May 17, 2020

How to Ensure Your Mine Site Budget is Water Tight

financial planning
budgeting
Finance
budget
Admin
5 min
Effective planning could boost revenue streams
Mine firms big and small share universal financial management responsibilities. Proper financial management and budget planning helps rejuvenate revenue...

Mine firms big and small share universal financial management responsibilities. Proper financial management and budget planning helps rejuvenate revenue streams and possibly create new revenue opportunities. Comprehensive mine site financial management and planning also holds the potential to help mining corporations weather downturn markets and fortify themselves against stiffening competition. Take advantage of the following outline to make sure you’re not letting anything slip through the cracks of your mine-site budget and cost management.

Driving Productivity Improvements

There is a strong cyclical nature to the mining industry. Sometimes finding themselves at the mercy of Fortune’s Wheel, even top mining firms across the world can find themselves at the bottom of their budgets after a boom bust. Therefore, mining firms, whether riding a boom or weathering a downturn economy, need to focus on driving productivity improvements. Improved productivity during a strong mining market promotes increased profits, which are obviously desirable, regardless of how well the market is performing. What’s perhaps more important though, the profits produced through improved productivity also serve to keep the company strong in times of a poorly performing market.

Increased Visibility

Financial management and budget planning are key drivers behind improved productivity. It’s vital that these components stay connected. Primarily, there needs to be a comprehensive degree of financial visibility. Throughout the mining industry, there is significant evidence that Boards and senior management are calling for an increase in this type of visibility. The ability to see the entire scope of a mining firm’s financial picture is frequently impeded because vital statistics and financial information are often buried under numerous levels of operational numbers.

There is growing demand for mine-site financial managers to increase the visibility of a larger, more detailed range of statics. These numbers include the firm’s individual, unique numbers as well as industry wide trends and KPI’s. Ensuring that a firm’s numbers are considered in relation to the industry and the performance of their top competitors helps create a more realistic, accurate understanding of their fiscal performance, as opposed to a skewed perception void of concrete relation. Furthermore, making these numbers highly visible to the key decision makers of the firm creates a greater degree of control.

Increased Control

Mine-site financial planners, mining firm budget managers and those in similar positions can affect significant, positive change in the current and future health of their firm by assigning greater importance to financial visibility and its powerful byproduct of improved control. As part of this, performing in-depth plan versus actuals analyses allows for extremely valuable variance reporting. This type of reporting grants an improved understanding of the reasons and contributing logic behind the causes of specific, significant activity underlying a company’s performance.

A great deal more can be done to properly plan and manage budgets when armed with the vital information garnered from variance reporting. While the ideal situation would include a flexible budget, it is usually only a minority of companies that are able to enjoy said flexibility. However, incorporating variance reporting does help facilitate some degree of liquidity in budget, providing strong indicators of areas that are matching up well with their budgetary expectations and those that need to be adjusted accordingly.

Increased Predictability

Another powerful, invaluable financial management and budget planning tool for mine sites is the use of past and present data sets, including plan versus actual, to improve prediction capabilities regarding capital and operating cost structures. Harnessing the ability to predict the financial implications of changes in the mining environment is of critical importance to a mining company’s success.

Centralized Financial Platform

Granted, there exists great power in the inherent knowledge that accompanies successful predictions. But this highlights the important responsibility of mining-firm financial managers to properly present these predictions and convincingly show the right, key confidence factors to establish a strong enough case for the best course of action. Board members look at the financial profile of a company much differently than the financial managers and budget planners. This highlights how beneficial a central platform can be for the financial management of a company.

A robust software suite, financial toolbox or budget-purposed program enables in-depth analysis and the generation of different scenarios using auditable and validated information. Mining corporations who have adopted this as part of their standard operating procedures are able to consistently expose the strengths and weaknesses of the mine plan and provide critical information which management can use to act upon. In essence, this mode of operation serves as a pervasively effective means of bridging the gap between the mine and the boardroom.

Dynamic Reforecasting 

A predictive environment, obviously, isn’t always possible. When unexpected events do occur, such as equipment failure, weather-related events, fluctuations in the labor market or a major shift in commodity prices, solidifying your understanding of the financial impact on the business is crucial. You need to be able to make informed decisions based on your financial analysis to promote cost-saving, performance-enhancing agility. Sometimes, this also involves a modicum of pride management as well. For example, some financial managers and budget planners have taken their mine even further down the wrong tunnel simply due to an unbending adherence to their original projections, insisting that the market or weather will randomly come back around to match up perfectly with the original budget or financial plan.

Regardless of the degree of planning or certainty applied to the initial budget or cost assessment, the mine’s vitality can often hinge on management’s ability to reforecast. Standardizing financial costing models, enabling fast consolidation and central control of underlying assumptions can provide a strong component of successful flexibility.

Comprehensive Financial Planning

Comprehensive financial planning should be considered a prime objective necessary for excelling in today’s mining environment. Increasing a firm’s financial data mining, analysis, planning and replanning, combined with improved access to information for technical and operational decision-making, delivers more efficient, more productive mining and increased certainty for key stakeholders.  

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May 7, 2021

Lithium producers bullish as EV revolution ramps demand

Lithium
Electric Vehicles
Albemarle
SQM
3 min
Lithium producers are drawing optimism from rising prices for the electric vehicle battery metal

Rising demand for lithium is stoking prices for the electric vehicle battery metal, fueling long-delayed expansions that still may not produce adequate supplies that automakers need to meet aggressive production plans.

Lithium

Growing industry optimism from higher lithium prices is a change from last year when funding for mines and processing plants dried up during the pandemic.

Albemarle Corp, Livent Corp and other producers are scrambling to make more lithium, but some analysts worry the recent price jump will not spur a big enough expansion to meet a planned wave of new EV models by mid-decade.

Since January, General Motors Co, Ford Motor Co LG Energy Solution and SK Innovation Co, along with other automakers and battery parts manufacturers, have said they will spend billions of dollars on EV plants.

U.S. President Joe Biden has proposed spending $174bn to boost EV sales and infrastructure. The European Union has similar plans, part of a rush to catch up with global EV leader China.

Those moves have helped an index of lithium prices jump 59 percent since April 2020, according to data from Benchmark Mineral Intelligence, a commodity pricing provider.

The rising demand “reflects what feels like a real and fundamental turning point in our industry,” said Paul Graves, chief executive of Livent Corp, which supplies Tesla Inc. On Monday, it said it would more than double its annual lithium production to 115,000 tonnes.

Graves warned, though, that “it will be a challenge for the lithium industry to produce sufficient qualified material in the near and medium term.”

Albermarle

Albemarle, the world’s largest lithium producer, aims to double its production capacity to 175,000 tonnes by the end of the year when two construction projects are complete. Albemarle's Q1 profit beat expectations thanks to rising lithium prices. Chile’s SQM, the No. 2 producer, said its goal to expand production of lithium carbonate by 71 percent to 120,000 tonnes should be complete by December.

Australia’s Orocobre is paying $1.4 billion for smaller rival Galaxy Resources, a strategy designed to boost scale and help it grow faster in regions closer to customers.

“The next few years are going to be critical in terms of whether there’s enough available lithium supply, and that’s why you’re starting to see commodity prices start to ramp,” said Chris Berry, an independent lithium industry consultant.

The price gains helped Albemarle and other major producers, including China’s Ganfeng Lithium Co and SQM, post big gains in first-quarter profit and boost forecasts for the year.

Even China’s Tianqi Lithium Corp, saddled with debt due to years of low lithium prices, signaled that recovering demand should help it swing to a profit this year.

Electric Vehicles

Forecasts call for demand for the white metals to surge from about 320,000 tonnes annually last year to more than 1 million tonnes annually by 2025, when many automakers plan to launch new EV fleets, according to Benchmark.

Still, demand is expected to outstrip supply in 2025 by more than 200,000 tonnes, so lithium prices may need to rise to encourage producers to build more mines. That could boost the prices consumers pay for EVs. “Companies across the lithium-ion supply chain are in the best position they’ve been in for the last 5 years,” said Pedro Palandrani of the Global X Lithium & Battery Technology ETF , which has doubled in value in the past year.

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