https://www.miningweekly.com

Cautious optimism prevails in mining as prices rise, shallow growth returns

7th April 2017

By: Ilan Solomons

Creamer Media Staff Writer

     

Font size: - +

For the first time in a number of years, there is a mood of cautious optimism in the mining industry, 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, says advisory firm Deloitte.

However, the company notes that the industry is still at a “pivotal point” as it faces challenges from cybersecurity threats to technological disruption and environmental issues. Deloitte states that mining companies face key choices about where to invest and how to position themselves in the coming years.

This is according to the firm’s recently released ninth yearly global mining report, entitled ‘Tracking the Trends’, which explores how mining companies can succeed by understanding and reacting to ten trends that are expected to impact on them in 2017 and beyond.

“Mining companies willing to engage in substantive change, by rethinking strategy and embracing disruption to help unlock productivity and improve sustainability, will likely be best positioned to succeed,” says Deloitte global mining sector leader Philip Hopwood.

He remarks that these mining companies will require “strong leadership, greater collaboration and adoption of a long-term view to propel the industry forward”.

Deloitte Africa mining leader Andrew Lane adds that governments of resource-rich countries are grappling with the issue of how to equitably distribute the returns from their resource endowments to investors, governments and communities.

“There are no simple answers to this and the answer lies in effective engagement and productive dialogue.” Further, he notes that, as one looks to the future of innovation in mining, it is not just about diversifying revenues, but also about creating viable, sustainable streams for both shareholders and other stakeholders as mines approach the end of their operating lives.

Further, Hopwood highlights that, in an increasingly complex world driven by new technologies, mining companies are turning to innovation to fuel success. He says that, in recent years, the mining sector has invested in technological innovations, such as driverless trucks, sensors and advanced analytics to reduce costs, streamline equipment maintenance and prevent safety incidents.

“New technological advancements are rapidly driving the next wave of productivity gains, as technologies, such as drones, real-time modelling and geocoding, are creating real-time, productive and functional improvements.”

He adds that, to achieve the next layer of efficiency gains, companies should not only adopt the technology but also create a culture of innovation that leverages insights from beyond the mining industry.

Meanwhile, Lane notes that, by adopting innovations from other sectors, such as manufacturing, automotive and pharmaceuticals, the mining industry can enjoy the full range of benefits new technologies offer.

Additionally, he points out that the report emphasises that mining companies must improve shareholder value. Lane explains that, historically, the mining industry has underperformed in this space, with total shareholder returns in steady decline since 2011.

He comments that the optimisation of portfolios, the strengthening of merger and acquisition processes, sustaining focus on cost and making long-term investments are key to improving this performance.

Lane says that, 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. He remarks that adopting new forms of collaboration, including turning vendors into partners, collaborating with competitors and building extended partnerships, can help companies achieve this goal.

Moreover, Hopwood says that, while there are a number of benefits to embracing digital capabilities, miners must 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.”

He notes that, as technology permeates all industries and sectors, mining is not immune to the accelerating threats of cybersecurity. Hence, Hopwood holds that mining companies are subject to a “wide range” of risks and, with an evolving threat landscape, leaders must strengthen their cybersecurity programmes.

Additionally, he states that, to create shared vision for the mining sector, companies and governments would benefit from finding middle ground that aligns interests and enhances cooperation when it comes to regulations.

Hopwood points out that winning a social licence to operate is particularly difficult for miners, particularly in light of a number of recent catastrophic mining accidents as communities continue to raise concerns about the industry’s impact on the environment. However, he says that, by lessening their environmental footprint, miners can foster the community trust needed to regain this licence.

He also highlights that, while commodity prices have started to recover since initially declining significantly in 2011, following years of record profits, 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 currently considering how to align their operating models with these choices so they can position themselves to meet their strategic objectives and sustain their new, lower cost positions.”

Further, Hopwood states that productivity improvement has been elevated to a mining industry mantra following the commodity price weakness of recent years. He stresses that companies, however, need to recognise that productivity goes beyond reducing costs and streamlining processes, and includes social factors, such as mental health, wellness and diversity, which should be considered and addressed.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

Comments

The content you are trying to access is only available to subscribers.

If you are already a subscriber, you can Login Here.

If you are not a subscriber, you can subscribe now, by selecting one of the below options.

For more information or assistance, please contact us at subscriptions@creamermedia.co.za.

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION