TECHNOLOGY AT WORK

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52 Citi GPS: Global Perspectives & Solutions February 2015 Autonomous Robots Outside the Auto Industry Outside of Autos, autonomous robots will be an important factor in agricultural vehicles, forklifts and cargo-handling vehicles This emerging technology in automation will affect a variety of transportation and material moving jobs. Agricultural vehicles, forklifts and cargo-handling vehicles are imminently automatable, and hospitals are already employing autonomous robots to transport food, prescriptions and samples. 71 Kiva Systems was bought by Amazon in 2012 for $775 million to automate its warehousing, with the company providing robots able to navigate their way around crowded warehouses. Further, the computerisation of mining vehicles is being pursued by companies such as Rio Tinto, seeking to replace expensive labour in remote Australian mine-sites. 72 If such vehicles become commonplace, they will provide a rich resource of big data gathered by sensors that may have many knock-on effects for employment. For example, law enforcement may be affected by the recordings made by vehicles near crime scenes. Improved machine intelligence is behind other advances in robotics. Baxter, a $22,000 general-purpose robot, provides a well-known example. The robot features an LCD display screen displaying a pair of eyes that provide an expressive reaction to user input. Baxter is able to learn new manual tasks by having a human worker guiding its robotic arms through the motions that will be reproduced in completing the task. Baxter then memorises the patterns of the motions and can communicate that it has understood its new instructions. 73 OC-Robotics' robotic snake arm is unique in its ability to manipulate and explore cramped environments. However, its flexibility comes at the cost of increased difficulty in control: it is only advances in machine intelligence that permit its application to plant maintenance. As robot costs decline and technological capabilities expand, robots can thus be expected to gradually replace human workers in a wide range of low-wage service occupations. Alarmingly, it is in these occupations that most US job growth has occurred over the past decades: 74 robotic automation may cause considerable disruption to US employment. Autonomous Mining Natalia Mamaeva Head of European Engineering Research Klaus Bergelind European Machinery Analyst Contrary to other sectors such as Automotive, where our Autos team believe that driverless vehicles won’t be commercially viable until 2025, autonomous mining equipment is available “here and now”, and the incentives to go autonomous are big. Labour is one of the biggest cost drivers for a big miner, contributing to over 30% of a miner’s cash cost. There is also the aspect of safety. Not only is this important in itself, but the safest mines are often the most productive. The adoption so far has been slow, with surface technologies only recently commercially viable. Driverless underground technology has been in place since the 1960s, when LKAB’s Kiruna iron ore mine in Sweden (considered the world’s largest modern iron ore mine) started using driverless underground trains. The presentation of the first fully autonomous drill rig, a year ago, by Atlas Copco and Rio Tinto, added to already autonomous trucks/haulers in surface mining, closing the technology gap further with underground technologies, with now only excavators still in need of manned control. Telematics (condition monitoring) have been in place since the last peak in 2007, monitoring the performance of the equipment to avoid downtime, but the real savings visible is when machines can replace staff, contributing to pure overhead savings but also increasing productivity as autonomous machines move faster, are more precise, and cover longer distances. 71 Bloss (2011). 72 Rio Tinto's computerisation efforts are advertised at http://www.mineofthefuture.com.au. 73 MGI (2011). 74 Autor and Dorn (2013). © 2015 Citigroup
February 2015 Citi GPS: Global Perspectives & Solutions 53 We can see $1.4 billion of savings from introducing full autonomy into just 10% of existing mining trucks, a meaningful number against total operating expenditure reductions of $8 billion so far and $35 billion of cost headwinds over the last decade The Numbers – Calculating the Benefit The biggest saving in applying autonomous technologies is undoubtedly through the possibility to cut labour costs, with over 30% of a miner’s cash costs stemming from staff. According to online media (Unmanned Systems News, Engineering and Mining Journal), it takes 4-5 drivers to operate a truck 24-hours, but up to 10 people in total once support staff are taken into account. Each driver is paid a salary on average of $120,000 per year, thus around half a billion dollars in cash costs for the operation of each truck (excluding the cost of support). According to an article in Wall Street Daily in May 2014, the population of autonomous trucks today is a mere 0.5% of the 40,500 total global population of trucks. Our discussions with BHP suggest that one-tenth of trucks could be autonomous in the near future, whilst the most bullish comments suggest fully automated mines are a reality within the next 10-15 years (according to Unmanned Systems News and Science and Technology World). A simple calculation of the benefits just from cutting down staff (ignoring the increase in productivity) looks as follows: According to a study by Deloitte on the economics of autonomous mining, introducing an autonomous truck could reduce the number of operators by 75%, i.e. 1-2 operators are sufficient instead of 4-5 today. This implies a $360,000 reduction in cash costs, or $1.4 billion in total assuming 10% of the truck population is autonomous (Figure 43). A cost reduction of $1.4 billion is meaningful and compares to about $8 billion of total savings from the majors achieved so far and $35 billion of cost headwinds over the last decade. On the productivity gains and other costs such as maintenance, John Meech at the University of British Columbia in Canada presented his findings in the paper “Simulation of Autonomous Mine Haulage Trucks” in 2012, which showed a 15-20% increase in output, 10-15% decrease in fuel consumption and an 8% reduction in maintenance costs, by shifting to autonomous haulers. Compared to autonomous drill rigs, this is interesting, as Sandvik and Flanders have presented figures showing that autonomous drill rigs can increase productivity by near double the level of autonomous haulers — by 30%, and in some cases by 60% when shifting to autonomous drilling (Figure 44). Figure 43. Implied cost savings by adopting autonomous trucks Truck population (units) No of drivers Salary per Cash costs Savings per Manual Autonomous Total per truck driver ($) per truck truck ($m) savings ($m) ($bn) Today 4-5 120,000 600,000 40,500 203 Implied 1-2 120,000 240,000 360,000 36,450 4,050 1.4 Source: Citi Research, Deloitte, University of British Columbia © 2015 Citigroup
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