Productivity, followed by capital decisions and obtaining a social license to operate, are now the top three risks faced by mining and metals companies globally, according to the latest report by EY.
In Business risks facing mining and metals the analysts claim that 2014 has been the year in which CEOs begin to realize that regaining lost productivity is critical for long-term profitability.
Without a social licence to operate, miners have a lot to lose.
The study acknowledges that the major industry players have made steady progress on capital management and optimizations, following a spate of asset write downs that peaked last year.
However the report notes that when it comes to capital challenges little has changed in the past 12 months for many juniors and explorers.
Bruce Sprague, EY’s Canadian Mining & Metals leader, says that the need for a social license to operate has become critical, as the number and size of projects being delayed or stopped by community and environmental activists continues to rise.
Access to water and energy is the only new entrant to this year’s risks list. Burgeoning energy costs and competing water demands in many regions, particularly Chile, Peru, South Africa and Mongolia are starting to have a bigger impact on costs and companies’ ability to operate.
Mining companies spent US$11.9 billion on water infrastructure globally last year alone — a 250% increase over 2009. And global energy prices have leapt 260% since 2000..
“Risks in the sector continue to shift in ranking but they all remain key priorities for companies,” says Sprague.
Global demand for energy is expected to increase 36% by 2025, and with falling ore grades, this risk is higher every passing year, EY explains. As a consequence, the mining industry faces higher energy prices and volatility.
Image from Everett Collection|Shutterstock.
Comments
Dave Koelzer, CRL
It’s interesting but not really surprising that productivity is at the top of the list.
The key to real productivity is gettingthe budgeted loads, the maximum through put, the repairs done in the right way and safely the first time, every time.
It is amazing how many mining companies know what they need to do but they struggle with getting the right stuff to the right people at the right time. We see this every day, day in and day out with what we do. Our mining customers struggle with getting the right parts, the right permits, the right everything to the guys on the shop floor or the operators in the plants. The technicians, or the worker bees do good work. The problem is for example, that they may have a work order to account for what they’re doing during the shift. However, if they don’t have the right instructions, the right parts, the right tools, the list goes on…. this one delay or a series of small delays is very problematic. It is essentially the death of productivity best described as a death by 1000 cuts.