Perspective
A recent report titled ‘Mining and Metals Scenarios to 2030’ launched by the World Economic Forum initiated dialogue on an important question “How will the environment for the global mining and metals sector look in 2030?”. The report identified five key drivers that will likely influence the global mining and metals sector; Social drivers such as population growth, skills gap and health and safety expectations; Technological drivers such as automation of operations, energy innovation and low carbon technologies; Economic drivers such as global economic growth, developmental state of economies and global wealth distribution; Environmental drivers such as climate change policy, price of CO2, and global industry adaption of environmental standards; and (Geo)political drivers such as level of state intervention in business, resource nationalism, resource management and global governance. By constructing different scenarios of how these drivers will affect the mining and metals sector in the coming 20 years, the report calls on organizations to rethink their strategies in order to respond appropriately and be adequately prepared for the challenges ahead.
Current challenges
A few years ago, the mining sector worldwide experienced exceptionally good times due to high commodity prices fuelled in large part by high economic growth rates in different parts of the world. However, with the global economic crises and a slow down on the ultra-high economic growth rate in China and other emerging economies the good times in the mining industry have been turned upside down. The high profits and healthy shareholder returns have taken a hit with rising costs, falling commodity prices and at times unpredictable investment climates amongst the most pressing challenges to face the mining industry. For instance, in Australia the total revenue for the top 40 mining companies in 2012 remained flat at $731 billion compared to 2011 despite a 6% increase in production volume. A net profit decrease by 49% was recorded for the same period. As a reflection of the bad times in the industry, capital expenditure for 2013 was estimated to stand at $110 billion, a decrease of 21% on the 2012 capital expenditure figures and up to $148 billion worth of investment was lost through either suspension or cancellation of mining projects.
Fundamentally, with projected steady growth in China set to continue, new rising economic giants such as India, Brazil, Indonesia and other emerging economies, the demand for metals and mineral resources will remain strong on the road to 2030 and beyond. The biggest challenge is how organisations navigate lean times now, while continuing to deliver value to shareholders, assuring investors of a healthy return on capital invested and managing the enormous challenges outlined above. In addition, with easily available resources now increasingly located in remote locations and from low grade deposits, the traditional approach of riding out tough times by simply increasing production volumes will not work. The attendant increased cost of production, environmental concerns, safety issues, carbon print and government legislation make this approach no longer economically viable. Higher productivity, more effective cost management regime and new technologies will be required drive recovery in tough times and sustainability in the long term.
Last Frontiers
In Africa, new mines are commissioning in zones referred to as the last Frontiers. In Kenya, Tullow Oil, Base Titanium, and Mui Basin Coal Mines are the “First Born Kids” on the block. The Kenya Government is currently navigating a Mining Act to guide the industry.
Austica
In order for players in the mining industry to remain profitable and competitive in the face of the challenges outlined, they need partners who are committed to innovation and cost effective service delivery. Driven by innovation and continuously searching for new ways of delivering value to our clients and partners, Austica is your perfect partner for your Mining Projects.
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