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Industry at inflection point as mining tide rises – Deloitte

1st February 2017

By: Henry Lazenby

Creamer Media Deputy Editor: North America

     

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VANCOUVER (miningweekly.com) – Companies that are willing to engage in substantive change by rethinking strategy, embracing technological disruption and adopting a long-term view, will be best positioned to succeed and propel the mining industry forward, a new report by professional services firm Deloitte has found.

According to the ninth iteration of Deloitte’s report entitled ‘Tracking the Trends’, a mood of cautious optimism has returned to the Canadian mining industry for the first time in years, with commodity prices on the rise, shallow growth returning to different end markets and most mining companies in better cost positions than in the recent past.

However, the industry is still at a pivotal point as it faces challenges from cybersecurity threats to technological disruption and environmental issues, Deloitte warns.

“Mining companies must now make key decisions about where to invest and how to position themselves in the coming years. It is critical that companies are aware that, with technological and digital disruption occurring across all industries, come accelerated threats to the mining industry,” stated Deloitte’s Canadian and global mining leader Phil Hopwood on Wednesday.

A trend quite new to the industry this year is digitisation; and while there are several benefits to embracing digital capabilities, miners must decipher how to turn potential benefits into reality.

“In order to experience the full range of benefits and efficiencies new technology offers, companies need to fully integrate digital capabilities into their culture. To thrive in the future, companies must embed digital thinking, processes and structures into the entire organisation. There is no time like the present to consider new strategic approaches to help transform the way mining operates across the board,” global mining innovation leader Andrew Swart added.

2017 TRENDS
In recent years, the mining sector has invested in technological innovations such as driverless trucks, sensors and advanced analytics to reduce cost, streamline equipment maintenance and prevent safety incidents. Today, new technological advancements such as drones, real-time modelling and geocoding are rapidly driving the next wave of productivity gains and functional improvements.

While there are several benefits to embracing digital capabilities, Deloitte said miners should figure out how to turn potential benefits into reality. To thrive in the future, companies must embed digital thinking, processes and structures into the entire organisation.

Historically, the mining industry has underperformed when it comes to shareholder value improvement, with total shareholder returns in steady decline since 2011. Optimising portfolios, strengthening mergers and acquisitions processes, sustaining focus on cost and making long-term investments are key to improving this performance.

Productivity improvement has been raised to a mining industry mantra following the commodity price weakness of recent years. Companies, however, need to recognise that productivity goes beyond reducing costs and streamlining processes: mental health, wellness and diversity should also be considered and addressed.

For the sector to realise major breakthroughs, companies will need to shift from a go-it-alone mentality, to one that recognises the value of operating within an ecosystem. Adopting new forms of collaboration including turning vendors into partners, collaborating with competitors and building extended partnerships can help companies achieve this goal, the report recommended.

To foster a shared vision for the mining sector, companies and governments could benefit from finding a middle ground that aligns interests and enhances cooperation when it comes to regulations.

Winning a social licence to operate is especially difficult for miners in light of a number of recent, catastrophic mining accidents and at a time when communities continue to raise concerns about the industry’s impact on the environment. By lessening their environmental footprint, miners can foster the community trust needed to regain their social licence to operate.

Further, Deloitte noted that while commodity prices have started to recover, industry leaders now understand the importance of adopting operating models that can help them respond to industry challenges and market volatility. Companies that took steps to strengthen their balance sheets in the latest round of cost take-outs are now considering how to align their operating models against these choices so they can position themselves to meet their strategic objectives and sustain their new, lower-cost positions.

With governments demanding greater levels of transparency, the sector is working to strengthen compliance and disclosure practices. By standardising information, considering the benefits of over-reporting and reviewing information technology systems to ensure consistent data measurement and reporting capabilities, companies can adapt to a steep change in the reporting environment, the report stated.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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