Top Challenges Facing Mining Companies – What is New?

THIS POST WAS ORIGINALLY PUBLISHED MAY 24, 2010

Top Challenges Facing Mining Companies – What is New?

“The mining sector is entering a time of amazing opportunity. As companies take steps to improve their strategic focus and shore up long-term operational gaps, they can ideally position themselves to benefit from the next boom cycle.” David Quinlin, Partner, Zurich, Switzerland
This was said way back in 2008, when Deloitte produced a study “Tracking the trends 2009. The top 10 global mining issues”. This report identified the ten most pressing global challenges facing the mining industry at that time:

1. The commodity price rollercoaster Is this a short-term phase or the new norm?
2. The double squeeze. Caught between higher costs and lower prices
3. Capital punishment. Tight credit markets put expansion at risk
4. Running on empty. Talent and equipment shortages remain chronic
5. Risky business. Permitting, politics and tax policy volatility
6. Location, location, location. Quality assets are getting harder to find
7. The urge to merge. Consolidation remains an industry imperative
8. Towards sustainable development. Environmental concerns continue unabated
9. The cost and complexity of compliance. Preparing for a tighter regulatory environment
10. In the dark. Electricity shortages affect operations

Well,  18 months later, it seems that these concerns remain basically the same. Beginning of 2009 was marked with fast pace of Chinese companies on the M&A market. This year, it looks like the new pandemic is spreading – affecting No. 4 and 9 of the above. The latest initiative of the Australian Government on taxes is being picked up in the world. “Brazil and China may follow Australia’s lead. India and the Democratic Republic Congo have since promised new mining taxes. There could be major consequences for the industry. Multiple windfall levies could push up metal prices by 10% to 15% longer term, according to UBS.” – this is Wall Street Journal. So, miners have a lot to think about….

Another view on miners’ concerns was highlighted this month by the new study , “The Mincom Annual Study: Mining Executive Insights”. This done by Mincom, a leading provider of software and services to mining companies worldwide; being the first in a series of research studies designed to gauge perceptions of key stakeholders in the mining industry.

The list looks as follows (percent of responders):

• Ensuring workplace safety (71 percent)
• Improving performance and operational effectiveness (67 percent)
• Managing capital projects (46 percent)
• Recruiting and retaining a skilled workforce (38 percent)
• Addressing environmental concerns (37 percent)

It interesting to note that the new issue emerged: Ensuring workplace safety.  “Workplace safety is a complex topic that encompasses cultural, equipment, work management and safety feedback mechanisms. It is also an area impacted by many of the other top challenges that mining executives face. When accidents happen, they make headline news, putting companies and their business practices under the spotlight.” It is true and we have seen a lot of unfortunate examples in recent months.
Over 73% of respondents stated the top action their company is taking is to build an accurate operational model that links predictive production costs to operations and finance – no other action comes close in terms of urgency:

Another worth mentioning fact is determination of biggest obstacles to organic company growth:

• For all mining companies, the top obstacle to organic growth is “complying with government regulations.”
• For coal mining companies – “decline in market demand” was the biggest hindrance.
• For gold and copper mining companies – “delays in getting new mines operational”.

I am sure that this year will bring more and more anxiety to the mining business, but nevertheless, I still think that we should be optimistic!!!
Download the “The Mincom Annual Study: Mining Executive Insights” HERE