Mining companies have seen unprecedented growth in capital projects investments because of rising commodity prices, with expenditures peaking at more than $140 billion in 2012. A study published Wednesday by consultants at Accenture (NYSE: ACN) indicate the sum could have been considerably lower.
In their report, “Achieving Superior Delivery of Capital projects, Accenture global survey of the metals and mining industries,” the analysts examine ways in which capital project delivery in the mining industry can be improved.
The research was based on 31 interviews with mining and metals executives responsible for capital projects around the world.
Less than a third of the respondents said they stayed within 25% of approved budgets for all projects, and less than a fifth said they completed all projects within a 10% budget range.
Overruns and delays
The tremendous scale and complexity of mining projects – which are often multi-billion dollar investments – mean that budget overruns and delays in completion are not unusual. Among the contributing factors, the interviewees mentioned infrastructure needs —such as roads, ports and electrical power in less developed regions — the lack of talent and skilled workforces, and environmental and regulatory requirements in developed regions.
When asked what typically causes delays in project schedules, survey respondents cited the availability of talent (57%), new or unconsidered regulatory requirements (45%) and insufficient detail during the planning stage (42%).
Metals companies tend to have fewer delays and smaller budget overruns due to the reduced size and complexity of plants as opposed to mining projects.
Accenture research estimates that metals and mining expenditures for capital projects will reach $1.5 trillion by 2025.
From the survey results, Accenture has identified five key aspects that would boost returns on investment (ROI) in mining projects. These include establishing strong project governance and risk management tools, managing external stakeholders’ increasing expectations for sustainability in a proactive way and optimizing scarce talent through organizational flexibility and training.
Accenture also recommends companies to integrate information systems among capital projects players and to accelerate operational readiness.