Deloitte predicts industry transformation - Tracking the Trends 2019 report
Deloitte has published the eleventh edition of its annual report on the mining industry. Tracking the Trends identifies the top ten trends transforming the future of mining in 2019
The Deloitte report endeavours to provide the mining industry with insights it can leverage to support its continued quest for productivity, capital discipline, strategic development and sustainable growth.
Philip Hopwood, Deloitte’s Global Leader - Mining & Metals, commented: “It appears that the mining industry is poised for greater growth than it’s seen in a decade, but today’s market realities are very different than those of the past. We’re now dealing with geopolitical tensions in the form of trade wars and tariff concerns, as well as looming asset shortages. Rising commodity prices should fuel expansion, but could also result in a return of inflation and the costs that go with it, eventually eating into margins.
Disruption and volatility has become the new normal and the pace of change is outpacing our ability to adapt. This makes it imperative for mining companies to clarify how they plan to drive value into the future and how they intend to respond when prices inevitably drop again.”
Here are the key messages provided by the 2019 report:
- Disruption and volatilitymake it imperative for mining companies to clarify how they plan to drive value into the future and how they intend to respond when prices inevitably drop again. To thrive into the future, mining companies will need to challenge the status quo by soliciting a diversity of opinions and taking the risk to do things differently.
- Technology and artificial intelligence (AI) will play a key role, not only in helping companies envision future scenarios, but in identifying risks at an enterprise level and transforming the supply chain. Moreover, advances in finance platforms, sensor technology, autonomous vehicles, cloud- based solutions, and analytics are paving the way for the design of a digital mine.
- Understanding the needs and perceptions of people both inside and outside the organization will be critical. Companies must build a more diverse workplace and address succession planning, while fostering loyalty and retention among existing employees. At the same time companies must do more outreach to local communities, governments, and consumers so they can be more transparent and receptive.
Top Ten Trends Transforming the Future of Mining:
- Rethinking mining strategy - Embedding the discipline to deliver measurable value across the cycle
- The frontier of analytics and artifcial intelligence- Moving up the maturity curve
- Managing risk in the digital era - Exploring a new approach to controls and risk management
- Digitizing the supply chain - Why innovation requires integration
- Driving sustainable shared social outcomes - Finding value beyond compliance
- Exploring the water-energy nexus - Making the case for a systematic approach
- Decoding capital projects - Learning from past mistakes
- Reimagining work, workers, and the workplace - A blueprint for the future
- Operationalising diversity and inclusion programs - From theory to practice
- Demanding provenance- EVs and battery minerals provoke the desire for provenance
EY survey finds losing 'licence to operate' is the biggest risk to the industry in 2019
According to EY’s 11th annual survey of 250 executives, mining companies believe the biggest risk their businesses face over the next two years is the threat of losing their licence to operate (LTO).
More than half (54%) of those questioned identified LTO as the top risk to business, highlighting an important shift in the industry from profit to social responsibility for the first time in the survey’s history. Last year’s survey results ranked LTO as the seventh biggest risk, with digital effectiveness leading the top ten.
The report found a number of reasons for LTO’s pole position in the survey. Escalating risk is on the agenda at board level due to the changing stakeholder landscape which is forcing miners to adapt against a backdrop of advancing nationalism on the global stage. Meanwhile, the necessary push towards digital transformation underlines the need for a stronger LTO.
With the sector making efforts to redefine its image as a sustainable and responsible source of the world’s minerals, EY’s global mining and metal advisory leader Paul Mitchell said: “Licence to operate has evolved beyond the narrow focus of societal and environmental issues. There are now increasing expectations of shared value outcomes from mining projects. Any misstep can impact the ability to access capital or even result in a total loss of licence.”
EY maintain mining and metals companies need to transform their business models to remain competitive and welcome all their stakeholders along on that journey. To achieve a positive outcome a new approach is required – like safety, LTO needs to quickly become part of a mining company’s DNA.
EY’s report stated: “We believe our sector is facing an era of disruption like nothing it has ever experienced before - both from within and outside.
“The themes of license to operate and disruption run through this year’s risks as mining and metals companies have to deal with many new and variable factors, including societal expectations, digital transformation, and unique challenges to portfolio and capital investment decisions.
What can organizations do to protect themselves against the challenges of keeping their license to operate, improving productivity and nationalism? They have to use capital and collaboration to their advantage as they transform and protect themselves from disruption.”
EY warned the survey shows that a narrow LTO focus can put out you out of business. It highlights that a series of critical changes which need to be strategically managed are redefining stakeholder’s expectations:
- An increase in societal participation (beyond local communities)
- The rise of minority voices
- The advancement in technology
- A shift of ownership
- An increase in the expectation of shared value outcomes
- The mushrooming of disclosure regimes
- The founding of governance on an accountability framework
- A rise in litigation