In Deloitte’s Tracking the Trends 2019 report, the company has urged mining companies to clarify how they plan to drive value into the future how they intend to respond when prices inevitably drop again.
The report highlighted disruption and volatility as two key issues the mining sector is facing that made long-term planning and decision making more important.
“In this new world order, miners must go beyond communicating the value that they currently bring to communities and will need to articulate what they stand for by developing differentiated business models designed to drive long-term value,” Deloitte said in the report.
Deloitte’s ten trends to watch for 2019 included:
- Rethinking mining strategy;
- The frontier of analytics and artificial intelligence;
- Managing risk in the digital era;
- Digitising the supply chain;
- Driving sustainable shared social outcomes;
- Exploring the water-energy nexus;
- Decoding capital projects;
- Reimagining work, workers, and the workplace;
- Operationalising diversity and inclusion programmes, and;
- Demanding provenance.
On rethinking mining strategy, Deloitte said: “Mining companies have typically anchored their strategic planning on producing the highest volumes of ore at the lowest possible cost. However, in today’s environment, companies must take an ever-expanding range of issues into account when setting corporate strategy.
“Consumers, governments, and communities are becoming more vocal and irrevocably altering industry dynamics. As a result, corporate social responsibility initiatives are now morphing into stakeholder engagement programmes, and social license to operate is becoming a pivotal strategic issue that will either differentiate mining companies or derail them.
“Looking at these factors alone – consumer awareness, social license to operate, geographic risk, and access to input commodities – it becomes clear that mining companies must take an ever-expanding range of issues into account when setting corporate strategy if they hope to create competitive portfolios robust enough to generate value across multiple scenarios. This is especially critical as the industry shifts into a new stage of growth.”
On the frontier of analytics and artificial intelligence, Deloitte said: “Although mining companies are exploring and investing in analytics and AI, there is still a long way to go. Three horizons in AI are emerging and, to date, most organisations are working in Horizon One, where machine intelligence requires human assistance and interpretation.
“To move up the analytics maturity curve into Horizons Two and Three, organisations must answer progressively complex questions. The first is ‘what happened?’ The second is ‘why did those things happen?’, this allows organisations to identify the root causes.
“Only with this foundation in place can organisations answer the third question: “what will happen?” This is the key that empowers organisations to predict variability, mitigate emerging risks, and manage stakeholder expectations.”
On managing risk in the digital era, Deloitte said: “The current risk landscape is characterised by a host of issues such as mounting tariffs and sanctions, potential trade wars, cyber threats, uncertain tax and royalty regimes, rising input costs, heightened scrutiny from the investment community, environmental disasters, and infrastructure breakdowns.
“To stem this tide, mining companies must take their cue from organisations that take a more holistic view of risk. Increasingly, these leaders are moving towards the next generation of internal audit, Internal Audit 3.0.
“This approach should help mining companies address risk at an enterprise-wide level, rather than assessing isolated risks at the functional or mine site level and develop appropriate controls to both mitigate and manage the expanding array of risks they face.”
On digitising the supply chain, Deloitte said: “The mining supply chain is ripe for transformation, as supply chain improvements remain incremental instead of delivering innovations designed to optimise mining operations.
“To create a more interconnected and responsive supply chain, mining companies need to stop thinking in linear terms and imagine instead a circular system that we call the digital supply network.
“The ultimate goal is to leverage advanced algorithms, AI, and machine learning to turn data into insights that allow companies to reduce their capital expenditures, respond to changing project requirements quickly, and optimise mine planning to integrate real-time changes.”
On driving sustainable shared social outcomes, Deloitte said: “Until recently, mining companies’ social spend has been seen as a cost of compliance, rather than a way to deliver measurable and sustainable benefits to host countries and communities. If mining companies hope to drive different social outcomes, that dynamic has to change. A social enterprise is an organisation whose mission combines revenue growth and profit making with the need to respect and support its environment and stakeholder network.
“Finding value beyond compliance is no easy task. It requires miners to listen more closely to their constituents to determine what stakeholders truly want, and then to shift their operational processes in response.
“To deliver on the social breadth of these programmes, mining companies cannot work in isolation. Instead, they should look for opportunities to collaborate with other companies working in the region.”
On exploring the water-energy nexus, Deloitte said: “True value from energy management can only be derived by addressing the triple bottom line of social, environmental, and financial performance. This requires companies to approach energy management as an integrated corporate initiative.
“Yet energy isn’t the only input at risk. Mining companies must now contend with water scarcity as well as risks associated with excess rainfall, which can result in flooding.
“With a constant knowledge of how every drop of water is being used, and an understanding of all the parameters associated with its use, mining companies can manage water in the way they have begun to manage electricity, as a valuable resource.”
On decoding capital projects, Deloitte said: “Burdened by years of sub-par returns, cost overruns, and impairment charges, many mining companies opted to concentrate on maximising output from their existing operations rather than investing in new mine supply and exploration.
“This resulted in supply shortages for commodities such as copper, zinc, cobalt, lithium, and gold. But with the cycle turning, mining companies will need to engage in a wave of new capital projects to offset production declines and meet demand.
“To overcome these challenges, mining companies must build their maturity in five key areas: delivery models, data and technology, project controls, license to operate and collaboration.”
On reimagining work, workers, and the workplace, Deloitte said: “The mining industry is facing a changing talent landscape, with digitisation necessitating new skillsets, a massive generational shift when considering C-suite succession planning and a younger generation of workers who measure loyalty to an employer in months instead of years.
“To prepare for this imminent future, organisations need to clarify not only their business goals and aspirations, but also the role that their talent strategy should play to deliver on them.
“They will also need to identify the workers of the future by considering what the employee experience will look like, and the role that innovation will play in that experience. Finally, they must reconceive how employees will interact with each other and conduct their work, be it in a physical location or remotely.”
On operationalising diversity and inclusion programmes, Deloitte said: “The mining industry is not attracting sufficient numbers of diverse candidates and, to shift this balance, companies will not only need to change their talent attraction and retention policies, they will also need to change historical perceptions about the mining industry.
“Instead of approaching the issue by adopting point initiatives, they must design integrated programmes to tackle the challenge holistically. This extends into the area of talent retention, because when companies do attract women, they often struggle to retain them.
“In tandem with shifting the way they operate, mining companies must take steps to amend their public image. This starts with the image they portray on their reports and in their advertisements.”
And, finally, on demanding provenance, Deloitte said: “Rising demand for electric vehicles (EVs) is increasing demand for EV battery materials such as cobalt, lithium, graphite, and copper.
“However, socially-conscious consumers are now questioning the provenance of raw materials. As a result, downstream customers, such as automotive manufacturers and technology giants, are demanding ethically-sourced minerals.
“This is putting unprecedented pressure on mining companies to create a more transparent interface with their customers and driving the adoption of technologies such as blockchain to enhance the traceability of commodities.”
To download the full report, go to deloitte.com/trackingthetrends