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Mines need to overcome current challenges in the near future

TRYING TIMES Mines have to improve operations to stay afloat in the global economy

SEAN AMMON Mining companies are facing significant challenges and risks, with the cost of doing business potentially leading to mines’ feasibility being questioned

8th July 2016

By: Victor Moolman

Creamer Media Writer

  

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The South African economy contracted by 1.2% quarter-on-quarter during the first quarter of 2016, dragged lower by the poor performance of mining and agriculture – the economy was also 0.2% weaker year-on-year.

The performance of mining came amid a drop in volumes and weak commodity prices and atop 13 negative quarters for the sector from 2011 until the first quarter of 2016.

According to Statistics South Africa, the largest negative contributor to gross domestic product (GDP) growth levels in the first quarter was mining and quarrying, which fell by 18.1% and contributed –1.5 percentage points to GDP growth. Had it not been for mining’s poor performance, the economy would have experienced growth of 0.5%.

Global strategic partners consultancy and advisory firm Deloitte Consulting identifies an urgent need for South African mines to overcome the current challenges, which are impeding their profitability, through efficient energy management, leveraging the innovation of technology and digital solutions, and reorganising themselves to work more effectively. “This ‘mine-of-the-future’ vision is about finding innovative ways of extracting minerals deep within the earth while reducing environmental impacts, further improving safety and advancing the use of people and technology,” emphasises Deloitte Consulting energy and resources associate director Sean Ammon.

He says, in the current mining context, the key drivers of improved business are the control of key labour costs and rescuing the bottom line, through managing critical resources such as energy and water. This enables mines to benefit from operational cost savings and available government incentives, as well as creating a stable environment for further African mining investment.

Mining companies are facing significant challenges and risks, with the cost of doing business potentially leading to mines’ feasibility being questioned, says Ammon.

Management challenges faced by mines include labour management challenges, the cost and reliability of energy, in-house and external spending, as well as complying with legislative changes. This, coupled with the current downturn in commodities prices, creates a highly pressurised environment.

Deloitte Consulting advocates a holistic approach to tackle the challenges associated with critical resources, such as energy and water, instead of intervening “just in time”.

As such, the firm suggests a systematic and integrated approach to managing energy, water, environmental and financial resources. In doing so, mines will reduce waste and emissions that pollute the environment, and facilitate bankable bottom-line benefits through implementing process improvements and optimising the way employees work across the mine. This leads to mine innovation opportunities, in terms of remuneration and reward practices, and incentivising all staff to be more efficient in the delivery of their daily tasks.

“Our findings show that a requisite energy improvement programme, from a strategy to operational level, not only leads to bottom- line financial relief but also creates opportunities for strategic realignment, process optimisation, improved workforce management, employment creation and socioeconomic boosts.”

Therefore, Ammon recommends a back-to-basics mindset, where input resources are tracked, from origination points and use to exit and reuse. “This provides a good opportunity for organisations to not only understand usage patterns but regain control of the relevant supply chains, where necessary.

“We have found that mitigating key challenges and improving mine productivity is directly proportionate to the time available for the mitigation,” states Ammon, adding that the implementation of corrective initiatives in some cases could be too late and, therefore, diluted or irrelevant.

Another critical sustainability factor to address in overcoming the challenges faced by the mining industry is the ability to involve the entire workforce and gain their support to embed the necessary changes. “Making the change ‘stick’ is sometimes the most complex part of a mine improvement programme,” Ammon stresses.

The world is changing at a rapid pace, fuelled by disruptive technology, digital developments and changing customer requirements, which require mines to constantly adapt. Enlisting the support of a global strategic partner has assisted many of Deloitte Consulting’s mining clients in managing the complexity and providing capacity to implement a large-scale improvement programme that achieves the required results in time, Ammon outlines.

Historically, mining organisations had long-standing partnerships with engineering companies that assisted them in growing their businesses through the sinking of shafts and, he explains that, “recently, we find that our mining clients are looking for long-term strategic partners to assist them in growing their businesses through strategic insight, cost reduction and successfully embedding change”.

This mindset shift is an important one, he points out, as mining is a critical contributor to the African economy: “A long-term vision that leverages the possibilities for renewable-energy expansion, global innovation and modern workforce enablement tools will keep mines ahead of the game.”

Edited by Tracy Hancock
Creamer Media Contributing Editor

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