Skip to main content

The free-flowing communication at Dundee’s Chelopech mine is thanks to a fully enabled underground WiFi network – a technological leap is attracting international attention

You would think an iPhone would be an utterly useless gadget in Dundee Precious Metals Inc.'s Bulgarian gold mine for the simple reason that the mine lies nearly a half kilometre below impenetrable rock.

But the underground reception is working well and that makes Mark Gelsomini, information technology director for the Toronto-listed company, smile like he has just tripped over a gold nugget the size of a golf ball. About 400 metres underground, his e-mails arrive without a glitch. Phones are static free.

"You're coming in clear," Mr. Gelsomini tells Dundee CEO Rick Howes, who is also deep underground in a dark tunnel that connects the mine's various operations.

The free-flowing communication at Dundee's Chelopech mine is thanks to a fully enabled underground WiFi network – a technological leap is attracting international attention.

One of the mine's visitors this week was Mark Cutifani, CEO of Anglo American PLC, one of the world's biggest mining companies. He was there to learn whether Anglo could adopt some of Dundee's communications and data systems for its own operations, perhaps in partnership with the little Canadian gold player. He says he was impressed by what he saw: "This is where the innovations are, in the smaller mines."

Installing a data network in the mine puts Dundee at the forefront of the industry's next phase – treating mines as if they were just-in-time manufacturing sites. That means every activity, from the number of scoops of ore delivered to the crushing machine to the number of metres drilled into the rock face, is recorded and displayed in real time.

In most mines, this data is now written on paper and collected at the end of the work shift, and the numbers are often inaccurate. "We want to turn an extremely low-tech industry into a high-tech industry," Mr. Howes says. "If this industry wants to advance, it's going to take a lot of software development."

Any mishap or slowdown, from a truck that has made an unscheduled stop to a miner who is behind schedule, is immediately transmitted to the surface and action is taken. The surface crew even knows the whereabouts of its workers because an RFID – radio frequency identification device – is embedded in the battery that powers the helmet-mounted lamps.

While the real-time monitoring sounds suspiciously like Big Brother, the company insists it's all about meeting production targets with the greatest efficiency, and ensuring the safety of its employees, not checking on whether their lunch or toilet breaks are overly leisurely.

"The data allows you to course correct in real time," says Mike MacFarlane, a former AngloGold Ashanti executive who is now a consultant to France's Dassault Systèmes, whose mine management and planning software is used by Dundee. "Chelopech's real-time data is the first I've seen in the world able to do this. It's like taking the lid off an underground mine. You can see where everything is, what everyone is doing."

The upshot is that the Chelopech mine is becoming a marvel of efficiency compared to its "dud" state – Mr. Howes's description – a decade ago. That's when Dundee, then converting from a closed-end investment company into a gold miner, bought the Communist-era mine from a bankrupt Irish company for essentially nothing. Today, the mine's cash operating costs, at about $300 (U.S.) a ounce, make it one of the lowest-cost gold mines in the world, allowing it to produce decent profits in spite of the recent slide in the metal's price. In 2012, the Chelopech mine's EBITDA – earnings before interest, taxes, depreciation and amortization – was $196-million.

The data-collection innovation is one reason that Dundee has become a gold company to watch as the gold-mining industry undergoes a shakeout propelled by falling prices and out-of-control costs. Mr. Howes, 56, says the company wants to bulk up its small portfolio by buying gold mines or gold companies, but would give no details about its next move.

Dundee has two wholly owned working gold mines – the other is in Armenia – and a smelter in Namibia. It also has a development site, called Krumovgrad, in southern Bulgaria, which is expected to go into production in 2015, after being scaled down and redesigned to exclude cyanide use.

Last year, the company produced 142,000 ounces of gold, up 70 per cent over four years, and expects to produce up to 168,000 ounces this year. Production of copper, a byproduct, rose 105 per cent over the four-year period to 45 million pounds. But in spite of the enormous rise in production, and far lower operating costs, the falling gold price has sliced Dundee's market value by half this year, to about $540-million (Canadian).

In the third quarter, Dundee, which is 25 per cent owned by Ned Goodman's Dundee Corp., reported a net loss of $1.3-million (U.S.) compared to a net profit of $21.9-million in the same quarter a year earlier. The loss was the result of lower gold prices and unrealized losses on equity warrants and derivative contracts. In 2012, Dundee's net profits were $54.4-million.

The low gold price is pushing Dundee to spend more on data collection to make its mining operations more efficient. The software costs so far have been minimal – perhaps $3-million. "The input of real-time data will add 10 per cent to 15 per cent to every miner's bottom line," Mr. Howes says. "The payback is huge."