Amazon lends helping hand to miner on giant copper development

[MELBOURNE] Amazon.com Inc. has provided its expertise on cloud computing to the Central Intelligence Agency and BMW AG. Now it's offering an Australian miner lower tech advice - guidance on handling costly projects as it plans to develop the country's largest untapped copper deposit.

The world's biggest online retailer is sharing its experience in project planning and spending with OZ Minerals Ltd ahead of a decision next year on whether to proceed with the A$980 million (S$1 billion) Carrapateena project in South Australia. It comes as miners increasingly look outside the industry for ideas to curb costs and foster innovation after a downturn in commodity prices.

"There are lots of big capital decisions that we make and we've shared with them insights into how we've gone about making those decisions," Paul Migliorini, managing director for Australia and New Zealand for Amazon Web Services, said by phone.

Seattle-based Amazon's web services unit, the leader in the cloud computing market according to Synergy Research Group, is extending its reach beyond pure technical support, according to Mr Migliorini. In addition to advice on computing capacity, the unit is offering guidance on clients' wider businesses and corporate culture either through its own staff or by partnering with traditional advisory firms, he said.

Adopting new technology and business methods is taking a greater role in lowering production costs, according to BHP Billiton Ltd, the world's biggest miner, while Barrick Gold Corp is investing an initial US$100 million in a collaboration with Cisco Systems Inc to overhaul its global operations. OZ Minerals, which is also working with Amazon and a third party on cloud computing services, is looking to tap broader benefits from its relationship with the retailer.

"We've sat down a number of times and we've had them come and present their strategy, more on innovation, on how do they innovate, how do they get people thinking differently," OZ Minerals chief executive officer Andrew Cole said in an interview in Sydney. The producer will rule on the Carrapateena investment after completing a feasibility study by the end of March, it said Monday in a statement.

Lessons from Amazon include limiting resources to drive employees to find more creative ways of achieving goals, said CEO Cole. The producer lowered its annual exploration budget to between A$10 million to A$15 million in a bid to improve results, he said. Exploration expenses of A$20 million in the last full-year included work on Carrapateena.

"If you take away a little bit of the money that probably would have been needed to do a project and not quite give them as many people, but you want the same outcome, they have got to think differently about it," Mr Cole said. "That's what I think helps drive innovative behaviour."

Getting Carrapateena up and running would help meet a predicted deficit in the copper market forecast to arrive by the end of the decade. The deposit will have average annual production of 61,000 metric tons of copper and 63,000 ounces of gold over a life of at least 20 years, according to the Adelaide-based company.

Amazon's other resources customers include BHP and Rio Tinto Group, the world's two biggest miners, according to Mr Migliorini. Woodside Petroleum Ltd, Australian second-biggest oil and gas producer, has worked with Amazon's cloud unit and Accenture Plc to use data generated from 200,000 sensors at its Pluto liquefied natural gas plant off Western Australia, to predict and prevent potential unplanned shutdowns at an acid gas removal unit.

The largest miners and energy producers "have some big, big problems that they are trying to tackle and they are using technology in interesting and innovative ways to do that," Mr Migliorini said. Efforts to instigate change have been helped by the drive to slash costs as commodities prices retreated from their 2011 highs, he said.

"It's a really good forcing function for people to innovate aggressively."

BLOOMBERG