Commodity prices, productivity, innovation, M&A, safety, security focus for Australian miners in 2016 has been saved
Commodity prices, productivity, innovation, M&A, safety, security focus for Australian miners in 2016
Deloitte releases latest top 10 mining trends
3 December 2015: Weak commodity prices, the ongoing productivity challenge, an innovation imperative, M&A and safety and security lead the list of issues that should be top-of-mind issues for Australian miners in 2016.
Deloitte’s latest mining trends report, Tracking the Trends 2016, looks at the pressing trends facing miners in the year ahead, and offers strategies they can employ to adapt to changing industry dynamics.
The top global issues for 2016 include:
- Going lean: Operational excellence remains front and centre
In an effort to achieve true operational excellence, sector leaders are leveraging best practices from other industries and tackling difficult issues, including labour relations
- Innovation: Preparing for exponential change
Innovation is critical. Short-term strategies should include collaborative ecosystems, digital workforce engagement, improved asset management
- China’s transition: Looking for the silver lining
Given China’s influence on the global economy, miners need to understand the global impact of its domestic market trends and develop plans relative to China’s offshore investment initiatives
- Adjusting to the new normal
Commodity demand might be down, but production isn’t falling. In fact, some miners have ramped up output to reduce unit costs, consolidate market share or avoid costs of shutting down older mines
- Preparing for inevitable change
Fossil fuels will remain critical role in the global energy mix, but the global move towards renewables threatens the outlook for thermal coal – and is inevitable
- Changing the nature of stakeholder dialogues
Old tactics no longer work, and a new form of stakeholder engagement is needed. Miners should align their investments with the underlying needs of their disparate stakeholders to fully maximise opportunities
- Starved of finance, miners struggle to survive
Attracting capital in the face of continuing losses has become harder than ever. In response, companies will likely continue to seek out alternative financing, even when the terms aren’t entirely in their favour
- Tax challenges will impact yesterday’s management
To keep pace with the evolving tax environment, companies need to understand the financial implications of new tax rules, assess their operational and corporate structures, and engage with government stakeholders
- The M&A paradox: To buy or not to buy
Despite predictions of a pick-up in mining M&A, deal values and volumes continue to disappoint. Miners should take advantage of opportunities, consider buying counter-cyclically and think twice before divesting
- An expanded view of corporate and personal welfare
Risks related to both safety and security continue to grow. To enhance their safety records and security postures, miners may want to strengthen their safety procedures.
According to Nicki Ivory, Deloitte Australia’s National Mining Leader, West Coast: “During the boom, everyone seemed to think prices would remain high forever. Now, everyone is asking ‘When will this downturn change its course?’ What’s clear is that the cycle times between good and not so good are lengthening. It could take years to adjust to current market forces, but things are still cyclical.
“The operating environment remains volatile and complex and the imperative remains to innovate, adapt, manage costs and drive sustainable operational excellence and productivity improvements while also driving and maintaining cultural change, in the face of these challenges and around workplace safety and health.
“Innovation and operational excellence will remain critical, and miners need to be more open to adopting lessons and ideas from other sectors, such as collaborative ecosystems, digital workforce engagement, enhanced asset management and 3D printing.
“Solutions once considered unviable or inapplicable to the industry continue to be adapted to suit the needs of mining companies – including the move to replace diesel with lower carbon fuel sources and the growing reliance on sensors to monitor fixed and mobile assets.
“Collaboration will be central in driving bold actions. Miners can no longer afford to look at industry trends and address challenges in isolation. They will need to work better together, as an industry and with their suppliers, and seriously consider strategic alliances as a way to share resources and increase their operational effectiveness.
“On the M&A front, there is emerging evidence that deal activity is picking up in Australia. Gold remains the big commodity play for mid-tier miners with producing assets, but this looks likely to extend to copper and nickel if buyers can shake off their lingering nervousness about commodity prices that continue to drop.
“Perhaps mindful of where future growth options will come from, the top end of town is also signalling an increased appetite for deal making. While the challenge will be getting investors onside, we expect to see more deals in 2016.”
Reuben Saayman, National Mining Leader, East Coast, said: “The overriding trends are relevant for operators across the country, and companies are starting to adapt to a longer-term, low commodity price outlook and investing in strategic areas beyond just cost cutting to gain a competitive edge.
“Creative approaches to safety and workplace health need to be at the forefront for local operators. The industry has invested a vast amount of money, time and effort in safety, for example, but incidents are still occurring, and even increasing.
“Enhanced safety analytics, strengthening mental health policies, improving security protocols, employing risk monitors and improving crisis management are just some of the strategies that can be used to detect risks, prevent incidents and change workplace cultures.
“Cyber security and its associated risks, needs to be a strong focus area globally as well as in Australia. Cyber criminals engaged in corporate espionage, blackmail campaigns or malicious efforts to cause damage via hacking are using increasingly sophisticated tactics to target both organisations and individuals.
“Financial performance data, technologies used to streamline processes, strategic planning and information around potential transactions can all be exposed, with the costs to business ranging from damage to a company’s reputation and profits, to serious safety and security impacts.
“And as these risks expand, miners will come under greater pressure to tighten their processes and controls around safety and security to better protect all of their critical assets, from the well-being of their people to their physical facilities and data.
“Stakeholder activism and relations will also remain a significant issue, especially for the coal sector, and industry challenges will mandate changes in the way miners work with the communities in which they operate.
“In the end, from technology investments and portfolio diversification to stakeholder relations, fundraising and safety, miners that are able to collaborate better, innovate more effectively and develop agile organisations will benefit in the longer term.”
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