities. BDO Inter-national Limited and each of its member firms are legally separate and independent entities and have no liability for another such entity’s acts or omissions. Neither BDO International Limited nor any other central entities of the BDO network provide services to clients. Please see www.bdo.global/about for a more detailed description of BDO International Limited and its member firms. Nothing in the arrangements or rules of the BDO network shall constitute or imply an agency relationship or a part-nership between BDO International Limited, the member firms of the BDO network, or any other central entities of the BDO network. BDO is the brand name for the BDO network and for each of the BDO member firms.

This publication contains general information only, and none of BDO International Limited, its member firms, or their related entities is, by means of this publication, ren-dering professional advice or services. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact a qualified professional adviser at your local BDO member firm to discuss these matters in the context of your particular circumstances. No entity of the BDO network, its partners, employees and agents accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the informa-tion in this publication or for any decision based on it.

Editorial: BDO Global Office, Belgium

Copyright © BDO January 2018. Brussels Worldwide Services BVBA. All rights reserved.

www.bdo.global