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Deloitte outlines trends to assist miners find new strategic approach

29th January 2019

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer

     

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JOHANNESBURG (miningweekly.com) – To thrive amid the demands and exigencies that the Fourth Industrial Revolution (4IR) presents, mining companies will need a new strategic approach – one that considers not only the full range of industry shifts and risks, but that also provides executives with an enterprise-wide view of their value drivers.

It is for this reason that professional services firm Deloitte publishes its yearly ‘Tracking the Trends’ report, in which the firm discusses some of the trends affecting the mining industry.

Deloitte global leader for mining and metals Phil Hopwood remains optimistic that the mining industry is poised for growth, more than what it has seen in the last decade, but he warns that today’s market realities are very different to those of the past.

As a result, mining companies need to determine how to operate in a market that is characterised by constant disruption, volatility, rising stakeholder demands, a widening talent gap, as well as dwindling access to key inputs such as energy and water.

The eleventh edition of the firm’s report, published on Tuesday, is aimed at providing mining companies with insights they can leverage in their ongoing pursuit of productivity, capital discipline, strategy development and sustainable growth.

Among the top trends identified by Deloitte is ‘rethinking mining strategy’. The report discusses how many mining companies are still grappling with the strategic legacy of the concept of low-cost operations.

In essence, the report states that mining companies have not yet “sufficiently broadened their strategic outlook to take a range of critical industry shifts into account”.

With consumers, governments and communities becoming stakeholders that can irrevocably alter industry dynamics, the report highlights the need for corporate social responsibility initiatives, which are now evolving into stakeholder engagement programmes.

In a miner’s strategy, the report advises companies to look at factors, such as consumer awareness, social licence to operate, geographic risk and access to input commodities, when setting up corporate strategies.

This consideration is especially critical as the industry shifts into a new stage of growth, such as that which is expected from electric vehicles (EVs), Hopwood tells Mining Weekly Online.

While EV adoption may not be a “full-scale” revolution, the EV boom stands to increase demand for materials, such as lithium, cobalt, rare earths, graphite, nickel and copper. By 2035, demand for copper, for EVs alone, is expected to reach 11-million tons.

The annual consumption for copper is about 23-million tons, in total, Hopwood says.

An additional 1.2-million tonnes may be needed to build charging stations and upgrade distribution lines, while demand for cobalt and lithium is expected to double between 2022 and 2025.

However, Hopwood warns that, while demand for commodities is expected to increase, the global mining industry may not necessarily be able to supply this demand owing to a current lack of mines.

“We live in a world with declining orebody grades and, in certain key commodities, there are supply shortages. The reality is . . . we are in a world where people will still need those commodities, but we don’t have enough mines to source those commodities,” Hopwood tells Mining Weekly Online.

Capital investment is also debated in the report, under the ‘decoding capital projects’ trend, and discusses how, despite mining companies’ concerns about realising sustainable returns, miners cannot avoid putting off capital project investments indefinitely.

Instead the report suggests that miners must learn from past mistakes by approaching capital projects with a new frame of mind, in which they need to focus on “honing stronger organisational capabilities across their entire portfolio of projects”.

Meanwhile, like many traditionally male-dominated industries, mining has an inconsistent record when it comes to workplace diversity and inclusion, the report notes under the ‘operationalising diversity and inclusion programmes’ trend heading.

The report highlights that many mining companies have relooked their inclusion strategies and have begun setting targets for gender equality and greater cultural inclusivity.

Here, Hopwood highlights diversified miner BHP, which has set a goal to achieve gender balance across each of its global operations by 2025. To reach this target, BHP will need to recruit more than 19 000 women by 2025 to reach its gender parity target.

In 2017, BHP hired 1 800 women.

Hopwood explains to Mining Weekly Online that, right now, the mining industry is not attracting sufficient numbers of diverse candidates to truly make a difference in diversity and inclusion strategies.

To shift this balance, the report advises that mining companies will not only need to change their talent attraction and retention policies, but will also need to change historical perceptions about the mining industry itself.

Deloitte’s report also touches on several other key themes in the mining industry, namely those of the 4IR and artificial intelligence and how it will enable increased connectivity; how miners can explore and manage the risks that the digital era brings, as well as how miners can digitise the supply chain and why innovation requires integration.

Additionally, other trends, such as driving sustainable shared social outcomes, exploring the water and energy nexus, and reimagining work, workers and the workplace, are discussed.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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