Overcapacity to lead to renewed focus on productivity
The issues contributing to the continued fall in...
According to Statistics South Africa, gold contributed 3.8% to GDP in 1993, dropping to 1.2% in 2015.
The issues contributing to the continued fall in production include the increasing depth of operations, continued declines in productivity, ageing infrastructure and falling gold grades.
With increased travelling times for workers to reach work areas, the actual amount of time spent on production has diminished.
Research conducted by the Chamber of Mines showed that if there is no substantial change in the mining methods used, local gold mining could cease in 2033.
The issue of productivity in mining is not confined to just South Africa. On 31 December 2017, after 107 years of operations, Porcupine Gold Mines’ Dome underground mine in Ontario, Canada, ceased operations, with low productivity cited as a factor it its closure.
Likewise, the issue is not solely a concern for gold miners. Worldwide mining operations were as much as 28% less productive in 2015 than a decade ago, according to McKinsey research.
Furthermore, it also has a knock-on impact for those businesses supplying equipment and services to the industry.
“The focus right now is not on capacity. We are not building a lot of new plants. What we are more focusing on is the productivity part, and helping our customers – earning more money.
“There is an ongoing consolidation in the market, and also a focus on actually starting to earn money, because the productivity, especially in the mining side, has been sacrificed for years over capacity.
“Three years ago, four years ago, it was mainly about capacity,” said Søren Grubbe, VP of Supply Chain, FLSmidth.
“Now there's overcapacity. Now we need to take the other approach and say, we need to optimise what we have.”
Some within the mining industry have long embraced this approach, optimising the resources already available.
Productivity of workers at Coal India has doubled in the past 10 years.
The company now produces 50% more coal with two-thirds of the manpower 10 years ago, thanks to higher utilisation of machines.
According to the Coal Controller of India, output per shift — the quantum of coal each worker producer during a single shift — at the state-run company has increased from 8.6 tonnes for opencast mines in 2007-08 to 16.57 tonnes in 2017-18.
During the same period, the company's manpower reduced from 445,000 employees to 310,000.
Coal India's average productivity per employee has increased to 1,787 tonnes a year from 821 tonnes.
The company, however, is very much bucking the prevailing trend. Productivity, on both a volume and cost basis, has been declining significantly in the mining industry since 2000, according to EY.
EY research also reveals that mining labour productivity in Australia has declined by about 50% since 2001, by nearly 30% from 2009 to 2012 in the US coal sector and by an estimated 35% since 2007 in the South African gold sector.
With this in mind, the need to refocus on productivity is more pressing than ever.
People Moves: Peter Cunningham appointed Rio Tinto CFO
Rio Tinto has appointed Peter Cunningham as Chief Financial Officer (CFO) with immediate effect. Peter, who has been Interim Chief Financial Officer since 1 January 2021, will also join the Rio Tinto Board as an executive director at the same time.
Peter Cunningham appointed Rio Tinto CFO
Peter Cunningham was previously Group Controller and has held a number of senior financial and non-financial leadership positions across Rio Tinto in Australia and the UK. In a career spanning 28 years with Rio Tinto, he has held roles including Global Head of Health, Safety, Environment & Communities; Head of Energy and Climate Strategy; and Head of Investor Relations.
Prior to joining Rio Tinto, Peter qualified as a chartered accountant.
Rio Tinto CEO Jakob Stausholm commented: “I am delighted to confirm Peter in the role and, having worked closely with him for a number of years, I know he is the ideal person to be our Chief Financial Officer. His detailed knowledge of the company and of the financial and non-financial drivers of our industry will be invaluable as we continue to strengthen Rio Tinto.”
Rio Tinto Chairman Simon Thompson added: "I look forward to Peter joining the Rio Tinto Board and know from experience that his deep understanding of Rio Tinto and commitment to disciplined capital allocation will serve shareholders well and enrich our Board discussions.”
Rio Tinto aiming for net zero by 2050
Rio Tinto is aiming to reach net zero emissions across its operations by 2050. Across the company, it is targeting a 15% reduction in absolute emissions and a 30% reduction in emissions intensity by 2030, from a 2018 baseline.
Aluminium is found in everything from cars to phones. But one of the challenges of producing this essential material responsibly is finding ways to decarbonise the process.
Part of the reason is creating alumina – the main ingredient in aluminium – takes a lot of energy, which in turn creates greenhouse gas emissions. New technologies will be essential to helping reduce emissions, but many haven’t been proven. And some not yet even discovered. Rio Tinto is partnering with the Australian Renewable Energy Agency (ARENA)to develop hydrogen energy options and make a positive step towards these goals.