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Innovation and emerging technologies keys to survival in Deloitte’s top 10 mining trends for 2015
Mining sector faces challenges in price volatility, geopolitical turmoil, rising costs, declining grades and a general lack of financing
22 March, 2015 - Mining companies continue to grapple with challenging market conditions, including price volatility, geopolitical turmoil, rising costs, declining grades and a general lack of financing. To remain viable into the future, companies must get more adept at balancing short-term investor expectations with long-term business imperatives. This is according to Deloitte’s newly released report Tracking the Trends 2015: The top 10 issues mining companies will face this year.
The report highlights that in order to embrace the need for longer-term thinking, mining companies are getting back to the basics to clarify what they stand for, what they believe and what they plan to achieve long term.
“There is no doubt that mining companies operate in complex geographies where they face increasing challenges in responding to investment, human capital, community engagement, regulatory and compliance requirements,” said Salam Awawdeh, consulting partner and Energy & Resources leader at Deloitte Middle East. “At the same time, they have an imperative to adapt to changing market conditions embracing new strategies and tactics as they seek to produce more for less cost, in a world where volatile market conditions are the new normal, and geopolitical contexts are increasingly impacting economic decision-making.
Now in its seventh year of publication, the report delves into the pressing trends facing the mining industry in the year ahead and offers strategies that companies can employ to adapt to changing industry dynamics.
“Within our Region, priorities tend to be different from one market player to another driven ― for the most part, by return on invested capital (ROIC) requirements and risk management strategies. We are witnessing clients investing more into strategic workforce planning, employee engagement, career development programs to help push workforce nationalization plans and deal effectively with talent shortages. Some are focused on dealing with commodity prices as they manage phosphate, aluminium and gold portfolios susceptible to price fluctuations that may affect their operations profitability and cash flow. Others are focused on managing operating cost increases resulting from higher raw material, power, freight, and mining equipment costs. And, a few chose to focus on access to infrastructure enhancing their travel time on project sites and avoiding transportation systems breakdown. Our report speaks to the 10 common movements we see shaping the industry today,” added Awawdeh.
The 10 trends and solutions identified in the report are:
- Back to basics: the pursuit of operational excellence – To heighten operational excellence, miners must re-think their traditional operational processes and consider their cultural approach to costs.
- Innovation is the new key to survival: it’s about more than just cost control - Miners must overcome their traditionally conservative tendencies by embedding innovation into corporate DNA; thinking big, testing small and scaling fast; leveraging emerging technologies; becoming part of an innovation ecosystem; and preparing for new operational realities.
- The new energy paradigm: reducing project power costs – Miners should consider a new approach to energy including the use of unconventional fossil fuels and gaining stakeholder buy-in for developing renewable energy facilities.
- Dwindling project pipelines: walking the supply/demand tightrope –To avert the risk of future supply constraints, mining companies need to find a better balance between meeting short-term investor and analyst expectations and maintaining project pipelines.
- Financing’s great disappearing act: the implications reverberate across the market – While solutions are limited, juniors may be able to avert disaster by wooing foreign investors, pooling their resources, exploring alternative financing options and positioning for private equity.
- Survival of the juniors: navigating troubled waters –To capitalize on shifting ownership patterns, juniors should be taking steps to get their assets in order and consider options from partnership and joint ventures to sale and consolidation.
- Seeking new skillsets: shifting industry realities call for a new generation of talent – To attract new skills to the sector, companies will need to 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: from best guess planning to embracing uncertainty – Response strategies include lobbying for greater policy clarity, leveraging mining associations to influence government policy, becoming more risk intelligent and planning for myriad scenarios.
- Rising stakes around stakeholder engagement: companies struggle to balance competing interests – Companies should work to build win/win platforms, communicate in new ways, leverage the power of social media, work with mining associations to negotiate with local communities, improve their corporate giving practices and consult with affected community stakeholders to plan mine closures.
- Engaging with government: finding new ways to communicate and collaborate – Strategies to counter regulatory uncertainty include working to build better government relationships, becoming more vocal in both industry association and through social media, measuring social impact, helping to set the policy agenda, and better leveraging mobile technologies.
To view the report, please visit: www.deloitte.com/trackingthetrends
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About Deloitte & Touche (M.E.)
Deloitte & Touche (M.E.) is a member firm of Deloitte Touche Tohmatsu Limited (DTTL) and is the first Arab professional services firm established in the Middle East region with uninterrupted presence since 1926.
Deloitte is among the region’s leading professional services firms, providing audit, tax, consulting, and financial advisory services through 26 offices in 15 countries with more than 3,000 partners, directors and staff. It is a Tier 1 Tax advisor in the GCC region since 2010 (according to the International Tax Review World Tax Rankings). It has received numerous awards in the last few years which include Best Employer in the Middle East, best consulting firm, and the Middle East Training & Development Excellence Award by the Institute of Chartered Accountants in England and Wales (ICAEW).