1、An untapped goldmine:opportunities for South African mining February 2023By Tycho Mncks,Peter Clearkin,Hans Kuipers,Anas Laabi,Emile Detry,Martin PocquetBoston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportun

2、ities.BCG was the pioneer in business strategy when it was founded in 1963.Today,we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholdersempowering organizations to grow,build sustainable competitive advantage,and drive positive societal impact.Our div

3、erse,global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change.BCG delivers solutions through leading-edge management consulting,technology and design,and corporate and digital ventures.We work in a uniquely collaborative mode

4、l across the firm and throughout all levels of the client organization,fueled by the goal of helping our clients thrive and enabling them to make the world a better place.1 AN UNTAPPED GOLDMINE:OPPORTUNITIES FOR SOUTH AFRICAN MININGHistorically,the mining sector has contributed significantly to Sout

5、h Africas economic growth and employment,supported by a rich natural endowment of mineral resources,including Platinum Group Metals(PGMs),gold,iron ore,and manganese.Currently,the mining sector remains an important engine of South Africas economy,contributing 8%of GDP and providing direct employment

6、 to roughly half a million people.The South African mining sector also has the capacity to contribute to future growth:as developed economies seek to diversify their supply of critical minerals away from Russia and China,and with its variety of mineral deposits,South Africa has the clear potential t

7、o strengthen its position as a supplier of critical minerals,such as PGMs,vanadium,manganese,copper,and nickel.Additionally,early exploration has indicated that there might be potential endowments of future-relevant resources,such as cobalt and magnesium.Despite the opportunities presented by the mi

8、ning sector,the industry faces enormous challenges as it seeks to sustain and grow its position.Large-scale investments and strategic partnerships will be required to unlock the value at stake in the mining sector,and certain prevailing roadblocks must be mitigated.We have identified nine overarchin

9、g challenges that constrain the development of South Africas mining sector to its full potential,as shown in Exhibit 1.While all nine challenges will need attention and action from public and private stakeholders,three areas stand out where mining companies can take decisive action in the short term

10、:improve exploration to uncover new resources and reserves,address the currently unreliable and unsustainable energy situation,and enhance the cost position of day-to-day mining activities.This paper investigates these three areas in greater detail,with recommendations and tangible examples of how m

11、ining companies can act decisively to strengthen their competitive position.The potential of South African miningBOSTON CONSULTING GROUP 2Exhibit 1-Roadblocks|Call for decisive action especially on three focus areasIllegal activities and corruptionIllegal mining,criminal activities and corruption th

12、reated safety and security 7Unreliable infrastructure Deteriorating transport infrastructure(ports,rail)limits competitiveness8Aging mining sector Various assets are nearing end-of-life,requiring substantial investment9Source:SNL data,BCG and analysisExhibit 1-Roadblocks|Call for decisive action esp

13、ecially on three focus areasUncompetitive policy with heavy com.dev.needsUncertainty in policy;need to streamline processes and enhance transparency4Wanting talent pool Funding for skills development and capacity building is limited5Poor perception of South Africa Overarching perception of South Afr

14、ica as a complicated location for investment 6Limited explorationPoor quality and outdated geo-maps inhibit exploration for high-demand resources1Unreliable,costly and CO2-intense electricity Unreliable power,rolling loadshedding reliant on carbon-in-tense generation,costly tariff increases2Not cost

15、 competitive SAs mining is comparatively expensive due to structural and local problems 33 AN UNTAPPED GOLDMINE:OPPORTUNITIES FOR SOUTH AFRICAN MINING1 Sample of countries selected based on value of mineral production,excluding mostly petroleum-producing countries.Limited exploration activityPoor qu

16、ality geo-maps and suboptimal cadastral system setup inhibit exploration for high-demand resources.According to SNL data on mining exploration maps,South Africa scores poorly relative to international benchmarks with a score of 2,significantly lower than China(score of 5),as well as an average of 3.

17、2 across the sample of countries1.This problem is exacerbated by an antiquated cadastral system that is hard to access,with limited data granularity and poor data formats.This poor quality of prevailing geo-mapping and an outdated cadastral system cause a lack of exploration appetite,limiting the co

18、untrys ability to uncover new deposits and identify new future-relevant mineral types to drive growth in the industry.A renaissance in exploration is required to breathe new life into South Africas mining industry.This resurgence in exploration will rest on improved analytics and new technologies ap

19、plied to exploration,such as AI,which can enable more effective,cheaper,and faster exploration efforts.Addressing roadblocks to growth for South African mining BOSTON CONSULTING GROUP 4Deep-dive:AI to enhance exploration success An example of an emerging,analytically driven approach to increase effi

20、cacy and cost of exploration is combining satellite imagery(e.g.,from Descartes)with drilling data sourced from mining companies.BCG is developing an integrated Artificial Intelligence(AI)approach to bring those two sources together,which helps to enhance exploration success even in the absence of d

21、iligent (cost-and time-intensive)geo-mapping efforts.Expensive,unreliable,and unsustainable electricity South Africas electricity is costly,unreliable,and unsustainable,with costs the fourth highest among its peer group of mining countries,a record 1600 hours of load-shedding in 2022,and coal-fired

22、plants making up 80%of installed capacity.South Africas unreliable electricity supply is a major barrier to growth in the mining sector with 1,600 hours of load-shedding and 500 hours of load curtailment in 2022.Unfortunately,load-shedding is a reality the country likely must cope with for the fores

23、eeable future as electricity demand growth expectations at 2%CAGR meet supply constraints due to closures of aging coal plants and projections of worsening EAF towards 2025.Meanwhile,the building of renewable electricity and alternative energy sources will take time to fill the gap.Exhibit 2-Poor qu

24、ality geomaps constrain exploration AI as a mitigation measureSouth Africa has poor quality maps relative to international peer group but AI-based approach can increase exploration efficiency in the short runSource:SNL data,BCG and analysisCHNINDUSAPOLGHNCANMEXTURKAZUKRCHLZMBRUSZARIDNBRADEUNGAPHLCOL

25、Miner drilling dataBCG AI capabilitiesBCGs AI processes drilling data and satellite imagery to predict best locations for explorationDescartes satellite imagery01223455 AN UNTAPPED GOLDMINE:OPPORTUNITIES FOR SOUTH AFRICAN MININGSouth African electricity is also among the most expensive of its peer g

26、roup of mining countries,with costs per kWh higher than Australia and the fourth highest in our sample.With the recently approved tariff hike of 19%by the National Electricity Regulator of South Africa(NERSA),these costs will only continue to rise.Additionally,the high prevailing share of coal power

27、 generation in South Africas energy mix will penalise local(mining)companies.As key regions adopt carbon border taxes and other instruments in the fight against climate change,the relative competitive position of materials mined and processed in South Africa decreases.This creates a clear imperative

28、 for the South African mining sector to transition towards cleaner and more reliable sources of electricity,such as through renewable self-generation.South Africas current energy policies enable electricity to be generated by businesses for their own consumption,and miners are already seizing the op

29、portunity for cleaner,more reliable electricity.For example,Gold Fields was among the first with a 40 MW solar build at its Westonaria-based South Deep facility,while larger projects have been initiated by Anglo American(with a pipeline of 600 MW of projects in partnership with EDF Renewables)and Ri

30、o Tinto(150 MW for Richards Bay Minerals assets).To further facilitate investments in renewable generation for their facilities,mining companies will benefit from policy support from the government to fast-track licensing applications and provide regulatory certainty on embedded generation.Even with

31、 todays policy landscape,though,investments in renewable energy sources by mining companies can make a meaningful difference.International cost competitivenessSouth African competitiveness in international markets is diminished by high costs and low productivity but this can be turned around by new

32、technologies and advanced analytics.Digital technologies,especially in labour-intensive industries like mining,are often perceived as primarily reducing jobs in the respective sector.However,digital technologies applied to mining operations can enable substantial improvements in productivity and rec

33、overy,conserving mining operations competitiveness and ensuring they are commercially sustainable in the future.In addition,specific digital interventions such as enhancing recovery can be net-positive.Embracing the digital transformation will allow the mining sector to remain a sustainable employer

34、 in South Africa and advance towards higher-skilled job profiles and safer working environments.Artificial intelligence(AI)and advanced analytics have several high-potential use cases in the mining sector that South African miners should prioritise to boost international competitiveness.Mining compa

35、nies that invest in AI and advanced analytics in their maintenance and operations activities seek to unlock significant value from increased productivity.Critically,these tools can also be designed to work even with limited or incomplete data sets and can positively impact a variety of mining compan

36、ies with differing levels of digital maturity.Jointly with mining clients,BCG has successfully applied these tools in global mining contexts with two key use cases explored in this paper:advanced analytics in mining operations and AI in maintenance activities.Exhibit 3-Electricity supply gap expecte

37、d to widenElectricity capacity planned decisions vs demand forecast(2020-2030)(GW)Demand growth and supply constraints expected to create a widening supply gap202051,64353,23166,60176,46051,64354,08057,55757,36754,55653,04051,86551,39049,74048,69020224202520262027202820292030Source:Eskom

38、annual report;Adjusted IRP data;IEA Data Services;CSIR Energy Centre;IPP Projects website,NBI-BCG Analysis24GW market size gap to be filled by 2030Demand forecast(NBI)Installed CapacityCommitted/Already Contracted CapacityAdditional Capacity(IRP Update)3,6622,5515001,0001,8705,7209,52013,02018,47023

39、,570BOSTON CONSULTING GROUP 6Operations processes have the potential for significant improvements in their performance and efficiency thanks to advanced analytical models,and mining companies that invest in advanced operational optimisation can unlock a step-change in their cost competitiveness.One

40、example of a mining company that has embarked on an ambitious journey to unlock the value-at-stake in digital operations solutions is Endeavour,one of the largest miners in the West African region.BCG and Endeavour together built advanced AI and analytics tools to increase the productivity of gold m

41、ining processes,especially in blending and milling boosting throughput and enhancing recovery.To improve the performance of Endeavours blending facilities,BCG applied an optimisation model that defines the best blend to process based on key process constraints.Specifically,the model is provided with

42、 a“budget”or monthly target for gold production,as well as key process criteria,such as limitations on the levels of copper or arsenic in blending mixes.Using Machine Learning,the model is also able to estimate the gold produced by a blend,incorporating both linear and non-linear effects of external

43、 factors,such as rock quality and even rainfall.This model was able to substantially improve blending efficiency,increasing gold recovery rate by 2 percentage points.BCG also built a“digital twin model”based on Machine Learning to optimise Endeavours SAG mill.This model uses a data-driven approach,i

44、ncluding information about the mill itself and other constraints to estimate the throughput of material and predict optimal parameters to maximise throughput.The model offers several advantages over a manual process,improving operator reaction times and allowing for a greater understanding of the mi

45、lls behaviour,while also increasing throughput by 2%relative to historic levels.Use Case 1:Advanced analytics in mining operations at Endeavour.Source:BCG case experienceExhibit 4-Case Study|AI and analytics boost productivity&recoveryDescriptionBlend Optimisation+1.9pprecovery+2%ThroughputA Machine

46、 Learning and optimisation model to maximise gold production by defining the best blend to process,respecting process constraintsA Machine Learning and optimisation model to maximise gold production by defining the best blend to process,respecting process constraintsMove from manual selection of dai

47、ly blend to automatic selection based on process constraints and targeted productionIncrease ability to have longer-term view,e.g.,have full vision of monthly budgetImprove operator reaction time with data driven approachOptimise throughput under operational constraintsUnderstand SAG Mill behaviors

48、better and enable real-time adjustmentsBenefitsImpactSAG Mill OptimisationCase Study|AI and analytics boost productivity&recovery7 AN UNTAPPED GOLDMINE:OPPORTUNITIES FOR SOUTH AFRICAN MININGUse case 2:AI in maintenance.Case Study|The journey towards AI-drive maintenance at a mining company5-10%Produ

49、ction increase 20%Maintenance&spare parts costs savings Assess of the current operational capabilities and definition of a path toward Maintenance 4.0Install advanced condition monitoring sensors&platform to collect data from equipment for further analysis&modelingDigital Maintenance Diagnosis&Roadm

50、apCondition Monitoring SystemJourney to Maintenance 4.0First predictive maintenance use cases to prove value&enable teams to continue transformation effortsLighthouse Use CasesNext level of Maintenance 4.0 journey,starting implementation of the key use cases and enablersScale-up&ReplicationTangible

51、business value associated with AI-driven maintnanceSource:BCG case experienceProcess optimisation is not the only part of mining companies operations that can be improved through AI and advanced analytics.Maintenance is a critical part of a mining companys operations,with improper maintenance contri

52、buting to costly unplanned outages.Knowing when maintenance is needed and what maintenance is most pressing is critical.To improve the quality of their maintenance operations,BCG has invested in capabilities to build AI-based maintenance models.This offering starts with an initial assessment of curr

53、ent operational capabilities,with a defined path towards Maintenance 4.0,through the installation of advanced condition monitoring systems to collect detailed equipment data and linking this data to AI tools with initial predictive maintenance use cases.AI-based predictive maintenance employed in th

54、is way can unlock substantial value by preventing equipment outages and optimising maintenance time:with an estimated 5-10%increase in production and 20%savings in maintenance and spare parts costs on lines where the model is applied.This experience will be delivered to other clients by BCG as a jou

55、rney to Maintenance 4.0(Figure 5).1 On lines where model is applied,not total productionBOSTON CONSULTING GROUP 8South Africas mining sector will not be able to develop without support,in both investments and partnerships.South Africas mining industry faces several critical roadblocks to sustaining

56、and strengthening its role as a substantial contributor to economic growth and social advancement in the country.Nonetheless,a step change is possible by focusing on the biggest roadblocks impeding growth:limited exploration,unreliable electricity,and uncompetitive costs.In these areas,mining compan

57、ies have the capacity to unlock significant value by making the right investments in new exploration solutions,renewable energy,and advanced technologies.While these problems are solvable,support will be required from international partners to achieve the required progress in a timely manner.Local m

58、iners will require support in the form of investments and commercial assistance,as well as non-financial support in the form of skills and technology transfers.International partners willing to make these changes happen and embark on this journey with South Africas mining industry can unlock signifi

59、cant value.South Africa is abundant in high-value materials,hence international partners can tap into a diversified source of supply for critical minerals.In this way,partnering with South African mining companies to support their development can be a win for international stakeholders,for South Afr

60、icas miners,and the broader South African economy.South Africa will need support to reinvigorate the local mining sector9 AN UNTAPPED GOLDMINE:OPPORTUNITIES FOR SOUTH AFRICAN MININGAbout the Authors Tycho Mncks is a Managing Director and Partner and core member of BCGs Industrial Goods practice,focu

61、sed on metals and mining.Since joining BCG in 2007,Tycho has supported mining clients globally across a broad range of functional topics including strategy,operations,and organization.As a member of BCGs global Mining Leadership Team,Tycho drives the firms mining practice in Africa,Europe,and the Mi

62、ddle East.Anas Laabi is a core member of BCGs Industrial Goods practice area.He has over 16 years of experience in large scale digital transformation,end-to-end operations excellence,mergers and acquisitions,post-merger integration,and new market entry strategies.Within the Industrial Goods practice

63、,Anas leads BCGs activities in materials and process industries across North and West Africa.Hans Kuipers is a Managing Director and Partner in BCGs Johannesburg office where he leads the firms Industrial Goods practice in Africa.He is also active in the TMT practice,Private Equity sector and leads

64、the offices Social Impact efforts.Peter Clearkin is a Managing Director and Partner and leads BCGs global mining practice,with a key focus on performance improvement and turnarounds for large industrial and mining clients.In these engagements,Peter advises clients on company strategy,organizational

65、redesign,cost reduction,productivity improvement,and mine strategy and planning.Emile Detry is a Partner at BCG and is mainly involved in industrial goods and commodity products projects across Africa as well as projects in transportation and logistics.Emile has specific expertise in strategic desig

66、n and operational improvement for the mining sector.Martin Pocquet is a Principal at BCGs Gamma division and is focused on the development of machine-learning and optimization tools for a broad spectrum of clients,especially in the Industrial Goods practice area.For Further ContactIf you would like

67、to discuss this report,please contact the authors.BOSTON CONSULTING GROUP 10Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities.BCG was the pioneer in business strategy when it was founded in 1963.To

68、day,we help clients with total transformationinspiring complex change,enabling organizations to grow,building competitive advantage,and driving bottom-line impact.To succeed,organizations must blend digital and human capabilities.Our diverse,global teams bring deep industry and functional expertise

69、and a range of perspectives to spark change.BCG delivers solutions through leading-edge management consulting along with technology and design,corporate and digital venturesand business purpose.We work in a uniquely collaborative model across the firm and throughout all levels of the client organiza

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