Artificial Intelligence in Mining: Boon or Bane?

Artificial Intelligence (AI) is probably the greatest creation of humanity.

That statement is at least accurate for the beginning of this century. With such a tool at our disposal, we’ll likely see more breakthrough technologies in the coming years.

Let’s face it…

The AI-driven technological revolution has begun, and it’s unstoppable.

Those who deny it or ignore it will likely lose in the end.

Those who make wise use of these cutting-edge tools will outperform the rest.

However, there is also a segment of the economy that will overinvest into impressive but impractical AI tools, chasing the latest trends.

We can’t speak for the entire market, but our expertise in the mining sector helps us to see the pros and cons of AI tools.

This article is a must-read for junior resource investors who want to stay on top of the latest trends and threats.

Benefits of AI

Every business looks to cut its costs and increase profits.

That’s where automation powered by AI tools comes in handy.

The latest algorithms can analyze, evaluate, and summarize vast amounts of data much faster than any white-collar employee.

With the correct settings that companies tailor to their needs, AI can add a lot of value to their business.

Despite spending a lot of money, time, and effort on purely physical activities such as digging and drilling, mining companies gather vast amounts of data before sending a single person to the field. That’s where AI can be helpful.

Here is what AI could improve:

1. Increased efficiency

AI technologies streamline various mining processes, increasing efficiency and productivity. For example, Freeport-McMoRan boosted production at its copper-ore concentrating mill in Bagdad, Arizona, by 10% using an AI model.

2. Cost reductions

AI-driven solutions help reduce operating costs by optimizing resource usage, lowering downtime, and improving maintenance schedules. Predictive maintenance and autonomous vehicles are prime examples of cost-saving AI applications.

3. Enhanced safety

AI improves safety in mining operations by reducing human exposure to hazardous conditions. Autonomous vehicles and predictive maintenance systems help prevent accidents and ensure a safer working environment.

4. Environmental benefits

AI technologies contribute to sustainable mining practices by monitoring environmental impact and optimizing resource usage. That helps reduce the carbon footprint and promotes ethical mining practices.

These are critical aspects for most mining businesses. Improving these vital parts can unlock vast amounts of shareholder value.

However, these improvements do not come for free. Often, these cost much more than the goods they deliver.

Risks

On the cost side, AI, like most revolutionary technologies, often comes with an extremely high cost.

No wonder one of the largest suppliers of “picks and shovels” in the AI space, NVIDIA (NVDA), is posting billions of dollars in sales. In the second quarter of this year, its sales hit a record-high $30 billion. The rapid adoption of AI tools supports these earnings.

The final users have no option but to pay a hefty bill for NVIDIA’s tech, which translates into certain risks. Such as:

1. High initial investment

Implementing AI tools requires significant upfront infrastructure, software, and training investment. That can be a barrier for smaller mining companies with limited budgets.

2. Technical challenges

The integration of AI systems in mining operations can be technically challenging. It requires expertise and continuous monitoring to ensure optimal performance.

3. Job displacement

Automating mining processes through AI can lead to job displacement for workers performing manual tasks. That necessitates retraining and upskilling of the workforce to adapt to new roles.

4. Data privacy and security

The use of AI involves collecting and analyzing vast amounts of data, raising concerns about data privacy and security. Mining companies must implement robust measures to protect sensitive information.

What to do?

As you can see by now, AI tools have benefits and risks. It’s up to the management to pick the tools that can make a meaningful impact on the business. Otherwise, the company may burn its capital without much benefit.

Investors should be very selective and conduct thorough due diligence. Many companies, especially junior mining stocks, follow trends and acquire AI tools to promote themselves and get on the front pages of media outlets. These stocks are risky investments; hence, they are not for everyone.

However, proper management can balance risks and benefits without overspending. Companies with strong balance sheets, strong margins, and steady profits can implement new technologies without going all-in and putting their businesses at risk.

These companies will have a lower risk profile while maintaining high growth potential.

We believe that AI will make a huge impact on the mining industry in the years to come. Investors should follow these trends and invest accordingly.