Can Rice Sorters and Car-Assembly Lines Inspire Mining Firms?

Miners look to the food industry and others to drive efficiency. Aivars Lode avantce

Can Rice Sorters and Car-Assembly Lines Inspire Mining Firms?

Rio Tinto, BHP Billiton Are Among Those Looking to Other Industries for Cost-Cutting Ideas

By

Rhiannon Hoyle in Sydney And

Alex MacDonald in London

July 28, 2014 2:04 p.m. ET

BHP Billiton and Mitsubishi joint venture BMA's Goonyella Riverside coking coal mine in Queensland, Australia. Rhiannon Hoyle/The Wall Street Journal

PERTH, Australia—Global mining companies have scoured deserts, mountains and jungles for resources to rev up their profits. More recently, the search has taken them to a different environment: the factory floor.

Car-production lines and machinery that sorts rice could help companies such as Rio Tinto PLC and BHP BillitonLtd. BLT.LN -0.29% wring greater profits from mining. Whereas miners spent a decade spending billions on acquisitions and new projects, they are now taking an opposite approach—conserving cash while waiting for commodity prices to recover.

The hills around Kennecott, Utah, are home to one of the world's biggest copper mines. Recently, Kennecott has also become the location of a machine the size of four London double-decker buses that Rio Tinto RIO.LN +0.10% hopes will cut down on the quantity of rocks that need to be crushed in search of copper.

The equipment is supplied by food processor Tomra Systems AS A, using technology it developed to sift everything from rice grains to scallops.

"What the food guys did 30 years ago, I see [us applying] successfully into the mining business," said John McGagh, head of innovation at Rio Tinto, one of the world's top five copper miners by output. "Rice sorters can color-sort up to a million objects a second."

When commodity prices started falling in late 2011, global miners responded by shutting pits, selling assets and laying off staff. Rio Tinto last year announced or completed sales of mines worth US$3.5 billion, and is using the proceeds to repay debts.

With the obvious cutbacks already implemented, companies are looking further afield for technology and ideas—to the military, aerospace and automotive industries.

For Lucas Dow, president of the BMA coal alliance in Australia run by BHP Billiton BHP.AU +0.26% andMitsubishi Corp. 8058.TO +0.37% , this shift took him to a Toyota Motor Corp. 7203.TO +0.43% plant just outside Nagoya, Japan. Iron ore is vital to make steel, a key raw material for Toyota's cars. But Mr. Dow was there on other business: to find ways of making mines thousands of miles away more efficient.

"We're certainly looking outside of our own industry, and shamelessly stealing and implementing ideas where it is possible," said Mr. Dow, who is based in Brisbane, Australia.

He said he's taking on many ideas from Toyota, the company that rewrote the book on lean manufacturing with techniques like just-in-time inventory, designed to wring out efficiencies. He wants to run BMA's mines using simple, repeatable processes that can flow without hitting bottlenecks, like a car assembly line.

At Goonyella Riverside, BMA's largest mine, which produces steelmaking coal, an employee recently suggested setting up several Formula One-style pit stops around the more than 12-mile-long mine site to improve refueling of dump trucks, which haul some 300 tons of raw material at a time.

That change came after Mr. Dow, praising the open communication between workers and management at Toyota, asked staff to provide feedback at the end of every shift.

BMA has also held discussions with supplier KomatsuLtd. 6301.TO +1.38% , a major Japanese equipment company, about using data analytics to keep its machinery running longer.

BHP Billiton and Rio Tinto are using so-called big data to fine-tune maintenance schedules so that the engines in their US$5 million trucks can be replaced just in time, rather than as prescribed by the manufacturers.

BMA has been looking at technology that enables mine managers to monitor truck engines remotely for problems—an idea borrowed from jet-engine makers Rolls-Royce Holdings RR.LN +0.09% PLC and Boeing Co. BA -0.11%

At Fortescue Metals Group Ltd. FMG.AU +3.71% —which hopes to lift output from its Pilbara mines in northwest Australia by as much as 13% through improving productivity—managers say a modular building style traditionally used in the oil-and-gas sector saved time and money in the construction of the company's latest processing plant.

Suppliers are also having to be more creative. Joe Mastrangelo, chief executive of General Electric Co. GE -0.78% 's power conversion unit, said miners have typically placed orders for new equipment with little dialogue. "But what we have seen in the past 12 months are a lot more discussions with clients who ask: 'What can you do to make me more efficient?'" said Mr. Mastrangelo. "Our job is to look for these solutions in other industries as mining recovers from its current capital expenditure downturn," he said.

At its Kennecott, Utah, mine, Rio Tinto crushes rocks the size of cars into fine powder to determine what should be kept. The process is costly, requiring lots of energy and water. Much of the crushed rock is simply tossed away.

Rio Tinto says food-processing technology could be a big help. Tomra's equipment uses color sensors to sort rice into white and nonwhite grains, before pressurized air is fired at unwanted grains to get rid of them. Adapting the technology to sort rocks containing iron or copper from barren material could lower costs.

According to Tomra, the technology could reject between 15% to 50% of rock before it is fully processed. It could also lower the mining industry's energy consumption by 15% and reduce the amount of water used by up to 1,050 gallons per ton of ore.

"We wouldn't do it unless the numbers look big and they do," said Rio Tinto innovation chief Mr. McGagh. He declined to estimate the potential savings, or how much has been invested till now.

So far, though, Rio Tinto hasn't been able to use Tomra's rice-sorting technology on a large enough scale. A machine in the Pilbara region was only able to process up to 150 tons of ore an hour, well short of volumes above 1,000 tons needed to make it viable. The Anglo-Australian miner hopes new trials at Kennecott will lead to a breakthrough.