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Robotic technology has moved by leaps and bounds in recent years. While it was a figment of the imagination just a couple of decades ago, it is actively being used in mining and oil and gas exploration. BHP Billiton (BHP) and Rio Tinto (RIO) have been at the forefront in ensuring that robotic technology is utilized in order to reduce costs, avoid risks and optimize exploration and drilling. Though Rio Tinto was the first one to use robotic trucks in Australia, BHP is now following suit.

I think BHP has made a great move here, as this strategy will likely affect its fundamentals positively in the long run and make the stock more attractive to investors looking at the mining sector.

BHP recently established its newest mine in the Pilbara region. The mine is coordinated from a recently established remote operations center located in Perth, Western Australia. Pilbara is known for its inhospitable conditions and very difficult working environments. This is precisely why BHP decided to use robotic trucks instead of having employees transporting iron ore to railway lines. What many people have questioned is why BHP had to wait until Rio Tinto tried the robotic trucks, instead of BHP going ahead with implementing the new technology by itself.

BHP iron ore and coal boss Marcus Randolph spoke to The Australian and said that BHP believed it was a better idea to see if these robotic trucks really worked the way they were projected to, and BHP effectively used Rio Tinto as a guinea pig. Rio Tinto is BHP's most formidable competitor and rival and BHP could not have made any mistakes when it comes to introducing newer technologies. Even I believe BHP did the right thing by waiting for Rio Tinto to try these robotic trucks before it set out to utilize them itself.

BHP will now begin to use a fleet of between 12 and 15 automated Caterpillar trucks at the Jimblebar mine. Rio Tinto has advertised and bragged about the use of robotic technology for quite some time. At the moment, Rio Tinto has 450 people working at its remote operations center at Pert Airport and uses a fleet of 10 robotic trucks in Pilbara. Rio intends to increase that number to 150 trucks by next year. BHP played it down by saying the company did not want to make the robotic trucks a selling point as the company doesn't believe in using technology as a selling point.

It is the amount of iron ore that is generated at the end of the year that matters. If BHP is able to use robotic trucks without much fanfare as opposed to Rio Tinto, and still manage to produce more iron ore and coal, I think BHP will stand in a better position at least in Australia. If BHP can manage to use the robotic trucks top increase production and ensure safety of its employees, I think the company will have achieved what it intends to achieve. Moreover, it is not necessary that BHP has to do everything that Rio Tinto does. It can afford to wait until Rio Tinto gets robotic technology right in order to make the right moves for itself.

As these technologies are not patented by mining companies and can be purchased from the marketplace, BHP is in a safer position to wait it out, instead of going all out into the field with the help of unmanned robotic trucks.

Rail-Veyor Technologies Global had unveiled a robotic train designed to assist mining companies in their quest to unearth more metals and stones. The Rail Veyor train was used by vale in Sudbury, Ontario. Vale (VALE) spent almost $50 million to install these tram-like robotic vehicles. Datong Coal Mining Group installed four palletizing robots.

The Chinese coal mining company took this step in order to reduce hazardous working conditions for its workers. Coal mining is one of the most dangerous professions in the mining world. AngloGold Ashanti (AU) had once discussed using robotic technology too, in order to improve the working conditions of its workers. However, the company has faced many problems related to wages given to its workers in South Africa. What surprises me is that only BHP and Rio Tinto have gone ahead and started to use robotic trucks. Vale is the only other major mining company that is invested in robotic technology. If more mining corporations utilize robotic technology, costs can be reduced while efficiency is increased.

Mining equipment giant Caterpillar's robotic trucks cost over $5 million each. A Caterpillar 797B truck can carry more than 300 tonnes of material per load. BHP Billiton recently announced that it will test the use of robot trucks at its Jimblebar iron ore mine in Pilbara. The company plans to use between 12 and 15 automated Caterpillar trucks by the end of 2013. This will cost the company approximately $60 to $75 million. Despite the high cost of this equipment, I believe the expenses are well worth it because of the truck's lower rate of error, improved productivity and much lower manpower cost. Roughly ten employees are needed to operate each manually driven truck. This number could be cut in half by using the robotic trucks.

BHP currently trades at $71. It has a price to book ratio of 2.88 and price to sales ratio of 2.62, which are not bad numbers either. I think using these robotic trucks will have a positive effect on BHP's fundamentals because it will eventually increase production and reduce its dependency on human workers, which will reduce its operational costs in the long run.

Moreover, BHP will be better able to compete with the likes of Rio Tinto. BHP has suffered rising debts, with its total debt amounting to $28.59 billion. However, it has an operating cash flow of $24.38 billion and a total cash of $4.83 billion, which may help to offset its liabilities. In any case, investors have much to cheer about. BHP has one of the highest profit margins among mining companies, with an astounding 21.34%. Its operating margin is 36.54%. These numbers do suggest that the returns are more than satisfactory and BHP is one stock that investors should consider seriously.

Source: Robotic Technology Makes BHP More Attractive