Mining Practice

Advancing metals and

mining in Southeast
Asia with digital and
analytics
Southeast Asia is a top producer of base metals, including nickel and
copper, but its downstream-processing industry is lagging behind.
Investing in digital and analytics could enhance productivity.
This article is a collaborative effort by Ying Wan Loh, Azam Mohammad, Avinash Tripathi,
Eben van Niekerk, and Yanto Yanto, representing views from McKinsey’s Mining Practice.

© Photon-Photos/Getty Images

March 2023
 Southeast Asia’s downstream-processing industry
has recently seen rapid growth and expansion. Much
of this industry is concentrated in Indonesia, with a
smaller but significant presence in other Southeast
Asian countries. Our research shows that since 2021,
commodity prices for base metals such as nickel
and copper have increased by 80 to 120 percent. In
response, Indonesia and other countries are investing
in the downstream-processing industry to capture
increased value across sectors and drive domestic
industry growth.
Although these efforts to encourage growth have
proved effective, players in the downstream-
processing industry in Southeast Asia can go further
by pursuing digital and analytics (DnA) opportunities.
By imple­menting DnA-enabled practices, processing
plants can capture the value of data across the value
chain, optimize their operations, and subsequently
achieve better results. In fact, our estimates show
there is potential to achieve 8 to 10 percent in
through­put improvement as well as an uptick of one
to three percentage points in recovery performance.
Ultimately, these increases could unlock approxi­
mately $4 billion to $5 billion in value.
Current market conditions present a pivotal moment
for Southeast Asia’s downstream-processing indus­
try to build plants for the future. To leapfrog toward
it, leaders in the downstream-processing industry
can focus on implementing “triple transformations” in
business, organization, and technology functions, all
geared toward harnessing the true potential of DnA.
Industry snapshot: Downstream
processing in Indonesia
The cascading effects of the COVID-19 pandemic
and the war in Ukraine have affected a range of
commodities, from crude oil to nickel, copper, coal,
and palm oil. For example, in March 2022, the price
of aluminum almost doubled from the 2020 average,
reaching a record high of $3,496.1 Similarly, the
price of copper doubled, peaking at about $4.90 per
pound in March 2022.2 Commodity supply chains
have been forced to react to this volatility and have
subsequently started to tighten, with companies
anticipating a further rise in costs and transportation-
and shipping-related risks.
In Southeast Asia, where many raw materials are
produced, industry leaders have identified an oppor­
tunity to move down the value chain to capture more
value from semifinished or finished goods. This has
spurred a booming processing industry, particularly
in Indonesia, the largest economy in the region.
In the past, Indonesia’s mining and minerals industry
focused on exporting raw ore directly rather than
participating in the rest of the production value
chain. But the industry has since transformed
and expanded as the government has made
active, continuous efforts to develop downstream
industries.3 These new industrial policies were set in
motion even before the COVID-19 pandemic struck;
for example, in 2019, the Indonesian government
publicly announced a policy promoting investment
in nickel-ore-processing facilities.4 Such policies
have led to a new focus on processing commodities
into ready-to-use products, which has boosted
the economy and enabled the country to produce
higher-quality products that can be used directly
in manufacturing. Further plans are also under way
to increase Indonesia’s processing capabilities. For
example, in 2022, there was a significant push for
the processing of bauxite—a raw material used in
aluminum production—and copper concentrate
processing and tin processing are set to increase
from 2023 onward.5
The new focus on downstream-processing
industries has had an outsize effect on the
commodity market, given that Indonesia is the
world’s largest producer of nickel, the second-

1
“Average aluminum prices from 2012 to March 2022,” Statista, May 5, 2022.
2
Based on figures from Market Index. For more, see “Copper,” Market Index, accessed January 23, 2023.
3
“Indonesia economic development through downstream industries,” Ministry of Investment/BKPM, accessed October 27, 2022.
4
Kresna Panggabean, “Indonesia amends regulation on nickel export to boost production of value-added products,” Norton Rose Fulbright,
October 2019.
5
Bernadette Christina and Fransiska Nangoy, “Indonesia confirms bauxite export ban to proceed as scheduled,” Reuters, December 21, 2022;
“Indonesia may stop tin exports in 2024, president says,” Reuters, November 11, 2021.

2 Advancing metals and mining in Southeast Asia with digital and analytics
largest producer of tin, the third-largest producer
of coal, the fourth-largest producer of bauxite, and
one of the largest producers of copper and gold
(Exhibit 1).
The new priority on developing the domestic pro­
cessing industry has pushed Indonesian companies
to reconsider their supply chain strategies. The Indo­
nesian smelter industry, for example, has ramped
up production thanks to several development pro­
grams. Before 2014, Indonesia had only two nickel
smelters. This figure jumped to 13 in 2020 and is
expected to more than double to a total of 30 by
2023.6 The increase in smelters for nickel and other
commodities means that Indonesia can now smelt
up to 12.3 million metric tons of nickel, 6.0 million
metric tons of aluminum, 3.2 million metric tons of
copper, and 19.0 million metric tons of steel per year.7
The number of smelting companies is also booming,
with 69 companies currently in operation, totaling an
investment value of $51.4 billion.8
As Indonesia has ramped up its production of
metals and other minerals, industry leaders
around the world have responded by assessing
investment opportunities to set up downstream-
processing plants in the region. For example, many
countries are jumping at the opportunity posed by

Exhibit 1
Indonesia is one of the world’s largest producers of commodities such as
nickel, tin, coal, and bauxite.

Commodity Nickel Tin Coal Bauxite Gold Copper

concentrate
Global mined
production volume,1 % 100% = 100% = 100% = 100% = 100% = 100% =
2.2 Mt 277 kt 7,560 Mt 378 Mt 3.5 kt 20.8 Mt
Indonesia 23 19 7 9 3 2

Rest of 93 91 97 98
77 81
the world

Production Production Production Production Production Production

volume (metal volume (metal volume volume volume (metal volume (metal
contained) contained) (salable wet) (salable dry) contained) contained)

Indonesia’s share of
global production, %
24 19 7 9 3 9

Indonesia’s position 1st 2nd 3rd 4th 10th 12th

as global producer

1
Mt is million metric tons, and kt is thousand metric tons.

McKinsey & Company

6
Isabelle Huber, “Indonesia’s nickel industrial strategy,” Center for Strategic & International Studies, December 8, 2021.
7
“Indonesia economic development,” accessed October 27, 2022.
8
Ibid.

Advancing metals and mining in Southeast Asia with digital and analytics 3
 Indonesia’s increased nickel production to set up
electric-vehicle (EV) battery value chains, of which
nickel is a core component—which could make
nickel a strategic resource in the energy transition.
Prominent Chinese players have announced rotary
kiln-electric furnace (RKEF) and high-pressure
acid-leaching (HPAL) projects to process nickel
ore domestically. Similarly, European chemical
and mining companies have announced studies
to set up HPAL and refining plants in Indonesia.9
As for copper, American and Indonesian mining
organizations have started construction on what will
be the world’s largest copper smelter in Gresik.10
Numerous new processing projects are planned for
the next few years in Indonesia, mainly focused on
the nickel and copper industries (Exhibit 2). When
these megaprojects go online, they could materially
increase the processing capacity of metal derivatives
in Indonesia and position the country as an emerging
and vital player in the processing industry. Other
Southeast Asian countries are not far behind and are
experiencing similar developments. In the Philippines,
for example, a change in policy on mining techniques
is set to increase the production of commodities such
as copper, gold, and silver.
Tech-enabled process optimization has
been at the core of improvements in
efficiency for all major front-runners in
the mining industry.
9
“Indonesia says BASF, Eramet near $2.6 bln deal to process nickel for EV batteries,” Reuters, January 28, 2023.
10
“Freeport begins construction of $3bn Indonesian copper smelter,” Mining Technology, October 13, 2021.
11
Red Conger, Harry Robinson, and Richard Sellschop, “Inside a mining company’s AI transformation,” McKinsey, February 5, 2020.
4 Advancing metals and mining in Southeast Asia with digital and analytics
A vision of the processing plant of the
future
Although new factories are emerging in Indonesia
and other parts of Southeast Asia, the region’s
downstream-processing industry still has significant
room for efficiency improvements. One source of
efficiency that companies in the region have not
yet fully harnessed is DnA technology, which could
make all the difference in building the successful
processing plant of the future.
Around the world, tech-enabled process optimi­
zation has been at the core of improvements in
efficiency for all major front-runners in the mining
industry.11 Traditionally, companies in the mining
industry have relied heavily on individual experience
combined with first principles to drive productivity.
However, due to a surge in data creation and
computing power along with the plunging cost of
data storage and Internet of Things (IoT) nodes,
there has recently been a paradigm shift across
the industry, leading operators to supplement
traditional methods with more sophisticated
technologies to make data-driven decisions.
Exhibit 2

Several new processing plants in Indonesia are planned to be completed in the

next three years.

Planned completion date

Q4 2022 Q4 2023 Q4 2024 Q4 2025

Type of Ferronickel Copper pro- Nickel rotary Copper Alumina Nickel Nickel
project (FeNi) smelter cessing plant kiln-electric concentrator smelter smelter processing
expansion furnace plant plant plant

Location East West Nusa Southeast East Java West Central Southeast
Halmahera Tenggara Sulawesi Kalimantan Sulawesi Sulawesi

Capacity,
ktpa1
14 900 23 300 1,000 50 12

Type of FeNi Copper Nickel Copper Alumina Nickel Nickel

metal concentrate concentrate

Size of
project,
290 Not disclosed 2,200 230 165 Not disclosed 2,500
$ millions

1
Thousand metric tons per year.
Source: McKinsey MineLens

McKinsey & Company

In the past decade, Southeast Asian companies have
undertaken a similar proliferation of sensors and data
in both frontline and factory operations. For example,
to boost its productivity, one mining company in
Southeast Asia leveraged multiple digital solutions,
including real-time crew management, DnA-driven
maintenance, and digital control towers. These tech­
nologies were combined with a gamified training app
to increase adoption by employees, which helped the
company become an Industry 4.0 leader. Likewise,
an energy company made factories smarter with
communication portals, Industrial IoT (IIoT) system
monitors, and a tracking system that uses QR codes.
These technologies improved productivity and
efficiency by collecting and leveraging useful data
across operations.
Most metal and mining players in Southeast Asia
already own a trove of valuable data but have yet
to experience the truly transformational impact
of this data on the bottom line. Many companies
in the region are exploring ways to realize the
value of the data through tech-enabled innovation
across the value chain (Exhibit 3). The overall
goal is to improve operational efficiency while
helping companies achieve their sustainability
targets—that is, maintaining their productivity
while consuming less fuel. In fact, nearly half of
tech-enabled impact is driven by the application of
advanced analytics in processing plants to propel
end-to-end process optimization.

Advancing metals and mining in Southeast Asia with digital and analytics 5
 Exhibit 3

Digital and analytics–enabled innovations are emerging across the mining

value chain.

Examples of use cases in the value chain

1. Exploration
• Stochastic geological model
• AI helping to improve likelihood of finding
mineral deposits
2. Planning
• Dynamic bottleneck prediction model
• End-to-end stochastic process simulation
(digital twin)
• Optimal blending planning to drive maximum
3. Drilling and blasting recovery in downstream plant
• AI-driven expert system to drive blasting
optimization
• Optimization of planning and mining
development control
• Digital and analytics (DnA)–driven performance 4. Hauling and loading
management system • Dispatch optimization driven by AI models
and production simulation
• Load and haul performance management
using DnA
5. Processing plant
• Optimization of transport maintenance
• Optimization of yield, energy, and throughput
• Fuel consumption optimization
of end-to-end processing operations of a plant
through set-point advisory systems
• Stabilizing and optimizing a subsystem in the
plant (eg, mill, flotation, or furnace) by
improving and developing machine
learning–driven advanced process control
• DnA-driven performance management system 6. Maintenance
• Optimization of critical equipment maintenance
• Predictive maintenance on assets (eg, load,
haul, dump)

7. Energy and natural resources

• Boiler and heater parameter optimization
• Water usage optimization

8. Commercial or other
• Prediction of copper price variability

Source: QuantumBlack, a McKinsey company

McKinsey & Company

6 Advancing metals and mining in Southeast Asia with digital and analytics
 One of the challenges with processing-plant opti­
mization is its sheer complexity, with thousands
of operation parameters. Today, decisions are
typically made by operators who combine their
individual experience with small sets of process
control data, which can result in varying degrees
of success.12 A broader set of data, state-of-the-
art AI, and metallurgy principles can be combined
in proprietary optimization algorithms to give
operators advice that encompasses more variables
and historical data than a human can process.
For example, process optimizations for grinding
operations in a mineral-processing plant are
often complex and challenging. A control room
operator needs to consider multiple decisions
simultaneously across hundreds of process vari­
ables, many of which are often not transparent
and require various trade-offs. Optimizing trade-
offs between throughput, recovery, and product
quality is not straightforward, even for operators
with years of experience. Moreover, the existing
process-control solutions often optimize only a
single unit process without considering the effect
on downstream or upstream operations. For
example, an advanced process-control tool for
a grinding mill can optimize the feed rate to the
mill, but during the process, it can also neglect
the effect the initial feed rate has on downstream
recovery. As a result, grinding mills usually operate
well below their end-to-end optimal set points,
thus yielding daily production losses.
DnA has revolutionized processing-plant optimi­
zation, enabling users to analyze significantly larger
sets of operation data—for example, across multiple
years—and receive advice on optimal set points
in near-real time, pushing data-driven decision
making into daily operations. With tools such as
fully automated data pipelines and interactive
dashboards, operators can easily understand the
full impact of process param­eter changes. Through
customizable user interfaces, such as digital control
towers, operators can even gain the ability to con­
duct scenario-based operation tests prior to fully
12
For more on process controls, see “The potential of advanced process controls in energy and materials,” McKinsey, November 23, 2020.
13
“Inside a mining company’s AI transformation,” February 5, 2020.
14
“Freeport turns to artificial intelligence to raise copper output by 90,000 tonnes,” Financial Times, November 3, 2019.
Advancing metals and mining in Southeast Asia with digital and analytics
implementing them. As a result, operators can learn
and understand the operational tweaks needed for
individual assets, achieving significant reductions in
process variability and enhancing throughput.
The value of DnA technology goes far beyond
ease of use: across Southeast Asia, the adoption
of advanced analytics–driven technology can
improve the productivity of processing plants and
potentially create $4 billion to $5 billion in value
across key metal industries (Table 1). This proven
recipe has been deployed across more than 100
assets across industries and product commodities
globally, achieving an 8 to 10 percent increase
in throughput with an approximate 1 to 3 percent
uptick in recovery performance.
The proven global success of DnA
DnA’s potential to unlock value has already been
demonstrated in processing plants around the world.
Across all heavy-industry sectors, companies have
seen improved performance, resilience, and flexibility
by harnessing the power of data in sustained,
significant transformations.
In mining, Freeport-McMoRan leveraged advanced
analytics to drive a distinctive sitewide transformation
at its mill in Bagdad, Arizona.13 To improve perfor­
mance, managers fundamentally changed how
the mill works and implemented data science and
agile ways of working that enabled easier, faster,
and better-informed decisions. Better decision
making led to better results: using digital-informed
approaches allowed the mine to increase both
throughput and recovery and to produce up to 5
percent more copper annually.14
In the metals industry, a similar scenario played out
at Tata Steel’s plant in Kalinganagar, India. Using
historical data, plant managers were able to tap into
the value of data by building an analytics model of
the plant’s processes. By using the model to analyze
their superheating process, operators successfully
increased their “strike rate” (the percentage of
7
Table 1. Improving copper, gold, nickel, iron ore, and zinc processing could create as much as $5 billion in value across
Southeast Asia.

Country Potential mining processing value in Southeast Asia, $ millions

Indonesia $2,900–$3,700

Philippines $700–$900

Laos $150–$190

Vietnam $140–$180

Malaysia $50–$70

Myanmar $40–$50

Thailand $16–$20

$4 billion–$5 billion total potential value across Southeast Asia

Source: McKinsey MineLens

molten steel batches heated to the optimal range)
by up to 85 percent, increasing throughput by 8 to
12 percent.15 Managers supplemented this increased
productivity with a strong upskilling and capability-
building program to empower the team to work with
digital technologies.
up DnA even faster to ensure value chain resilience.16
By applying AI, companies in Southeast Asia can
break out of pilot purgatory, unlock significant value
for their organizations, and build resilience in a rapidly
changing world—if they can transform successfully to
support the new technology.17

DnA also holds great potential in the energy sector.

For example, an energy company achieved lasting
financial and sustainability improvements by
leveraging AI in its power plant operations. After
successfully deploying a heat rate optimization
program, the energy company went on to tackle
scaling, which is frequently the more challenging
step. By adding to the core functionality of the
program and training employees in its use, the
company efficiently scaled its new AI tools across
more than 50 generators to unlock more than $50
million in savings while abating a significant amount
of carbon annually.
These successful transformations are only the
beginning. Spurred by the COVID-19 pandemic and
geopolitics, industrial companies have been scaling
What it takes to deliver a DnA-enabled
operation
The best way to implement DnA-enabled operation
implementation is to adopt a comprehensive “triple
transformation” of business, organization, and tech­
nology functions to ensure end-to-end adoption and
to capture the full value of new technologies.
On the business side, companies should have a
clear vision of business value—including a road map
with impact use cases—when it comes to choosing
which DnA solutions to implement. The best use
cases drive value and have appropriate payback
periods. Companies with successful transformations
typi­cally establish internal processes that help link
digitalization to business value and create clear lines

15
Namrata Dubashi, Rajat Gupta, Rajiv Kumar, and Kunwar Singh, “How a steel plant in India tapped the value of data—and won global acclaim,”
McKinsey, March 8, 2021.
16
“Building value-chain resilience with AI,” McKinsey, November 26, 2021.
17
For more on breaking out of pilot purgatory using AI, see The executive’s AI playbook, QuantumBlack, a McKinsey company.

8 Advancing metals and mining in Southeast Asia with digital and analytics
 of sight to desired benefits, whether bottom-line
Find more content like this on the
impact, carbon-footprint reductions, or improved
McKinsey Insights App
safety performance. With greater overall clarity,
businesses can also focus resources on what matters
most and ensure a consistent and transparent
organization-wide communication.
As for the organization, a full-scale transformation of
culture and change management can help employees
fully embrace DnA and can create a clear path of
Scan • Download • Personalize
adoption by lines of business. Leaders should focus
on changing mindsets and behaviors from the board­
room to the front line to capture value at scale and
achieve sustainable impact. Paying attention to the
hearts and minds of employees can drive last-mile
adoption of new technologies and techniques. A
suite of interventions, including leadership role
modeling, awareness-building campaigns, and early
engagement of end users, can be useful tools for
achieving greater buy-in. In addition to changing
company culture, the processing industry as a whole
needs to prepare for shifting talent needs in the
future. To accelerate the pace of digitalization in the
industry, companies could consider upskilling their
organization internally and attracting top talent from
external sources. For example, within the existing
organization, field engineers could be retrained to
become analytics translators who bring a strong
domain-backed understanding to the application
of data analytics. Other digital capabilities, such as
product ownership, data science and engineering,
solution architecture, and cybersecurity, may need
to be hired from outside the traditional processing-
industry talent pool.
Finally, to transform technology, companies need
to establish a scalable infrastructure, thoughtful
data governance systems, and a dynamic partner
Ying Wan Loh is a consultant in McKinsey’s Kuala Lumpur office; Azam Mohammad is a senior partner in the Singapore
office; Avinash Tripathi is a consultant in the Sydney office; Eben van Niekerk is an associate partner in the Perth office;
and Yanto Yanto is an associate partner in the Jakarta office.
Designed by McKinsey Global Publishing
Copyright © 2023 McKinsey & Company. All rights reserved.
Advancing metals and mining in Southeast Asia with digital and analytics
ecosystem. One way to achieve a scalable infor­
mation technology and operational technology
(IT/OT) infrastructure is to adopt a two-speed
architecture. In this system, faster front-end
technology and middleware (such as IoT platforms)
are built to be adaptable and scalable. These
technologies then interface with existing back-end
enterprise systems, which are often slower and
could be outdated. Using this approach allows for
agile, high-speed developments with extensive
rapid prototyping to develop use case–based
functionality. Meanwhile, making slower changes
to core legacy systems such as enterprise resource
planning (ERP) and manufacturing execution
systems (MES) enables them to evolve over time. At
the same time, it is important to maintain rigorous
data governance across all domains, particularly
in key dimensions such as security, controls, and
prioritization. With well-governed data, companies
can build consolidated data sources to enable
data-driven decision making. In all these efforts,
traditional processing-industry players should
consider building and leading a focused, dynamic
ecosystem of partners such as cloud providers and
start-ups to accelerate their technology capabilities.
As Southeast Asia’s mining and minerals industry
expands, DnA-enabled operations have the
potential to deliver the next step change in value
creation for downstream processing. The region
is now at a pivotal moment to build an ecosystem
of DnA-powered capabilities that could help
the industry leapfrog toward supporting next-
generation processing plants. But the way DnA is
implemented—if it is implemented at all—will make
the difference in Southeast Asia’s future.
9