Mining Weekly

Mining companies willing to engage in substantive change by rethinking strategy and embracing disruption to help unlock productivity and improve sustainability will be best positioned to succeed in the upcoming years, says advisory firm Deloitte Global mining sector leader Philip Hopwood.

He notes that the mining sector, historically slow to innovate, is now taking its cues from industry peers to position itself for long-term success by increasing its focus on innovation, collaboration, cybersecurity and environmental stability. These and other issues will, thus, form key areas of focus at this year’s Joburg Indaba, held at the Inanda Club, in Sandton, Joahnnesburg, from October 4 to 5, where Deloitte Africa will be present as a corporate partner sponsor.

The company notes that, for the first time in several 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. However, the industry is still at a pivotal point as it faces challenges from cybersecurity threats to technological disruption and environmental issues, and Hopwood stresses that companies will require “strong leadership, greater collaboration and the adoption of a long-term view to propel the industry forward”.

Unlocking Productivity Through Innovation
With mining companies facing critical decisions in terms of where to invest and how to position themselves in the coming years, Deloitte Global’s ninth annual mining report, ‘Tracking the trends’, explores how mining companies can succeed by understanding and reacting to the top ten trends that will impact on them in 2017 and beyond. Released in February, the report also includes a range of case studies which showcase how mining companies are bringing new solutions to life to manage these evolutions.

In an increasingly complex world driven by new technologies, the report notes, a turn to innovation to fuel success is the reigning trend across industries. 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. New technological advancements are rapidly driving the next wave of productivity gains and technologies such as drones, real-time modelling and geocoding are creating real-time, productive and functional improvements.

“To get to the next layer of efficiency gains, companies should not only adopt the technology but also create a culture of innovation that leverages insights beyond the mining industry . . . By adopting innovations from sectors such as manufacturing, automotive and pharmaceuticals, the mining industry can enjoy the full range of benefits new technology offers,” says Deloitte Africa energy and resources leader Andrew Lane.

Another key focus for mining companies identified by Deloitte Global is improving shareholder value by enhancing performance. Increasing the efficiency of portfolios, strengthening merger and acquisition processes, sustaining focus on cost and making long-term investments will all be critical in this pursuit, the company says.

For the sector to realise major breakthroughs, companies will, moreover, 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,” says Deloitte.

While there are numerous benefits to embracing digital capabilities, the company also emphasises that miners must determine how to turn potential benefits into reality by embedding digital thinking, processes and structures into the entire organisation. This will also mean that mining companies must strengthen their cybersecurity programs, in line with the evolving threat landscape associated with an increasingly digitalised world.

Winning a social licence to operate is also a core focus, as it has grown especially difficult for miners in light of various recent catastrophic mining accidents and continued concerns raised by communities about the industry’s impact on the environment. By reducing their environmental footprint, miners can foster the community trust needed to regain their social licence to operate. “To foster a shared vision for the mining sector, companies and governments could also benefit from finding middle ground that aligns interests and enhances cooperation when it comes to regulations.”

Further, mining companies must ensure that structures are implemented to provide support for their strategic priorities, adopting operating models that can help them respond to industry challenges and market volatility. Deloitte notes that 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 with these choices so they can position themselves to meet their strategic objectives and sustain their new, lower-cost positions.

However, companies also need to recognise that productivity goes beyond reducing costs and streamlining processes and includes the mental health, wellness and diversity of their workforces. These factors should, thus, be considered and addressed to create healthy and inclusive workforces.

With governments demanding greater levels of transparency, the sector is, moreover, working to strengthen compliance and disclosure practices, resulting in a need to adopt an integrated approach to reporting. By standardising information, considering the benefits of overreporting and reviewing information technology systems to ensure consistent data measurement and reporting capabilities, companies can adapt to change in the reporting environment.

“As companies recommit to a new set of strategic priorities, they will also need to adopt the next generation of operational approaches . . . The time is now for mining companies to consider new strategic approaches, transforming the way mining operates across the board,” Hopwood concludes.