Data-driven, data-dependent: Blockchain in the Mining Industry

Data is the basis of mining companies' operations. They essentially base their entire operations on data; geological and economic data to find out whether the operation is worthwhile in the first place; environmental data to monitor and mitigate impact; and financial data to keep investors up to date. Blockchain technology offers a tool to capture and communicate this data - with regulators, investors and the public - in a uniquely trustworthy and transparent way.

What is a mine’s main output? Minerals would be the first, obvious answer: there are mines around the globe producing thousands or even millions of tons of minerals.

So far, so good. But what else? Tailings would be a second response. The Global Tailings Review estimates that there are about 217km³ worth of tailings around the world, which is also a significant output.

However, there is another type of asset that is the basis for it all, determining financial viability, scalability of a mine, and a business advantage over competitors: data.

Mining companies essentially base their entire operations on data; geological and economic data to find out whether the operation is worthwhile in the first place; environmental data to monitor and mitigate impact; and financial data to keep investors up to date. Failure to correctly collect and communicate such data can lead to huge losses of capital, or the detriment of health and safety for workers and neighboring communities. Consequently, it is paramount to have the right technology tools to work with data.

One such tool is blockchain technology.

Blockchain in mining and metals has been mostly associated with tracking and tracing supply chains. It has become increasingly important (and feasible) to credibly demonstrate the provenance of materials. This is in order to ensure minerals are not sourced using child labor, or while violating human rights and environmental regulations in one form or another.

That is not all blockchain is capable of. At the end of the day, blockchain is a way of storing and sharing data; securely, immutably, and — if so desired — transparently.

Last year, Tanya Matveeva, a geologist with more than 20 years of experience, wrote this article about the vast potential blockchain holds for mining companies. In it, she proposes that blockchain can be used in virtually all aspects of operations, from data acquisition, to data management to reporting. It also can be applied to property registration, contract management and finance.

Realizing the potential of blockchain technology for miners, she founded her own consultancy, Kamni Chain, to help mining companies implement blockchain-based solutions. As the mining sector is increasingly digitizing its processes, we called up Tanya to discuss one use case where blockchain can be particularly useful for the mining sector: on-site data management and reporting.

Blockchain’s inherent benefits

Before we dive into this topic, let’s take a step back and remember the core advantages of blockchain technology:

Decentralization: A decentralized blockchain offers very high data security, meaning there is not a single point where data is stored and no one actor has the power to tamper with or even delete data. Note: this is not always the case — depending on the needs of the users, there are varying degrees of decentralization available in blockchain systems.

Immutability: Since data is not stored at a single database but distributed across the network, it is more difficult to tamper with it. Data is also time-stamped, so it shows when exactly it was uploaded. This makes data that has been entered practically immutable. That doesn’t mean data cannot be changed — after all, human errors happen and someone might accidentally upload wrong data — but if it is changed, there will be a digital record of that change.

Transparency: Blockchains (at least public ones) can be searched for information by anyone who cares to do so. And unlike company websites and regular databases, which can be modified, updated, or even deleted, data on the blockchain is there to stay — time-stamped and securely stored. Any changes would be recognized by the network.

Here, a small caveat: of course transparency is not necessarily absolute, after all there are business secrets and other information companies wish to keep confidential. But different levels of encryption in a blockchain system can enable different levels of access — so the right person gets to see the right information at the right time.

Reading those characteristics, it might already become clear how this technology could come in handy for a mine’s day-to-day business.

As a side note, if you would like a more in depth discussion of the technology, a good resource to start at would be the Blockchainhub Berlin or this explainer in under 100 words.

Blockchain for Data Management

To recap, we’ve established that mining operations are essentially data-driven enterprises. Before any extraction is happening, careful geological analysis will determine whether it is even worthwhile to start digging up the deposit.

From the very beginning of the exploration, throughout the lifetime of a mine, until its closure, mines are collecting data in order to be able to respond to regulatory requirements.

After all, operations always face the risk of damaging the environment and inflicting harm on neighboring communities. Consequently, data on water treatment, tailings and their dams, air quality, exhausts, and many other metrics are collected, processed, and shared with regulators to demonstrate compliance and identify points for improvement.

Depending on the context and scale of operations, those data points are collected manually, or constantly monitored using IoT devices and other sensors.

At the end of the day, mining operations (other than artisanal and small scale mining) are confronted with a wealth of environmental, financial, geological, and other data that needs to be collected, managed, processed, and shared with relevant stakeholders and the wider public.

Usually, much of this work is done with Enterprise Resource Planning (ERP) systems, software programs that store, analyze and manage data of all business processes and automate processes. Or it’s often simply done with excel sheets, and at regular intervals a third-party is granted access in order to independently audit it.

Needless to say, in the course of this process there is a lot of room for human error, or even fraud, and in the end, the original data reports are not necessarily visible, nor when certain data was collected, and how it has been processed.

The Potential for Fraud

These intransparent intervals between the regular reports open the door for human error and fraud, and examples abound of corrupt data leading to financial loss or environmental damage.

For the purpose of this article let’s focus on the latter, environmental data:

While fraud can occur in any industry, mining might be more affected than others. The 2019/20 Kroll Global Fraud and Risk Report points out that the extractives sector is particularly susceptible to fraud from internal parties and money laundering. And while 80% of respondents working in the extractives sector agree that serious risk management breaches are thoroughly investigated, only 66% of respondents reported that their organizations deal with risk management incidents in a consistent manner.

On the environmental side, studies point out that higher degrees of corruption lead to overall decreased environmental sustainability of mining operations — for example because agencies don’t react to reports indicating shortcomings, or concerning data is brushed over or not reported in the first place. In these situations, fraud or error does not only lead to loss of investments, but potentially the loss of lives: in particular if water or air is contaminated by operations.

Looking at this data, operations should make any possible effort to store data as securely as possible, and make sure it is not being manipulated after being collected. Given the risks at hand, companies should adopt the highest degree of transparency possible when determining how operations are affecting the environment.

Data should be available regularly, ideally in real time, and delivered in a way that reduces the risks of manipulation.

Of course, this alone does not eliminate corruption, fraud, and human error, but it renders companies and regulators more accountable. And that is where blockchain can help.

Blockchain’s potential…

As with anything, blockchain technology is no silver bullet for these problems, but it can certainly help to better manage and communicate data.

While discussing the benefits of blockchain in accounting, the founders of the Blockchain Research Institute, Don and Alex Tapscott, point out that data recorded on a public ledger has the potential to “bake integrity into the system”.

Their reasoning: if companies enter data on a public blockchain, it will be time-stamped, transparent, and visible at any point. Human error could be identified quicker, and fraud would have to happen on a constant basis in order to be viable. And if it still did, it would be well documented.

In the example of environmental audits, it is quite feasible to either deliberately manipulate, or inadvertently miscalculate the overall analysis of water quality in a yearly report. Any attempt to reproduce the result would have to run over the same time frame. If updates were provided more frequently — time-stamped and tamper-proof — it would be easier to replicate and verify the results. In case of concerning results, either communicated through the company or found out by independent analysis, all stakeholders could react immediately.

Tanya, the geologist-turned-blockchain-consultant, has a clear opinion on this, as geological data, too, is the basis of any mining operation, and has to be collected, processed, and stored, along the highest possible standards:

“What got me interested in blockchain in the first place is data management. As a geologist, you work with data all the time. And blockchain has the potential to store and manage data securely, in a tamper-proof manner, and, where needed, transparently.”

Environmental data,” Tanya goes on, “should go from an IoT device directly into the blockchain,” so human error is reduced and it becomes visible for everyone who is interested.

This scenario is not far-fetched:

“Every serious investor is looking at such data now, so mining operations have to make that data available anyways. And doing it in this way gives companies a competitive advantage. It’s just that somebody needs to start doing it.”

Numbers underscore this assessment: as one example, exchange-traded funds that based their investment criteria on companies’ ESG records almost tripled their net inflows between 2019 and 2020. Blackrock, the world’s largest investment management corporation, declared that future investment will pivot to sustainability-focused companies. So, with the increasing market pressure for more sustainably produced goods — virtually across all industries — this type of reporting could become the norm, rather than the exception.

So, more regular data has the potential to increase overall trust in an operation’s health and feasibility, providing assurance to neighbors and regulators alike. Since all the data has to be collected and shared anyways, why not do it in the most secure and tamper-proof manner possible?

Increasing trust in the sector

For environmental data, it is hard to come up with a reasonable argument why all stakeholders shouldn’t be kept informed on how a company treats the global commons, and for that information to be stored immutably, transparently, and securely.

In the end, higher degrees of transparency are ultimately beneficial to the mining sector in general: Talking about the mining industry’s role in society, Mark Cutifani, CEO of Anglo American, recently said on a panel:

“Even with all the contributions we make, people tend to see us as an industry that takes more than it gives […] One of the things we don’t do well as an industry is talk about what we do.”

So why not let the data speak?

As deeply data-driven operations, mining companies could massively benefit from secure, time-stamped, and tamper-proof data. Being able to communicate it transparently where desired undoubtedly enhances an operation’s value. While blockchain is gradually becoming recognized as more than simply “the technology behind Bitcoin”, it would be a lost opportunity not to capitalize on its advantages.

The use of blockchain technology can help the mining industry gain more trust from outside stakeholders, and make more secure data available for operations.

About the author

Christian Ecker is a Project Manager with Minespider. He focuses on the implementation of traceability processes and sustainability policies, with a particular interest in local-level human rights & environmental impacts. He holds a Master's in International Affairs from the Hertie School of Governance. In his free time, you'll find him hiking or playing handball.

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