Blockchain to Alter the Course of Mining Industry
Blockchain initially rose to prominence as the revolutionary technology underpinning high-profile crypto currencies like Bitcoin. It has since garnered significant attention on its own as a potent standalone infrastructure for executing and recording transactions. Simply stated, blockchain is a decentralized, distributed digital ledger system that records transactions in a secure, verifiable and permanent way. This technology reserves the potential to redefine a wide variety of practices and products throughout the global economy owing to the three overarching benefits that it offers: reduced costs, enhanced risk mitigation and greater efficiency. Astute organizations are already identifying which elements of their business models could be enhanced, or disrupted, by blockchain. These very features of Blockchain weigh in favour of being applied to the mining industry.
Applications of Public Smart Contracts
Engineering, Construction and Handover of Mine site The Engineering, Construction and Handover (ECH) business operations generate huge volumes of complex spatial and engineering information in structured and unstructured formats. Accurately maintaining this extensive volume of data involves high cost. Also if not completed in a stipulated period, the additional cost can cause a lag in the business momentum. Transactions are transparent and traceable with the implementation of blockchain structure. This resolves the complexities involved in managing regulations and standards, ensuring trust and work compliance.
Compliance and mining lease management
Blockchain is the answer to the identified pain points, namely management of approvals of documentation created in exploration, resource/reserve estimation, mine design and planning process. This also improves the mechanism of custody and control, with proof embedded in the documents that have been approved. Blockchain introduces traceability of inventory into the ERP for the inventory management of the resource/reserves.
Harnessing the feature of smart contracts can make a huge difference internally and extending the same application to external entities (eg: stock exchanges for release of resource/reserve estimates). Validation of workflow/audit of activities and outputs used in the resource/reserve calculations, is yet another plus.
Blockchain makes it simpler to track materials in the mining value chain from the blocks to the concentrate, to metal (aka gold bars, SW/EX copper plating, etc.). This can be shown in stepwise values for the provenance to the final customer Blockchain brings in transparency to JV partners. Most mining companies have a fragmented value chain with transactions spread across multiple parties. Traceability, transparency and accountability provided by a blockchain structure can ensure smooth running on these scales. Blockchain could lead to the automation of invoice reconciliation.
The ore samples are assigned a quality certificate. The customer sends it for lab testing for re-testing for assurance. There may or may not arise a dispute over the ore quality and price. This entire process can leverage Blockchain technology with the three parties involved – miner, customer and the arbitrator BHP.
The source of the mineral is of concern worldwide. The consumers are interested in the knowledge about the origin of the minerals. The knowledge that whether or not the process involves cruelty, exploitation or disharmony is of interest to the world of consumers thanks to the activists in the respective area. Companies like Apple have decided not to use minerals coming from conflict zones, from mining companies with underpaid labour and poor environmental standards.
Therefore the need to authenticate the source of the mineral becomes all the more important. This can also be addressed by the employment of Blockchain technology.
A novel approach
A novel approach, as conceived by Barrick Chief Innovation Officer Michelle Ash, describes an ideal mining scenario wherein no mineral should be extracted but the value to be determined in the ground. In this model, investors buy digital tokens that represent a green gold vault quantity. This will remain the gold that will never be mined yet traded on an exchange using digital tokens. This concept, if materialized, will call for an extensive blockchain exercise.
This model holds the potential to alter the way gold is perceived in the market and redefine its worth and value.
It is, hence, safe to deduct that blockchain holds serious potential in the mining industry and the industry heads are serious about blockchain technology. The next few years will witness a turn of events like never before with regard to the mining industry.