The past one decade has been a rollercoaster ride for companies in the mining industry. The commodity prices have reached both historic highs and lows, as well as operational realities shifted irrevocably in the face of the digital revolution. Mining companies better fasten their seat belts because those rapid changes are likely to continue and even accelerate this year as well. In addition, the industry’s commitment to strengthen balance sheet performance, reduce debt, and simplify portfolios, has resulted in record free cash flow, improved valuation metrics, and stronger shareholder returns. In many respects, the mining industry is once again poised for growth. As the mining industry’s value proposition is constantly called into question, mining companies have started to see that they cannot succeed in the future unless they change the way they operate. This goes beyond just enhancing efficiencies. It’s about re-establishing trust with stakeholders and collaborating to devise better responses. Here are some hindrances in the industry that mining companies can expect in 2018:
Data-driven insights to drive value
Once measured by how efficiently a company extracted resources, the value proposition in the mining industry may be shifting to how well mining companies act on information to optimize production, reduce costs, increase efficiency, and improve safety. It is becoming evident that success for mining companies doesn’t only depend on adopting the latest applications (apps) and technologies. Instead, it is also significantly dependent on embedding digital thinking into the heart of the company’s business strategy and practices to revamp the way corporate decisions are made. To succeed in this effort, mining companies need a clear vision of how the future digital mine might transform core mining processes, the flow of information, and supporting back-office operations. Hence, to deliver on the digital mine nerve center, mining companies need to develop the ability to use available data to resolve a wide range of business problems.
Changing customer, employee, and public perception
Mining companies operate under a legacy of weak environmental practices, fractious community relations, stock price underperformance relative to other sectors, and a historical lack of workforce diversity. Also, the public perception remains that mining companies contribute to environmental damage, cause a negative impact on the community, and engage in dubious practices abroad. Therefore, tarnishing the mining industry’s image. Also, negative perceptions can do more than damage reputations and affect stock prices. This mandates mining companies to take proactive steps to address and change their reputations.
Meeting shareholder expectations
As shareholder expectations grow, mining companies have started focusing on re-establishing their credibility among investors and analysts. Responding to rising shareholder expectations requires mining companies to walk a fine line. Although, it is vital for players in the mining industry to avoid decisions that can result in an erosion of value, shifting corporate direction to meet shareholder demand for short-term returns can result negatively in the long run. Mining companies can only win back investor confidence if they continually demonstrate the ability to deliver on their promises. This requires companies to improve their project management, forecasting, and reporting capabilities. Rather than prioritizing shareholder returns over all other corporate objectives, it may be helpful for mining companies to shift to a model that recognizes the breadth of functions they serve in the society. This includes activities ranging from generating shareholder wealth to providing employment, paying taxes, and contributing to local communities around the world.
Water management is one of the critical challenges that mining companies face. With each passing year, water has become a more crucial issue for the mining industry. The decline in ore grades results in the requirement of more water to extract the same amount of ore. The demand for water is also soaring globally due to population growth, industrial development, expansion of irrigated agriculture, and increases in per capita water consumption. So, it’s time for miners to improve their water management by rethinking their production processes and partnering with technology companies to incorporate and implement real-time water monitoring solutions.