The mining industry, which is facing tumultuous times in terms of funding, collapsed project pipelines and the ever-present issue of resource nationalism, needs to develop an innovative strategy to ensure its sustainability and relevance going forward, says professional services firm Venmyn Deloitte MD Andy Clay.

Delivering the keynote address at the Southern African Institute of Mining and Metallurgy (SAIMM) Surface Mining conference, last week, in parallel with the Electra Mining Africa Exhibition, he highlighted the issue of low commodity prices for industrial and bulk minerals.

If this trend continued, marginal producers would become even less attractive and only lower- cost mineral companies were likely to survive.

To overcome this, mining companies would need to optimise their mineral portfolios and target higher grades. In this case, Clay said, surface mines were at an advantage in terms of lower costs.

In terms of project funding, he had seen a shift away from developers seeking funding from banks and private financial institutions to developers approaching private-equity funders for financing.

However, unless mining companies could demonstrate positive returns to the private-equity- providing shareholders, the shareholders were unlikely to recapitalise.

To remain ahead and relevant in the mining industry, Clay advised mining companies to consider mine plans that initially required surface mining, followed by underground mining later on in the project life.

He also pointed to the need to consider mining high-grade areas initially to enable the project to be financed through self-generated funds.

Further, mining companies should consider establishing a processing plan that included a pilot plant that could initially process small volumes of material which could later be scaled up in a modular fashion when needed.

Meanwhile, in terms of energy, which is a massive constraint facing mining companies in South Africa, becoming self-sustainable was important. Clay said partnerships with independent power producers were being considered in the mining industry, while some mining companies were also considering installing baseload power plants.

He pointed out that if mining companies did not heed the warning to innovate, there would continue to be a downturn in the industry going forward. “Unless we start to change the ways in which we mine through innovation, the future looks bleak,” he said.