Costs overtaking prices threatening mining jobs, communities, governments
Tough industry conditions over the Last year have driven the profits of the top 40 global mining companies to their lowest level in ten years.
Miners are being forced to realign with harsh reality, professional services firm PwC says.
Yet, demands on those meagre profits are unrelenting. The fact that the industry’s cost curves are outdoing the price curves has not stopped the demands of mineworkers, politicians and communities, who all want a far bigger slice of the mining pie.
Little wonder that investors are shying away from mining and seeking solace in alternative quicker-return opportunities. Continuing to take long bets on markets that have no price guarantees is currently a no-no.
Mining companies themselves have been forced into ultra-cost-control mode.
However, despite the industry going all out to explain its predicament, the trust deficit widens.
This is despite the fact that formal systems for holding companies to account are not matched by formal systems to hold mineworkers, governments and communities to account.
The prolonged strike in the platinum belt has driven home the reality that there is no available mechanism to minimise strike damage, which has been colossal.
While mining’s contribution to government revenues, gross domestic product and employment is exceedingly important, its biggest benefit of all in developing countries, from an economic perspective, is its attraction of foreign direct investment that generates earnings in foreign markets – and this is now absent.
The platinum strike is preventing desperately needed foreign exchange earnings from coming to the fore, which is causing the country’s economic innards to stutter.
Meanwhile, global mining, through the International Council on Mining and Metals (ICMM), is getting its act together as an agent of change and an organisation whose members are expected to place human rights and human dignity at the very core of their approach to business.
Mining giants are committing to sustainable development through 33 ICMM member associations connected to another 1 500 companies in the sector.
Together, governments, communities, mining companies and mineworkers can do an enormous amount and that message must be vigorously communicated to all, especially mineworkers who have such a big contribution to make.
Everyone agrees that, in the long term, the mining industry has positive demand- side fundamentals but the question being asked is whether the short-term demands out there from the shareholders, government and labour can be realigned to create a long-term sustain- able industry.
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