Agility, operational excellence & innovation among key challenges for Australian miners
Deloitte releases top 10 mining trends for 2015
16 January 2015: As mining companies – in Australia and around the world – continue to grapple with challenging market conditions, they need to drive productivity, embrace innovation, and get more adept at balancing short-term investor expectations with long-term business imperatives.
Price volatility, geopolitical turmoil, rising costs, declining grades and a general lack of financing will make this year another one of challenges, but also opportunities, for the sector, according to Deloitte’s Tracking the Trends 2015 report.
Now in its seventh year, Tracking the Trends takes a global look at the pressing trends facing miners in the year ahead, and offers strategies they can employ to adapt to changing industry dynamics.
The 10 trends and solutions identified for 2015 are:
- Back to basics: To heighten operational excellence, re-think traditional operational processes and consider cultural approach to costs
- Innovation is the new key to survival: Overcome traditionally conservative tendencies by embedding innovation into corporate DNA
- The new energy paradigm: Consider a new approach to energy and its cost, including the use of unconventional fossil fuels and developing renewable energy facilities
- Dwindling project pipelines: To avert future supply constraint risk, find a better balance between meeting short-term investor/analyst expectations and maintaining project pipelines
- Financing’s great disappearing act: While solutions are limited, juniors may be able to avert disaster by wooing foreign investors, pooling resources and exploring alternative financing
- Survival of the juniors: To capitalise on shifting ownership patterns, juniors should take steps to get their assets in order and consider options such as joint ventures, sale and consolidation
- Seeking new skillsets: Attract new skills, commit to diversity, explore new talent management systems, get better at recruiting talent in high demand and invest in more targeted training
- Riding the waves of geopolitical uncertainty: Response strategies include lobbying for greater policy clarity, becoming more risk intelligent and planning for myriad scenarios
- Rising stakes around stakeholder engagement: Work to build win/win platforms, communicate in new ways and leverage the power of social media
- Engaging with government: To counter regulatory uncertainty, work to build better government relationships, become more vocal and help to set the policy agenda.
According to Nicki Ivory, Deloitte Australia’s National Mining Leader, West Coast: “No one in the Australian mining sector needs to be told that they operate in a complex environment, or that the imperative is to adapt to changing market conditions and produce more for less cost.
“But in a world where volatility has become the norm, the key to future success for Australian miners still lies in driving operational excellence via cost containment and productivity, and truly embracing innovation and technology.
“With commodity prices where they are, sustainable productivity improvements and a relentless focus on cost management remain critical, and achieving sustainable operational excellence requires both a long-term commitment and a willingness to embrace new cultural norms.
“In an environment of zero tolerance for underperformance, companies must rethink not only their traditional approaches to mining operations, technology deployment, and trading and marketing, but also their underlying cultural approach to costs.”
Reuben Saayman, Deloitte Australia’s National Mining Leader, East Coast, said: “When incremental improvements toward addressing market realities are no longer enough, the innovation imperative becomes more compelling than ever, and this is certainly the case for Australian miners.
“At its most basic, innovation presents an optimal strategy for controlling costs. Yet it’s rapidly becoming clear that innovation can do much more than reduce capital intensity. Approached strategically, it also has the power to improve productivity and reduce energy intensity, while increasing mining intensity.
“The key is to think of innovation as much more than research and development around particular processes or technologies.
“Companies can, in fact, innovate in multiple ways, such as leveraging supplier knowledge around specific operational challenges, redefining their participation in the energy value chain or finding new ways to engage and partner with major stakeholders and constituencies.”
“And as operators begin to apply innovation to their full operational ecosystem, they stand to realise significant gains.”
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