Productivity in the mining industry has been steadily declining for a decade, and companies need to make radical changes to their business models to reverse this trend, shows the latest EY study released this week.
In the report entitled Productivity in mining: A case for broad transformation, EY analysts note that miners made the mistake of chasing production growth at the expense of productivity on a volume and cost basis.
“Companies caught in the race to capitalize on high commodity prices are now facing a number of business model challenges,” said in a statement Bruce Sprague, EY’s Canadian mining and metals leader. “Operation expansion and inefficient use of labour and equipment are all compromising productivity.”
There are no easy solutions, the study warns. Cost-cutting exercises and minimal process and technology improvements aren’t enough to circumvent the damage that has been done.
“Behavioural change is critical given that many mine managers, frontline engineers and operations supervisors appointed to these positions during the super cycle have never operated under a marginal environment,” reads the report.
For Sprague, creating sustainable change requires a industry-wide broad business model transformation. “That means looking closely at mine plans, reassessing mining methods, making changes to equipment and considering opportunities for automation.”
The report comes to a five-step conclusion for miners to conduct the overhaul EY believes is necessary.
The analysts said it begins with a clear strategy based on a broad set of value drivers followed by an operating model that is aligned with the strategy. It also includes integration and alignment across the value chain through process integration, standardization of work procedures and lastly, aligned planning, budgeting and performance measurement
“Understanding all systems and processes is essential to ensure companies make informed decisions. Only then can miners create lasting change,” Sprague concludes.