Op-Ed: Mining’s hidden margin leak isn’t labour, it’s reliability

Ask most mining executives where margins are leaking today and the answers are predictable. They immediately talk about labor inflation, contractor costs, energy prices, supply chain disruptions, or workforce shortages.

Those challenges are real. But they do not fully explain why operations mining similar ore bodies with comparable equipment fleets and producing similar volumes continue to generate dramatically different EBITDA performance.

In many cases, the difference between mines that operate efficiently and those that do not has nothing to do with labour. It has to do with reliability.

Across the industry, profitability discussions often begin with workforce productivity, headcount, and labor efficiency. Yet reliability is frequently the larger economic opportunity. While it’s commonly viewed as a maintenance issue, reliability is ultimately a business issue. Every hour of unplanned downtime reduces throughput, increases operating costs, and erodes EBITDA. On the other hand, every improvement in asset availability creates productive capacity that can be converted directly into financial performance.

One of the biggest reasons why reliability often escapes profitability discussions is because it rarely appears on a financial statement as a single line item. Instead, its impact is dispersed throughout the operation. 

Every mining executive sees issues related to reliability in real time. It could be a critical haul truck unavailable longer than expected, a conveyor failure that disrupts a production shift, a planned shutdown that expands beyond its original scope, or preventive maintenance deferred to protect short-term production targets. Individually, these events appear manageable. But collectively, they create operational variability that quietly consumes value every day.

Margins rarely disappear because of a single major event. More often, they leak away through hundreds of small compromises that gradually become accepted as normal operating practice. Over time, organizations become exceptionally skilled at adapting to instability. Supervisors reallocate resources, maintenance teams recover equipment failures, and production plans are continually revised to keep operations moving. It becomes standard operating procedure, but at an increasing cost.

Over time, extraordinary effort begins to substitute for disciplined execution. A mine may still hit annual production targets, creating the appearance of strong performance. Yet beneath the headline numbers, growing amounts of organizational energy are spent recovering the plan rather than executing the plan. The cost eventually emerges as higher overtime, greater contractor dependence, lower maintenance productivity, increased downtime, and inconsistent asset performance.

This is one of the defining differences between average and high-performing operations.

Many mining companies still treat reliability as a maintenance KPI. But the highest-performing operations treat it as a business strategy. They recognize that reliability is not simply about reducing equipment failures, it’s about creating predictable production. This means that planned work remains planned, weekly schedules remain largely intact, and production decisions balance today’s output with tomorrow’s asset health. When reliability becomes a production requirement, it supports operational and financial performance alike.

The financial implications can be substantial. When reliability improves, throughput becomes more consistent, fixed costs are spread across more saleable tonnes, maintenance teams spend more time on planned work, and overtime and contractor use become the exception rather than the operating model. When reliability deteriorates, the economics run in reverse: downtime reduces output, emergency work increases maintenance cost, internal teams are pulled into firefighting, and fixed costs are absorbed across fewer tonnes.

The challenge is that these losses are rarely visible in one place. Downtime, overtime, contractor use, emergency maintenance, lost throughput, and poor fixed-cost absorption are often measured separately, making the full margin impact difficult to see. Across mining assessments, these hidden losses can add up to several points of EBITDA margin.

That is why reliability is one of the few improvement levers capable of increasing production and reducing cost at the same time. It also explains why some mines that appear to have labor challenges are actually facing operational variability that eventually shows up as a labor problem.

As instability increases, overtime becomes routine rather than exceptional. Contractor usage expands because internal resources remain consumed by reactive work. Maintenance backlogs grow. Skilled trades spend more time responding to failures and less time eliminating their root causes. Productivity declines even as employees work harder than ever.

At that point, workforce efficiency naturally comes under scrutiny. Headcount appears high relative to output, and organizations begin searching for savings through labor reductions. Yet labor is often responding to instability rather than creating it. While workforce reductions may generate short-term savings, they rarely address the underlying drivers of underperformance and can sometimes exacerbate them by removing experienced personnel critical to operational execution.

The best-performing mining organizations take a different approach. Rather than asking how to do more with fewer people, they focus on eliminating the instability consuming those resources in the first place.

The starting point is deceptively simple. You just need to answer a few easy questions: Have schedule changes become routine? Are preventive maintenance activities regularly deferred to protect short-term production? Has reactive work become the expected way of operating rather than the exception? 

If the answer to those questions is yes, the operation may not have a labor problem at all. It may have a reliability problem.

As the industry looks toward its next phase of value creation, the greatest opportunity may be closer than many leaders realize. Operational stability is not achieved through a single initiative, a new software platform, or another round of cost cutting. It is built through thousands of decisions that prioritize disciplined execution over short-term recovery.

Organizations that make that shift frequently discover they already possess more productive capacity than their planning assumptions suggest. Their availability improves, throughput becomes more predictable, costs stabilize, and EBITDA expands.

Mining has always been an industry where sustainable competitive advantage is earned through execution. Equipment can be purchased, technology can be implemented, and capital can be invested. But operational discipline, is built over time and through decisions made across every shift.

As mining companies continue searching for their next source of margin improvement, they may find that the largest opportunity – improving reliability – has been hiding in plain sight all along. 

*James Metro is a partner, and leads the 3M (Mining, Metals & Minerals) practice at EFESO Management Consultants