Rio Tinto (NYSE:RIO) is introducing the 4G LTE network to its existing operations at the West Angelas mine in the Pilbara region of Australia. This will be the first site in the Asia-Pacific region (outside of China) for the resource industry, which will be equipped with the mobile broadband technology. The network will be rolled out by Alcatel-Lucent for an estimated fee of $2-3 million over a 40-square kilometer area, and will replace the satellite and standard radio networks currently used by mine workers. 
Why Is It Needed?
The satellite and radio networks are used for voice and basic data communications to control machinery at the mine. With a number of automated technologies being introduced for various mining operations, data requirements will increase in future, thus necessitating introduction of faster wireless technologies. At Pilbara, improved connectivity resulting from introduction of the 4G network will be used for in-pit mining operations, such as safety systems and asset monitoring. 
- How Would Rio Tinto’s Bond Buyback Activity Impact Its Outstanding Debt?
- Why Rio Tinto’s Coal Portfolio Rationalization Makes Sense
- Why Has Rio Tinto Sold Off Its Mount Pleasant Coal Assets?
- Rio Tinto’s H1 2016 Earnings Review: Cost Reduction Remains On Track As Part Of Ongoing Response To Subdued Commodity Prices
- Rio Tinto’s H1 Earnings Preview: Subdued Commodity Prices To Negatively Impact Results
- How Is Rio Tinto’s Capital Spending Expected To Trend In The Coming Years?
Rio Tinto has been focusing on increasing automation of its mining operations in order to reduce labor and capital costs as well as to improve productivity and efficiency. The company has a dedicated division to work on its “Mine of the Future” program. In the past, Rio has successfully tested driverless trucks and even a driverless train.
Rio Tinto aims to expand its iron ore production at Pilbara to 353 million tonnes by 2015. Thus cost savings incurred here will have a significant impact on overall cost of operations for the company. 
4G Network Will Enable Extensive Automation
Most of the easy and accessible mineral reserves around the world have been tapped, pushing miners to find more remote locations for iron ore, copper, coal and other metals and minerals which are vital to economies. This keeps pushing costs upwards, not just for exploration and drilling, but also for labor. It is expensive to recruit workers willing to work in hostile geographical and environmental conditions. Further costs are incurred on setting up housing facilities for them at the mining site and transporting them back and forth from the city in company planes. 
Automating operations allows companies to control activity at the mining site from a remotely located operation center. But in order to issue real-time instructions to robots and other machinery, a dedicated network with the capacity to transmit huge volumes of data is needed. This is where new technologies like 4G come in handy. A 4G network will act as an enabler in bringing everything together, allowing the mining activity to be run more smoothly.
Robust Security Needed
But such a network system will require a secure firewall since network attacks are an unfortunate reality and a common occurrence these days. In order to prevent an electronic takeover of the mine, it is important to have a dedicated network security team and a number of security layers. For Australia, whose economy is heavily dependent on mining, such a security system is all the more critical.
We have a Trefis price estimate for Rio of $45 which is nearly 15% below its market price.Notes:
- Rio Tinto takes 4G to the Pilbara, Financial Review [↩]
- Rio Tinto to roll out 4G in the Pilbara, ComputerWorld [↩]
- Rio Tinto’s driverless trucks achieve a new milestone at Yandicoogina mine under Mine of the Future programme, Rio Tinto [↩]
- Miner Digs for Ore in the Outback With Remote-Controlled Robots, WSJ [↩]