For the past seven years Deloitte has been following movements in the mining sector and outlining the key issues affecting it, while also offering strategies to combat the challenges.
Here are the top ten issues for 2015 and Deloitte’s advice for addressing them.
1. Pursuing operational excellence.
Following on from productivity dropping to new lows in 2013, mining executives focused on improving operational productivity in 2014. That focus is expected to sharpen even more this year as commodity prices compound the pressure. Deloitte has pitched data analysis as the leading strategy for improvement, alongside innovative strategies to cut core costs such as energy. Streamlining management and governance structures is also a suggestion.
2. Tapping into innovation
Innovation is an almost over-used word and it arises again here in regards to achieving more than cost reduction alone. Deloitte references the fact that miners have implemented innovative technologies as a way of safeguarding against risk. But it says miners need to go further than that and embed innovation into the company’s corporate DNA and leverage emerging technologies such as 3D visualisation tools.
3. Reducing power costs
The growing shortage on power supply has brought associated rising power costs to the fore. Renewable energies are suggested as a cost reduction strategy, as are unconventional fossil fuels.The Tracking the Trends report also urges miners to explore all financing options to take the pressure off upfront costs as some may include subsidies.
4. Managing supply and demand
While miners can’t control demand, it’s highlighted that perhaps more attention should be paid to how they respond to fluctuations. To mitigate the fluctuations miners should manage short-term expectations with long-term needs through strategies such as predictive project analysis.
5. Securing financing
The funding challenge looks set to continue this year with analysts predicting a dramatic shift in the industry through consolidation as a result. The role juniors play in the larger mining sector is recognised, however, and strategies to secure funding include; wooing foreign investors, pooling resources such as talent and infrastructure, exploring alternative funding mechanisms and positioning for private equity.
6. The survival of juniors
The environment remains tough for those at the small end of town. In this respect Deloitte has elected the assessment of assets as the most pertinent strategy for survival. It says juniors should determine assets which are most productive while doing appropriate research to put a fair market value on those earmarked for potential divestment. The report also urges juniors to adopt flexibility and prepare for an improving environment.
7. Sourcing talent
Despite shifting market conditions, demand remains for particular skill-sets with the challenge affecting companies at both the boardroom and operational levels. To combat the challenge companies should look for diversity, explore new recruitment systems, recruit on a competitive basis and invest in training.
8. Geopolitical uncertainty
With many companies operating in and exporting to multiple geographic locations, they become susceptible to uncertainty in these areas. Deloitte anticipates increased uncertainty as the pace of change accelerates – making it more difficult for companies to assess the impact on their operations. To mitigate these risks it advises lobbying for policy clarity, collaborating with fellow mining companies and associations, becoming aware of the risks and planning for multiple scenarios.
9. Stakeholder engagement
Satisfying stakeholder expectation is becoming increasingly problematic as both the number of stakeholders continues to grow and relationships become more complex. Deloitte references the point that stakeholder relationships are often adversarial rather than collaborative. It suggests turning that relationship around to build relationships through strategies such as; communicating in new ways, building platforms of mutual benefit, leveraging social media, thinking long-term and adopting strategic social responsibility policies.
10. Engaging with Government
Red tape and administrative burdens continue to be problematic for miners – taking the Carbon Tax and Mineral Royalties as examples. In general, Governments have expressed desires to collaborate more with miners, which Deloitte advises the mining sector to take advantage of to build better relationships. They should also measure social impact to prove their worth, help set the policy agenda and engage in public discussion.
