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Top 10 issues mining will face this year

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, according to Deloitte Touche Tohmatsu Limited’s (DTTL) Tracking the Trends 2015: The top 10 issues mining companies will face this year, a report released on Monday.

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.

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. “Mining companies operate in complex geographies and need to increase mining intensity and focus on reducing capital, people and energy intensity. The outlook for several commodities is improving including nickel, aluminium, zinc and lead, though stakeholders around the globe are becoming increasingly vocal in their demands from the industry,” said Kalpana Jain, senior director, Deloitte in India.

Specifically about India, the report mentions that while both China and India have a long way to go on their paths towards urbanization, industrialization and electrification, India’s economy is finally stabilizing and growth forecasts are up to 5.5 per cent for 2015 and as much as 6.5 per cent from 2015 through 2018.

The 10 trends and solutions identified in the report are:

1. 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.

2. 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.

3. 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. 

4. 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. 

5. 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.

6. 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. 

7. 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.

8. 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.

9. 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.

10. Engaging with the 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.


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