Automation keeps Rio in the driving seat

A visitor to Rio Tinto's West Angelas iron ore operation in the hot and dusty Pilbara region of Western Australia could be forgiven for thinking it is just another mine. But looks can be deceiving.

The giant Komatsu trucks that follow a precise path over the red earth have no drivers. Instead, they are controlled by computers that are monitored from a nearby air-conditioned portakabin. The rig drilling holes for the next round of blasting nearby is also piloted remotely.

For an industry that has failed to keep up with technologies used in big engineering projects like the Channel tunnel, this is revolutionary. But Rio believes its vision - which includes unmanned trains, X-ray sorting machines and new boring technology - will give it a competitive edge over rivals.

The case for automation is illustrated by the high wages that workers in Western Australia receive as mines strive to satisfy China's insatiable appetite for iron ore. In the Pilbara, train drivers prepared to tolerate the 40 degree heat and 12-hour shifts can earn as much as A$210,000 (US$225,000).

When Rio recently unveiled plans to replace 500 drivers with computers on its 1,500km rail network, workers facing the choice of moving into lower paid jobs or finding another employer were dismayed.

"Everyone is weighing up their future," says Dennis Jones, a Rio driver and representative of the Construction, Forestry, Mining and Energy Union, who thinks it will be hard to find work elsewhere."Once the others have seen what Rio is doing they will follow suit."

Analysts say Rio is already several years ahead of its main competition, including BHP Billiton. Lydon Fagan, an analyst at RBS, calls Rio "the leader in mining automation".

"BHP has outlined plans for an iron ore operation centre and they do have some autonomous trucks in their coal operations, but Rio are much farther down this road than anyone else in Australia," he adds.

Rio's train divers are not the only workers facing an uncertain future. After a successful trial at West Angles, the miner is set to deploy 150 driverless trucks to the Pilbara over the next couple of years.

In the London office of Rio chief executive Tom Albanese, a glass display case contains a copy of De Re Metallica - a 1556 manuscript which was the first written documentation on mining technology.

"As I go through the document, I see lots of technologies that unfortunately look similar to the technologies we use today," says Mr Albanese. "While we use bigger pieces of equipment, in many ways the mining processes haven't actually changed that much ... to some extent over the centuries."

This, Mr Albanese says, is why Rio is pressing ahead with automation. At its control centre in Perth, it is trying to translate its "Mine of the Future" vision into reality. 1,500km away from Pilbara, employees in a room that looks like a cross between an air traffic control centre and a bank's trading floor track how much iron has been extracted, railed and shipped to customers in China and beyond.

Mr Fagan says one benefit of housing the operations in Perth is it reduces the need to build expensive houses in Pilbara - a cost that some analysts have put at $1m per worker. With 360 employees in the control room, that adds up to a large saving.

Greg Lilleyman, president of Rio's Pilbara operations, says the data mined at the centre have helped increase productivity. He says, for example, that Rio's iron ore cars now transport an average 7 tonnes more a trip than two years ago.

"That's an extra couple of billion of dollars of iron ore all because the operations centre allowed us to identify exactly where the bottle neck was," he says.

The complexity comes from the cast amounts of iron ore that Rio extracts from its 14 mines in Pilbara. It moves the metal on trains that are so heavy they take 2km to come to a halt. And the operation is about to get bigger. Rio is to invest another $2.9bn in expanding production to 283m tonnes a year.

Last year, Rio shipped a record volume of 225m tonnes from its Cape Lambert and Dampier ports in the Pilbara, helping its iron division to post a 26 per cent rise in underlying earnings to $12.8bn. To put that figure in perspective, in 2008 the division made profits of $6bn.

Iron ore now accounts for around 80 per cent of group profits at Rio and is by far its most important business. Indeed, the company is analysing plans to lift production in the Pilbara to 353m tonnes by 2015.

Mr Lilleyman says the US$500m that Rio is spending to convert its trains to driverless locomotives will allow it to hit productions plans without having to invest much in new trains. He says it will free up capacity by enabling greater scheduling flexibility, and is not about cutting jobs.

"There are around 10,500 employees in the Pilbara and over the coming few years that number will grow," he says.

At one pod in the Perth control centre, David Booth oversees mining operations at one of the Pilbara pits. From his desk, Mr Booth, who started working as an electrician on Rio's rail network, can load trains, monitor dust suppression systems and watch in near real time the giant machines Rio uses to crush rocks. If anything goes wrong he can immediately call in support.

"They make it very difficult for you to leave," says Mr Booth, a Yorkshire born 30-year old whose job would probably appeal to any serious computer gamer.

He and his colleagues also value the fact that they can live in a more vibrant place like Perth, far away from the fly-in-fly-out villages of the Pilbara. But that is of little comfort to Mr Jones or the other train drivers who face losing allowances of up to $48,000 a year as they are redeployed into what they fear could be "meaningless jobs" as Rio prepares to introduce the first driverless trains in 2014.

"We've not got a timeframe for the end of our careers," he says.

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