Better partnerships, the social investor lead 2020 Deloitte trends

For many years mining companies have been urged to improve how they collaborate in the industry and their supply chain through joint ventures and partnerships.

This advice has resonated with companies and resulted in a wave of new joint venture activity between large, mid-tier and junior miners across the industry, according to Deloitte’s 2020 Tracking the Trends report.

Read a summary of this year’s top 10 trends.

On a global scale, for example, former Kalgoorlie Super Pit partners Barrick Gold and Newmont have taken their relationship to another level by combining Tier 1 assets in Nevada, United States as a way to accelerate growth.

Locally, several of Australia’s leading operators have increased investment or ramped up activity to identify the next generation of deposits in metals such as gold, copper and nickel.

They are commonly working with junior companies by providing crucial funding that would have otherwise been difficult to source.

As is the case in Nevada, gold has been central to a number of joint ventures (JV), with Newmont and Newcrest Mining teaming up with junior companies to advance exploration opportunities in northern Australia.

Rio Tinto, meanwhile, has been progressing its future copper potential in the Paterson Province in Western Australia through a JV with Antipa Minerals.

Recognising these moves, Deloitte has identified ‘getting partnerships and joint ventures right’ as a key trend for mining companies in the 2020 Tracking the Trends report.

According to Tracking the Trends, mining companies have looked back on partnerships and JVs they have formed and realised that many have failed to deliver the value originally envisaged.

Deloitte Australia mining and metals leader Ian Sanders believes a solid foundation, selection of the right partners and key performance indicators (KPIs) are the major factors of a successful JV or partnership.

“The majors are looking at diversifying some of their risk, whether that means taking a stake in a mid-tier operation or it being a stepping stone to a future acquisition,” Sanders told Australian Mining.

“I think we are going to see more of it as industrial metals like copper and nickel continue to face supply issues.

“Mining companies in particular currently have strong balance sheets relative to four or five years ago and need to find a good home for their cash flow that sustainably grows the business.”

The need for better partnerships goes beyond joining forces with junior and mid-tier explorers; METS (mining equipment, technology and services) companies also have a role to play in today’s collaborations.

Mining companies require effective partnerships that enable them to drive social value, deliver technology projects or shape the makeup of their future workforce – all key themes of the 2020 Tracking the Trends.

The so-called ‘social investor’ and their demands for mining companies to deliver more social value through initiatives such as decarbonisation is a trend that is pushing for collaboration within the supply chain.

“Sustainability teams within our mining organisations do not have the bandwidth or depth to be able to achieve their stated objectives,” Sanders said.

“That’s not because they don’t want to, but because those objectives are so significant and vast, i.e. different examples of mining companies talking about their decarbonation footprint to 2050.

“To get there they are going to need to be talking right through the supply chain on scope one and two emissions and what can be done.”

Deloitte regards decarbonisation as a priority in 2020 that will elevate Australian miners in the eyes of the social investor.

Sanders also believes this focus is changing how mining companies are working with their supply chain partners to achieve their goals.

He said companies were being proactive in how they approached the supply chain to meet their social targets.

“What does that mean? … You as a supplier of (a mining company) will have ethical sourcing including the people that you use and the suppliers you use, first and foremost,” Sanders said.

“Secondly, how can we work collaboratively together to create a greater product that is going to satisfy environmental stewardship and carbon emissions for both of us and ultimately then help us with our customers.”

From a technology perspective, Deloitte highlighted ‘the road towards intelligent mining’ by taking advantage of digital technologies, artificial intelligence and analytics solutions.

The report reinforced the need for mining companies to modernise core technologies, while also understanding the impact digital initiatives can have on their workforce, leadership and the communities in which they operate.

“Digital investment alone isn’t enough to achieve the step changes,” Sanders said. “What’s really needed is where you conceptually focus across broader transformation, coupled with digital investments and innovation, along with people skills.

“Without people you are not going to get the change and efficiency you are looking for, or the engagement of those people.

“Some companies have therefore left some opportunity on the table because they have not put all of that together.”

Getting partnerships right is, again, a way for mining companies to ensure their technology projects and initiatives reach their potential.

Deloitte identified an emerging partnership model is to allocate project assets and liabilities across a full ecosystem of partners, including mining companies, original equipment manufacturers and service providers, to local communities and governments.

Sanders said the creation of trust and collaboration between organisations would lead to unique insights into what might be possible.

“I think those barriers that may have existed in the past are slowly coming down where organisations are seeing the competitive advantage they are going to get when they collaborate and work together,” Sanders concluded.

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