In Mining, Size Doesn’t Matter as Much Anymore
Gensource Potash Corporation aims to be a small operation among giants in Saskatchewan’s mining industry. In fact, the would-be potash miner wouldn’t have it any other way.
To its chief executive, Mike Ferguson, bigger isn’t always better these days, especially with the risks involved in going huge, a strategy that had largely dominated thinking in the mining sector globally for several years.
“But now there is a trend to go smaller for a couple of reasons,” says Ferguson, who heads up Gensource, currently in a financing phase to build a project near Tugaske and Diefenbaker Lake. “One, commodity prices have been relatively low, so to get things moving, this is what has to be done to facilitate financing.”
And two, existing megaprojects have shown how costs of construction can spin out of control, he says.
Certainly, the province’s largest miners — Nutrien with potash, and Cameco with uranium — have felt the sting of low prices for the commodities they produce, says Al Shpyth, executive director of International Mineral Innovation Institute, whose members include both companies.
“Potash and uranium are both challenged by the price they’re able to realize for their commodity,” he says. “You’ve seen the uranium industry respond to the low price environment by suspending operations.”
Among the closures are Cameco’s McArthur River mine and its Key Lake milling operations in 2017.
While recent times certainly bolster the notion that going big in today’s mining industry doesn’t always equate with big profits, Shpyth argues that companies such as Gensource are not necessarily proving smaller is better. Rather, the firm’s efforts highlight the importance of innovation in the industry.
“We do see innovation and technology as critical to our industry surviving and thriving in the current and future marketplace,” says Shpyth.
More and more companies, large or small, are implementing new technologies, including a growing array of connected equipment used underground to improve worker safety and automated vehicles for open-pit operations. As well, they are leveraging big data analytics throughout their operations to increase efficiency and reduce costs.
The potential savings for large companies are massive. According to a 2017 study by the World Economic Forum with Accenture Strategy, the mining sector could collectively realize about $190 billion in economic benefits over 10 years from digital transformation. That’s about three per cent of all revenues the industry generates worldwide, Shpyth says.
Ferguson points to a number of innovation processes Gensource aims to implement. One is module mining involving selective solution mining.
Traditional solution potash mining was invented in Saskatchewan, and it’s still widely used, including at K+S Potash Canada’s Bethune potash mine. But this method involves tailings of salt waste. Selective solution mining does not, Ferguson says.
What’s more, the company plans to scale operations to meet customer demand. Even before putting a shovel in the ground to build a mine, Gensource has signed an agreement to supply a major fertilizer producer for 10 years. And for now, one customer is all the company needs.
“We could scale up these techniques for a big operation if we wanted to, but we purposefully entered this market to be small,” Ferguson says. “It’s all about scaling to the market conditions.”
Paul Benson, president and chief executive of SSR Mining Inc., a multinational firm that operates the Seabee Gold Mine in the northeast part of Saskatchewan, agrees innovation and technology are critical, as is exploration.
The company is investing US$6 million for underground and surface exploration activities at the Seabee gold operation, expected to produce more than 100,000 ounces of gold this year.
Size no longer matters as much, he says, but that doesn’t mean operations must be small to be viable. Rather, projects must be more efficient.
“The key number to focus on is margins,” Benson says. “It doesn’t matter whether the mine is large or small. It’s about the ultimate cost per ounce, or tonne.”
Working in a supportive environment also helps.
“Saskatchewan is a very mining-friendly province and is supportive of mining,” he says of the province, which was rated the third most attractive jurisdiction in the world for mining investment by the Fraser Institute in February. “From our perspective, the province’s mineral industry competes globally for sales and talent, and it will continue to do so in the future,” says Shpyth.
Adopting new technologies — from robotics to artificial intelligence — is pivotal in competing for the next generation of skilled workers as mining becomes more digitized.
“Firms will need, more and more, a technologically savvy workforce, combining technical mining skills with digital competencies, and at the same time we need to make mining more attractive to the younger generations.”