Will These 2 Companies Bring Mining's Future Into the Present?

Technology is increasingly changing even the most mundane industries—and that's increasing true in the mining space.

Jun 21, 2014 at 10:13AM

Rio Tinto (NYSE:RIO) isn't modest. It's working on a technology initiative that it's dubbed the "Mine of the Future." In fact, it's trademarked that name. ABB Limited (NYSE:ABB), meanwhile, has introduced 3D mine monitoring technology. Mining has gone high-tech and it means big (and positive) changes ahead for an industry that's currently facing headwinds.

Grunt work
If you aren't in the mining industry, you probably envision a bunch of guys with pickaxes hacking around underground like some black-and-white image taken decades ago. That's far from the truth of the mining industry, though. For example, Rio Tinto recently announced that it has created what amounts to a centralized control room for some of its key operations.

(Source: Public Domain, via Wikimedia Commons)

The "Processing Excellence Centre" is located in Australia and oversees seven Rio Tinto mines across Mongolia, the United States, and Australia. It allows Rio Tinto to keep tight control over what's going on at its mines, but also eases the transfer of best practices between mines. The impressive part is that Rio Tinto has integrated technology in its operations to such a degree that it can now harness that power in new ways—such as a central monitoring center located thousands of miles away.

The results are meaningful. In 2013, Rio Tinto reduced its operating costs by $2.3 billion while at the same time increasing production across its operations by 9%. Capital spending was 26% lower year over year and production was up. Clearly Rio Tinto is doing something right.

What else is Rio Tinto doing?
The centralized control room is just one example of Rio Tinto's efforts. It is also introducing high-tech products like driverless trucks and trains. These efforts increase throughput because taking the humans out of the picture increases efficiency. Right now, efforts like this are helping to support margins under pressure from low commodity prices. When prices head higher again in this historically cyclical industry, however, the benefits from Rio Tinto's technology efforts will remain.

It isn't just Rio Tinto looking to do this, either. This high-tech trend is taking place throughout the mining industry. That's an opportunity for tech-savvy providers like ABB Limited. ABB Limited's new "Mine Location Intelligence" technology is a perfect example of what computers can do for miners.

(Source: BennedettaG, via Wikimedia Commons)

This application will allow miners to monitor their equipment and personnel on a real-time basis in 3D. That should help with safety and improve efficiency, as a mine turns into something of a video game where pieces can be moved around as events occur. That removes an information void and time delays that might hamper mine owners today.

While that's nice for the miner, ABB Limited not only gets to sell a product, but software like this is usually accompanied by support contracts. Increasing such service-based revenue is a key focus at ABB Limited because it is recurring in nature in an industry that's marked by lumpy big ticket deals.

In fact, between 2010 and 2013, ABB Limited was able to improve its services penetration by roughly three percentage points. While that leaves the company's "service order share" just below 20%, it speaks to the growth potential still ahead as ABB Limited introduces new and increasingly complex technologies to its industrial customers.

The future is now
With the mining industry suffering through a period of low prices, cost containment has become paramount. However, companies like Rio Tinto show that spending money on new technology isn't out of the picture if it can help improve performance. That's why ABB Limited should find a very receptive market for its new 3D mine imaging technology.

The industry's high-tech push is another reason to keep a close eye on the mining sector. When commodity prices start to move higher, the gains from these tech-led process improvements will mean fatter margins.

Do you know this energy tax "loophole"?
You already know record oil and natural gas production is changing the lives of millions of Americans. But what you probably haven’t heard is that the IRS is encouraging investors to support our growing energy renaissance, offering you a tax loophole to invest in some of America’s greatest energy companies. Take advantage of this profitable opportunity by grabbing your brand-new special report, “The IRS Is Daring You to Make This Investment Now!,” and you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers