Unearthing efficiency: McKinsey charts mining’s tech-driven turnaround

A new study by McKinsey's, a global management consulting firm, is emphasizing the critical importance of innovation in the mining industry as it faces unprecedented challenges, such as rising costs, declining ore grades, and intensifying demand.

The report, Unearthing a new era of innovation in mining, outlines how powerful tailwinds for transformation are emerging within the mining industry from the alignment of new technologies – such as automation, AI, advanced chemistry, and universal site connectivity – and how mining companies can chart a path forward as innovation continues moving from the lab to the real world.

The study reveals that mining productivity has declined by half from 1997 to 2023, while other industries have seen significant increases. This stagnation stems from unique challenges in mining, including declining ore grades and remote operations. However, surging demand for critical minerals makes productivity improvements crucial. In fact, OECD data shows that while productivity in manufacturing industries more than doubled from 1997 to 2023 – with other sectors like agriculture, forestry, and fishing increasing by more than 1.5 times – mining saw its productivity decrease by half, a trend further confirmed by McKinsey analysis.

The McKinsey report highlights several key findings. The study identifies extraction, hauling, and comminution as the mining sectors with the highest innovation potential. It also reveals that operating strains primarily stem from declining ore grades and the high costs of labour and energy. Additionally, the report emphasizes that the mining industry has fallen behind other adjacent sectors in terms of manufacturing productivity increases. These insights underscore the urgent need for technological innovation in the mining sector to address current challenges and boost overall productivity.

"Given the challenges facing today's miners, it's clear that the next era of performance will be led by the innovators who obsess about solving the real business challenges they face. The mining innovation leaders will act with courage and clarity, making moves today to not only deploy technology, but do so with a laser focus on the right problems, with ambitious aspirations, pursue disciplined innovation, and execute with speed and conviction," Sean Buckley, senior partner at McKinsey, stated.

"Simply put, innovation will be a real differentiator. A small number of miners will make it based on their geological endowment. For everyone else, winning in innovation will be critical to moving down the cost curve and creating competitive advantage."

"Mining has a rich legacy of innovation, yet today's challenges call for more. So the question for mining leaders is no longer whether to innovate—but practically how to innovate. The next decade will likely reward those that make clear, bold, and intentional strategic decisions about what roles they play in the innovation landscape and what problems they explicitly focus on solving," Richard Sellschop, senior partner at McKinsey, added.

To download the report: Unearthing a new era of innovation in mining, visit https://www.mckinsey.com/industries/metals-and-mining/our-insights/unearthing-a-new-era-of-innovation-in-mining.