Here’s what miners should expect and do in 2017
Global miners, particularly Canadians, are showing increasing signs of optimism as commodity prices are on the rise, shallow growth is returning to different end markets, and most are in better cost positions than in the recent past, the annual “Tracking the Trends” report by Deloitte released Wednesday shows.
However challenges remain, and the industry is still likely to have to deal with cyber-security threats, technological disruption and environmental issues, it warns.
“It is critical that companies are aware that with technological and digital disruption occurring across all industries, comes accelerated threats to the mining industry,” notes Phil Hopwood, Deloitte’s Canadian and Global Mining Leader.
As in the past years, the consultancy firm outlines the top 10 challenges miners are likely to face, as well as the possible solutions to them, which can be summarized as:
- Cyber attacks and other threats: Mining companies are subject to a wide range of risks, and with an evolving threat landscape, leaders must strengthen their cyber-security programs.
- Unlocking productivity through innovation: Think beyond driverless trucks, sensors and advanced analytics to reduce cost, streamline equipment maintenance and prevent safety incidents. Today, new technology such as drones, real-time modeling and geo-coding are driving the next wave of productivity gains.
- Digital revolution: Miners must figure out how to turn the potential benefits of digital thinking into reality.
- Improving shareholder value: Optimizing portfolios, strengthening M&A processes, sustaining focus on cost and making long-term investments are key to improving this performance.
- Creating healthy and inclusive workforces: Miners need to recognize that productivity goes beyond reducing costs and streamlining processes: mental health, wellness and diversity should also be considered and addressed.
- Operating in an ecosystem: Companies will need to shift from a go-it-alone mentality, to one that recognizes the value of operating within an ecosystem.
- Creating a shared vision for the sector: To foster a shared vision for the mining sector, companies and governments could benefit from finding a middle ground that aligns interests and enhances cooperation when it comes to regulations.
- Re-earning the social license to operate: Winning a social license to operate is especially difficult for miners in light of a number of recent, catastrophic mining accidents and as communities continue to raise concerns about the industry’s impact on the environment. By lessening their environmental footprint, miners can foster the community trust needed to regain their social license to operate.
- Supporting strategic priorities: Industry leaders now understand the importance of adopting operating models that can help them respond to challenges and market volatility. 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 against these choices.
- Adopting an integrated approach to reporting: With governments demanding greater levels of transparency, the sector is working to strengthen compliance and disclosure practices. By standardizing information, considering the benefits of over-reporting and reviewing IT systems to ensure consistent data measurement and reporting capabilities, companies can adapt to a steep change in the reporting environment.
No “one-fit-all” solution
Unlike in previous versions of Deloitte’s report, this year’s includes a wide range of case studies and sector-tailored recommendations.
“Companies that mine iron ore or thermal coal, for instance, have an entirely different outlook than those heavily weighted in precious metals,” the study acknowledges. “Diversified miners face different challenges than companies with a niche commodity focus. Major producers are planning for a very different future than the one that appears on the horizon of most junior explorers,” it notes.
However, the analysts conclude that while mining companies’ approaches to the future will (and should) differ, all of them need to be looking for the answer to one common question: “Going forward, where should we play and how can we win?”
The full “Tracking the Trends” report is available here.