Where to from here?
Followers of action adventure are familiar with the scene where the hero jumps into a taxi and shouts, “Follow that car!” On some level, the mining industry has been re-enacting that very scene in their pursuit of production, richer deposits and higher yields. The push to produce safely at all costs has become a reality, against a backdrop of spiralling costs for raw materials, labour, capital projects and compliance.
At the same time, macro-economic issues continue to take their toll. While the US has been recovering slowly, Europe’s sovereign debt crisis persists. Despite ongoing commodity price volatility, governments around the world are taking larger shares of mining profits. Local communities, too, are demanding greater concessions.
While long-term demand from industrialising nations is anticipated to rise over time, short-term dynamics are interfering with current operations. Amid rumours of growing stockpiles, China’s buying activity has been waning. Additionally, share prices have decoupled from underlying commodity values for many miners, restricting access to capital on favourable terms. This is particularly challenging in an environment of declining grades – a trend that’s pushing companies to more remote, and more costly, regions.
All these factors speak to the need for more sophisticated portfolio allocation decisions. Mining companies can no longer commit to production solely on the basis of their initial business cases. Before companies decide where to locate and which projects to pursue, they should take a wider range of factors into account – including shifting legislative and political realities, community expectations, infrastructure needs, risks associated with corruption and fraud, talent requirements, and the availability of key resources like energy and water. This mandates a level of analytical capability that many companies currently lack.
In this fifth year of publication, our 2013 edition of Tracking the trends is our most ambitious yet. Beyond highlighting key industry indicators, this year Deloitte’s global mining professionals share a range of responses companies can adopt to prepare for shifting industry realities. We’ve also bolstered our input with some quantitative analysis to help frame key issues and impart greater context. We think this provides an excellent foundation to spark debate.
Download the article . . . . Tracking the trends 2013 – The top 10 issues mining companies may face in the coming year
If you require a more detailed discussion, contact the Deloitte South Africa Mining lead, Abrie Olivier, at email@example.com.
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