Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
A recent survey conducted by Timetric’s Mining Intelligence Center (MIC) that included 100 key decision-makers at operating mines throughout Latin America, respondents gave their Original Equipment Manufacturers (OEMs) low satisfaction ratings for cost-related factors.
OEMs were rated across 16 different factors relating to cost, product attributes, as well as supplier attributes and capabilities. The lowest satisfaction ratings were given to ‘maintenance and service costs’ and ‘price of equipment’. Respondents were consistent with those from Chile, Peru and Brazil, all giving these two factors the lowest satisfaction ratings.
Improvements to maintenance and service costs will be critical for suppliers in winning and retaining business in the future. When asked in what areas their OEMs differentiated themselves from the rest of the market during the selection process, 94% of the respondents cited ‘better maintenance and service provisions’ as the highest rating differentiating factor. Further to this, when asked to nominate areas in which their suppliers need to improve, 53% of respondents in Chile, 44% of those in Peru, and 22% of respondents in Brazil nominated the ‘ability to support cost reduction/minimisation’ as one of the top three areas for improvement.
Failure to improve may result in business loss, with a significant share of respondents saying they are likely to switch to a different supplier (26%) within the next five years. A further 25% of respondents indicated they were uncertain whether they would either switch or remain with their current supplier. There is a correlation between dissatisfaction with costs, in particular maintenance and service costs and the likelihood of switching. Of the major markets covered, Brazil, Peru and Chile had the lowest levels of satisfaction with maintenance and service costs, whilst having the highest shares who are anticipating a switch with 33% in Brazil, 32% in Peru and 26% for Chile.
“Timetric’s research demonstrates the current mindset of mining companies in Latin America and the importance placed on minimising costs throughout the business. This includes costs associated with the maintenance and servicing of heavy mining equipment. Mining companies have outlined their dissatisfaction with these costs and have indicated plans to switch OEMs within the next five years,” comments Nez Guevara, Senior Mining Analyst at Timetric’s MIC.
