2015 Mining Industry Outlook
Interview with Rick Carr
The mining sector faces some serious challenges, but companies have options that could help position them for the future, according to Deloitte Mining sector leader, Rick Carr.
After a steep fall in gold and silver prices in 2013, iron ore, coal, and copper followed suit in 2014. Fundamentals such as growing supply from new low-cost projects, a stronger US dollar, weak global demand, and credit restrictions in China have pushed prices of these commodities into a “technical graveyard.” Copper, for example, is trading close to its technical support level of $3 per pound, while iron ore prices are at a five-year low of $75 per ton.
Weakening prices and a sluggish outlook for demand growth have turned investors away from the mining sector. The S&P/TSX Global Mining Index fell by about 10 percent through the end of November 2014, while the S&P 500 rose by 11 percent. Given these market conditions, investors question the sector’s ability to address a decade-long productivity decline, improve capital efficiency, revive sinking shareholder returns, and service mounting debt and interest obligations.
Waiting for a market upswing or adopting traditional cost containment measures will not likely suffice to turn the sector around. Mining companies should consider pursuing innovation for sustainable cost reduction and margin improvement, embracing autonomous mining solutions by working closely with vendors, and leveraging data analytics to increase productivity, according to Deloitte’s Rick Carr.