Prolonged market volatility is forcing miners to change the way they operate, making tough strategic changes in a bid to remain viable.
Releasing its sixth annual Tracking the Trends report, Deloitte global mining leader Phil Hopwood explains that mining companies are facing a climate marred by volatile commodity prices and shifting demand fundamentals.
“To rectify cost overruns, improve capital efficiency and rebuild investor relationships, companies need to sharpen their focus on productivity, sustainable cost management and enhanced shareholder value,” Hopwood said.
Deloitte warns supply-demand imbalances, falling commodity prices and lower productivity levels are challenges which mining firms will continue to face throughout 2014.
“Simply waiting out the market swing is not an option,” Deloitte said.
“Rather, pursuing innovation will help both juniors and big companies weather current headwinds.”
Over the coming weeks Australian Mining will be showing you what to expect in the year ahead, in a 10 part series which will analyse the top ten trends for 2014.
3. Innovate or bust
Declining ore grades and resource depletion is forcing miners into increasingly remote locations and pushing up production costs.
When realising innovation opportunities miners cannot simply layer new technologies over old operating models; rather current models may require complete operation overhauls.
“This will present both challenges and risks, but failure to innovate will result in greater risk over time – not only as costs escalate, but as more remote mining heightens safety risks,” Deloitte stated.
The company’s mining leader for Canada, Jürgen Beier explains that tweaking existing process will not deliver the sizeable changes required in today’s capital-constrained environment.
“To build true competitive advantage, companies must look beyond incremental performance improvement to determine how they can revise their systems to embrace the broad theme of innovation,” Beier said.
Innovation strategies for 2014 include automating processes and rethinking energy management, energy inputs account for between 40 and 60 per cent of a mine’s operation costs – thinking outside the box in terms of energy consumption can make a significant difference for miners.
Deloitte also explains that sharing infrastructure can also deliver economies of scale.
“By collaborating to achieve economies of scale (e.g. by building shared pipelines, water plants, power plants, etc.), companies can reduce costs while strengthening community relations in the process,” the company said.
A sentiment that was expressed by WA Premier Colin Barnett who said warring between resources companies over rail access and infrastructure deals is holding projects up more than government red tape.
Barnett said resource companies fighting over sharing infrastructure is one of the biggest hurdles in keeping projects to time and on budget.
Tomorrow: Trend four – Funding falters