An Ernst & Young (EY) report has named the licence to operate (LTO) as the leading risk facing the mining and metals industries over the next two years.
In its Top 10 business risks facing mining and metals in 2019–20 report, EY surveyed 250 mining and metals industry executives across various topics, with 54 per cent of respondents citing LTO as the top risk to the end of 2020.
This was up from seventh place in EY’s 2017–18 edition and it is the first time the category has led the way in the report’s 11-year history.
The report stated that LTO had “evolved beyond the narrow focus on social and environmental issues” and that there were now increased expectations from stakeholders.
These expectations include increased societal participation beyond tax and employment opportunities, technological advancement and improved disclosure of both positive and negative impacts of projects, among others.
EY suggested that LTO should become a greater priority for miners, with commitments spanning beyond life of mine.
Lynas and Adani are two prominent examples of mining companies that have faced significant LTO issues. Lynas has faced government intervention at its Malaysian uranium operations, while Adani has been under scrutiny for its Carmichael coal project in Queensland.
“A new approach is required, and licence to operate needs to quickly become part of a mining company’s DNA in the same way as safety is,” EY global mining and metals advisory leader Paul Mitchell said in the report.
Digital effectiveness was the number two risk, down from first place in 2017–18. Of the respondents surveyed for this category, over 70 per cent said that less than 5 per cent of their budgets were allocated for digital initiatives.
Rounding out the top five risks in the report were maximising portfolio returns, cyber, and rising costs.
EY’s top 10 business risks: (1-10) Licence to operate, Digital effectiveness, Maximising portfolio returns, Cyber, Rising costs, Energy mix, Future of workforce, Disruption, Fraud, New World commodities.