Mining Trends

Mining Trends

The top 10 trends today’s leaner and fitter mining companies

will face in coming years, and how to prepare for them.

By Phil Hopwood

Things are starting to look up in the mining industry. With commodity prices on the rise and financing picking up, there is a measure of cautious optimism among miners. We are seeing a number of commodities in the middle of a bull run.

But that doesn’t mean it should be business as usual. The next two years will be critical for miners. From shareholder value and cyber security to demands for increased transparency, the challenges miners face are not insignificant – and understanding the trends that will impact them most will be more important than ever. For those willing to engage in substantive change and learn from leading practices, the 10 trends listed below provide ample opportunities for encouraging strong and sustainable growth.

Trend 1: Understanding the drivers of shareholder value

Some segments of the industry are feeling pretty good now that their commodity prices have bounced back. To continue to drive sustainable growth as a way to enhance shareholder value, mining companies should consider adopting a series of short- and long-term strategies, including pursuing top-line growth, optimizing portfolios, further widening margins, being more agile and encouraging long-term investment.

Trend 2: Unlocking productivity improvement

With the financial hit the industry took in the past decade, finding ways to drive out costs and improve efficiencies was critical. But cost-cutting can take you only so far. To get to the next layer of efficiency gains, miners need to turn to innovation and technology. Companies are already leveraging learnings from other industries and exploring the benefits of automation, artificial intelligence, 3-D printing, lean operations and outsourcing. Miners need to take a proactive approach to integrate innovation across the entirety of the organization and make a cultural commitment to innovate.

Trend 3: Operating in an ecosystem

Miners are part of an “ecosystem” that includes a wide range of stakeholders – a resource available for valuable input and collaboration. Miners have to move out of their comfort zones and explore strategies that embrace ecosystems, turning vendors into partners, collaborating with competitors, and building extended partnerships. Mining innovation hubs are now emerging to encourage greater industry collaboration among technology start-ups, businesses, industry leaders, government and academia. Only by shedding their go-it-alone mentality will miners realize major innovative breakthroughs.

Trend 4: The digital revolution

With all the low-hanging fruit in terms of efficiencies now gone, mining companies are starting to explore digitization as a way to improve operations. Making the most of digitization, however, involves more than just investing in apps and solutions. To thrive in the digital future, mining companies should articulate a clear digital strategy, define a supporting digital architecture, and foster the right skills and capabilities.

Trend 5: Mapping the threat landscape

As digital innovation becomes the norm, miners will find themselves more exposed to online threats. But IT security technologies used by many mining companies are often unable to protect their digital and physical assets from today’s increasingly sophisticated and malicious threats. Mining should adopt a more rigorous approach to cybersecurity by strengthening traditional security controls, becoming more vigilant and cultivating resilience in the face of a cyberattack. 

Trend 6: Creating a shared vision for the sector

It’s no secret that governments and miners have struggled to maintain open and cooperative conversations. This tension may be easing as many governments look for ways to align mining interests with support for local economic and social development. Miners should engage with these governments in a productive dialogue, fostering a shared vision for the sector that builds long-term solutions, links business success to societal benefit and tracks social outcomes. Such alignment can move a government relationship to a potential source of competitive advantage.

Trend 7: Re-earning the social license to operate

Winning social license to operate has never been a simple proposition for the mining industry. From clean water to safety to greenhouse gas emissions, communities continue to raise concerns about the industry’s environmental impact. We see many mining companies now subscribing to programs such as those laid out by the Mining Association of Canada’s “Towards Sustainable Mining” program. These types of programs often recommend engaging with communities and committing to the safety and health of employees and the population. And it’s very important for miners to get the word out when it comes to their sustainability and environmental efforts; never underestimate the importance of outreach with local populations and governments.

Trend 8: Supporting strategic priorities

Though commodity prices have begun to recover, industry leaders now recognize that to survive the lean times, operating models must be able to sustain growth during both good and bad markets. Companies with agile, flexible operating models are typically more capable of responding to industry challenges as well as seeing faster revenue growth and higher operating margins. As part of an operational excellence strategy, miners should look to five key aspects of their operating models: organizational structures, processes, technology, culture, and skills and people.

Trend 9: Creating healthy and inclusive workforces

Healthy and inclusive workforces are fundamental to productivity. Unfortunately, these are areas in which the global mining sector has sometimes been behind other industries. But as mining increases its focus on technology and digitization, it will need to compete with other sectors for workers with the right skillsets. To expand their options, miners should shift their thinking and push for greater diversity. Many mining organizations are already heading down this path and setting aspirational goals that seek to increase the percentage of women in the industry. Miners must also focus on the wellness of their workforce if they want to successfully compete for and attract talent. This means amending policies for fly-in/fly-out workers – who can experience higher levels of mental illness – extending wellness programs to all employees and cultivating an inclusive culture.

Trend 10: Adopting an integrated approach to reporting

Mining companies are facing increasing scrutiny from governments and regulatory bodies as well as from the investor community, which now expects miners to go beyond mere compliance when it comes to transparency. To meet these demands, mining companies should adopt a strategic and integrated approach to reporting. True transparency will involve strengthening compliance and disclosure practices and standardizing information – as well as seriously considering the benefits of over-reporting.

In the past decade, tough times forced the mining industry to become leaner and fitter. Now, with costs under control, debt more manageable and margins improving, mining companies may feel they have some breathing room. In reality, though, miners can’t afford to take their foot off the pedal when it comes to the financial and operational discipline. Given the fluctuation of commodity prices, the key to success will be surviving the lows and using the upticks to invest and innovate.

Keeping committed to this steady approach won’t be easy. It will require strong leadership and a long-term view. It will mean looking to other industries for leading practices and opening yourself up to greater collaboration. The trends clearly indicate that the opportunities are there. It’s up to the mining companies to capitalize on them.

Phil Hopwood is Deloitte’s global mining industry leader. For more on this topic, go to http://bit.ly/2mFixos.

 

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