Mining Weekly

While mining companies are trying to cut costs in-house and drive efficiency to survive the depressed market, advisory firm Eunomix states that these companies continue to be affected by a “tidal wave” of stakeholder pressures and volatile commodity prices.

“Without a strategy to navigate through this storm – or calm the waters – firms remain unnecessarily exposed to external risks. Mining leaders need a strategy that is responsive to and consistently engages all value drivers – internal and external,” says Eunomix MD Claude Baissac.

With this imperative in mind, the firm will again present a workshop at the Investing in African Mining Indaba, which runs from February 8 to 11 at the Cape Town International Convention Centre.

The presentation will focus on the role and formulation of a strategy to create value in times of uncertainty. The workshop, titled ‘A strategy primer: taking control of rising shareholder demands and lower prices’, will be facilitated by Baissac.

The role of corporate strategy in turning business around is a critical question at this juncture in the industry’s history, Baissac says. The company will, he believes, be able to provide significant insight into how the mining industry can develop strategies that take key lessons from the current crisis, as well as build resilience to a new norm of lower prices, while taking into account continuing high stakeholder demands and global instability.

Baissac emphasises that, while mining executives are under significant pressure to cut unit costs and improve productivity, they are simultaneously confronted with demands for increased transparency and accountability, social investment, environmental management, localisation and economic development – demands often well beyond their control.

“Moreover, the tension between the economic and social equations makes strategy not only difficult but also crucial.”

Therefore, a key aim of Eunomix’s workshop is to acknowledge these issues and discuss ways of managing the tensions effectively through strategy. Baissac acknowledges that strategy tends to remain focused on in-house efficiency, with external pressures, such as changes in policy and legislation, or labour unrest, to be managed as they arise. “While this is changing, this transformation is happening too slowly,” he laments.

The workshop will comprise real-world examples from Eunomix’s experience and that of participants. The company will also showcase empirical work on the relationship between commodity prices and company performance in terms of platinum-group metals, and demonstrate substantial insights into strategic levers for performance improvement.

“Although risk management has always been an important part of corporate strategy, too few mining companies fully engage in the underlying issues in their external environments that have a direct and significant impact on operations,” Baissac says.

He further points out that there are also significant assumptions made in developing corporate strategy, specifically with regard to the first-hand effects of in-house and external factors on operational decision-making and, in turn, a company’s performance.

“Eunomix will aim to address these two major issues in corporate strategy and, thereby, enhance its ability to deliver significant value to clients in ever-more complex and challenging operating environments,” Baissac adds, stating that the company’s service offering has become more relevant to the mining industry in these tough times.