Sound policy digging into losses in the mining industry

Brian Amaral (Host)
Welcome to Sound Policy, a podcast from FM where we share the latest insights on protecting today's businesses. On this episode, we'll be digging into mining and the major drivers of loss in this industry. The energy transition, the digital revolution, the data center boom: none of them happen without a mine somewhere in the world. So how can these businesses stay resilient? To break it down, we're speaking to Michael Beaumont, who has worked with FM’s mining clients for decades. Mike recently helped put together FM's latest mining industry loss history report. Mike called into the show from Australia, where he's based. Mike, thanks for being on the show.

Michael Beaumont (Guest)
Thanks, Brian. It's good to be here.

Brian Amaral (Host)
You've been involved in this business on the insurance side for quite some time. What do you like about it? What excites you about this industry right now?

Michael Beaumont (Guest)
This is where everything starts. I mean, it, it, it feeds into every single industry. So, if you're excited about AI, you should, in my view, be excited about mining because it's understanding its position as the first stop in the supply chain of pretty much everything.

Brian Amaral (Host)
You helped develop this report on losses in the mining industry. What is, what's in this report? Give us a broad overview.

Michael Beaumont (Guest)
So, this is a 20-year look at how mining losses really happened. It's based on about $2 billion worth of insured loss and a lot of our site-level engineering work and understanding this. So, it's really looking at a broad scope of the loss history. And it's trying to break it down and make it useful for the reader to then apply this and ask, "What if this happened at my site? What would that do to my business?"

Brian Amaral (Host)
So, the 2026 version of this report, and we will have a link to this report in the show notes if listeners want to read the whole thing, but what's your number one takeaway? What's the biggest thing that jumps out at you?

Michael Beaumont (Guest)
So, I guess there's probably two things. One is when I look at it, and we look at the actual basic breakdown of the graph, and you see how large a role fire plays. Because mining is made of steel and rock, and yet fire accounts for about a third of the losses. The other thing is that when you're digging through it, we're really looking at it through a systems approach. Then you look at the losses and realize these are more than just a fire. It's the escalation pathway that really matters. The losses that end up in our data are ones that have not only had a fire, but also a few other factors that have a high impact. We see that through business interruption. In a general breakdown of losses in the mining industry, about 25% of the loss paid out is property damage, and about 75% is business interruption.

Brian Amaral (Host)
So, it's not just the property damage that happens; it's the continued disruption that happens down the line. Seventy-five percent of that is actually business interruption risk?

Michael Beaumont (Guest)
Yeah. Quite often you'll be able to replace, say, a conveyor for maybe $10 million. But there may also be $10 million a day flowing through that mine out into the marketplace. And that's before you consider the flow-on effects. If you're out of business, it starts to do things to your business that aren't insured. The non-insured aspect is quite an important component too. It can affect market share. It can affect your windows of opportunity. Right now, if you're producing a critical mineral, you need to be producing it now.

Brian Amaral (Host)
So, we've done these loss history reports on mining. What do you think is the biggest change since the last time you crunched these numbers?

Michael Beaumont (Guest)
It comes back to fire and the growth in fire losses. Last time, and consistently for a number of years, fire was sitting around the 20% mark. I think it was about 21% in the last report. When I was doing the last report about five years ago, you could see it was trending up. We knew that we were having more fire losses in that five-year window. We've moved five years on, so the 20-year window has moved ahead five years. We've lost five years of older data, and that jumped to 32%. The size of the jump was a surprise. Not that it was trending, because we could see it trending all along anyway, and that certainly shows up in a number of our larger losses over the last couple of years.

Brian Amaral (Host)
What's driving that? What's causing that?

Michael Beaumont (Guest)
It's probably two things in the mining industry. One is the prevalent use of combustible materials. There are more plastics, polymer liners, rubber conveyor belts, and plastic equipment. The second is site layout. Things are being put into smaller areas and spacing may be a little tighter. The other thing that really has to be highlighted is operational complexity. The complexity of the mines themselves, as well as the supply chain and integration in that supply chain, is really driving it. If two or three of these factors come together for a failure, and then you get a fire that escalates through plastic equipment spreading it, the consequence becomes much larger. I don't think you're seeing growth in the number of losses. I think you're seeing growth in the severity of those losses.

Brian Amaral (Host)
Why are they becoming more complex?

Michael Beaumont (Guest)
It's driven by demand for materials. The more we mine, the more complex the ore bodies become and the lower the grades are. During the gold rushes of the 1800s, people were pulling up large nuggets. Today, in a gold mine, you're lucky to get two, three, or four grams per ton. That's a ton of rock for four grams of gold. That in itself is driving complexity. Then there is more demand for specialty minerals. Society once relied mainly on steel, but now we need many different materials for AI applications, electrification, military uses, and more. These materials are not necessarily easy to extract. Then you add supply chain complexity, which exists across industries. Mining simply becomes the first stop in that supply chain.

Brian Amaral (Host)
The mining business leaders that you're talking to, when you tell them over the last 20 years FM has seen $2 billion U.S. in mining losses, and that almost a third, 32%, are related to fire, does that surprise them?

Michael Beaumont (Guest)
It does surprise people because it comes back to the perception that they just deal with rocks and steel. The cover page of the report has a conveyor on it. It seems pretty benign, but that conveyor contains a huge amount of stored energy. When it ignites, the fire is significant. It doesn't matter whether the rocks can burn. The conveyor belt itself burns very hot, and then the steel loses its stability. That's something we're trying to emphasize when talking with business leaders and operators. The goal is to move the conversation from what can happen to what that event could do to the business.

Brian Amaral (Host)
This report also talks about what mining businesses can do to help prevent loss. What are some of the big takeaways?

Michael Beaumont (Guest)
We'll start with fire because many of these events are caused by hot work. It's basic procedural discipline, but we need to stay on top of it. One thing I should add is that equipment breakdown remains a core factor in many losses. Maintaining equipment, training operators properly, and managing change in the process are all critical. A mill breakdown can be a major loss itself, and many conveyor fires start from something as simple as a seized bearing getting extremely hot. Likewise, electrical fires often begin with an electrical breakdown before escalating into something much larger. The other aspect is contingency planning. Operators don't always focus on it as much as they should. If you're thinking about business interruption loss, having a contingency plan can take days, weeks, or even months off an interruption. These are resilient businesses, but the key is knowing ahead of time what you need to do, where materials can be sourced, and how to respond. Thinking through it before an event is far more effective than doing so afterward.

Brian Amaral (Host)
Were there particular commodities that were more vulnerable than others?

Michael Beaumont (Guest)
Short answer: no. Everything feeds into the supply chain. People talk a lot about rare earths and lithium because of technology and batteries. But there are also materials people don't often think about, like tin, which is in high demand because it's used in solder and electronics. Then there's copper, which is a really interesting example. Copper goes into data center buildouts, electrification, EVs, and many other applications. But at the same time, we still build houses and use copper wiring. There are all these standard applications that continue to drive demand regardless of what new markets are emerging.

Brian Amaral (Host)
When we're talking about business interruption risk, are there times where mining businesses are particularly vulnerable to disruption?

Michael Beaumont (Guest)
I'd say it's during periods of change. That's where a lot of these losses happen. Something is changing. It might be a modification to improve efficiency, taking equipment offline for hot work, or bringing a circuit down and back online. These actions happen every day, and for every loss event there are thousands of successful changes. But this is core business activity for mining companies, and it comes down to discipline. The best operators stand out because they manage isolations, verification, supervision, operating conditions, and management of change effectively. They appreciate that when things are in a state of change or operating in a non-routine environment, that's when major issues can arise.

Brian Amaral (Host)
It seems like the entire industry is in a state of change right now.

Michael Beaumont (Guest)
That's when people are pressed to meet market windows. Building a new mine takes years because of exploration, permitting, and development. If you look at gold prices recently, they increased much faster than a new mine could be brought online. So businesses look inward and ask whether they can improve capacity or keep operations running longer. That's when questions arise like, "Can we push out this maintenance?" or "Can we operate 10% above design capacity?" Engineers go through a proper process, but when you're working closer to the limits, you're more vulnerable.

Brian Amaral (Host)
So, we will have a link to the full report. If you're in the mining industry, even if you're not, it's well worth the read. There's a lot of great information in here. But if there's one thing a mining operator could do differently after reading this report, what would it be?

Michael Beaumont (Guest)
I would focus on a higher-level takeaway, which is a shift in perspective. The report is saying, let's move from asking what can fail to asking what happens when it does fail. That's an important mindset change. The report provides lots of information about what can go wrong, but the challenge for readers is to think about what those failures would mean to their own business. That's what we're doing with clients every day, because that's good risk management at its core.

Brian Amaral (Host)
We've been talking about the complexity in this industry, all the changes it's facing, and the challenges it has always faced. Can you paint a picture of what a modern mining operation looks like?

Michael Beaumont (Guest)
Surprisingly, if you take a step back, it doesn't look terribly different. Over the last 30 years, there are still a lot of big rocks. But what I see is that risk management has become much more embedded. Mining companies are much better at managing risk today. We still see opportunities for improvement, particularly around thinking through unexpected events and their impact on the business. Modern mining companies still crush rocks and do all the gritty work, but they do it with much more sophistication. AI is creating demand for minerals, but it's also helping companies improve maintenance, production, and exploration. We're using AI as well because we have large amounts of data about facilities. That helps predict which equipment and locations are more likely to experience an event.

One of the biggest developments is automation and autonomy. Autonomous equipment isn't really new. Mines have been pursuing automation for decades, and many have had autonomous trucking fleets for 10 to 15 years or more. AI can improve these capabilities, but it's following a path the industry was already pursuing. You can automate and digitize almost everything, but you still can't digitally replace a conveyor. It still needs to move rock from one place to another. Something still has to crush that rock into smaller pieces. You can digitize management, controls, and analysis, but a great deal of hard physical work still has to happen.

Brian Amaral (Host)
Where does the data behind this report come from? And is AI used to help understand and analyze these losses?

Michael Beaumont (Guest)
We've been collecting this data for about 70 years. The underlying database contains a very large number of events and associated details. Many larger events include claims reports, and we send engineers to investigate major losses because we want to understand what went wrong and use those insights in the future. We are also using AI to support predictive analytics models. That involves taking this loss history, along with hundreds of data points from each site, and using AI-driven analysis to identify trends and risk indicators. The charts in the report come from direct analysis of the data, but we also dig deeper because we have access to much more information than just the loss amount or location. That broader dataset can be very useful.

Brian Amaral (Host)
This report is coming out in 2026. What do you think happens in 2036? Where do you think the mining industry is going?

Michael Beaumont (Guest)
I wouldn't be surprised if I were reading articles about mining asteroids by then. Whether you take material from the Earth, the moon, or an asteroid, the process will still be similar. You'll still be crushing rock, moving material from one place to another, and blending things together. Maybe there's an asteroid floating out there waiting to be mined.

Brian Amaral (Host)
I'd love to be the FM underwriter or field engineer who gets sent to inspect an insured site on an asteroid. That expense report would be very interesting.

Michael Beaumont (Guest)
In 2036, I will be well and truly retired. But I would come back from retirement to do that visit.

Brian Amaral (Host)
Well, thanks, Mike, for being on the show.

Michael Beaumont (Guest)
Thank you. It was great talking, Brian.

Brian Amaral (Host)
If you'd like to reach the show, email [email protected]. Copyright 2026 Factory Mutual Insurance Company. All rights reserved. The views and opinions expressed by speakers or participants are their own and are provided for informational purposes only. This podcast does not constitute legal, regulatory, or professional advice. References to any products, organizations, or third parties do not constitute an endorsement by FM unless expressly stated. FM makes no express or implied warranties and assumes no liability for any use of, or reliance upon, the information or products discussed.