What is hitting Africa’s Mining?

East African Business Week - - FRONT PAGE - BY PAUL TENTENA

KAMPALA, UGANDA — For the first time in years, there is a mood of cau­tious op­ti­mism in the mining in­dus­try, with com­mod­ity prices on the rise, shal­low growth re­turn­ing to dif­fer­ent end mar­kets, and most mining com­pa­nies in bet­ter cost po­si­tions than in the re­cent past. How­ever, the in­dus­try is still at a piv­otal point as it faces chal­lenges from cy­ber­se­cu­rity threats, to tech­no­log­i­cal dis­rup­tion and en­vi­ron­men­tal is­sues. Mining com­pa­nies now face key choices about where to in­vest and how to po­si­tion them­selves in the com­ing years. The Deloitte Global’s 9th an­nual Mining Re­port re­leased in Johannesburg “Track­ing the Trends”, ex­plores how mining com­pa­nies can suc­ceed by un­der­stand­ing and re­act­ing to 10 trends that are ex­pected to im­pact them in 2017 and be­yond. “Mining com­pa­nies will­ing to en­gage in sub­stan­tive change, by re­think­ing strat­egy and em­brac­ing dis­rup­tion to help un­lock pro­duc­tiv­ity and im­prove sus­tain­abil­ity, will likely be best po­si­tioned to suc­ceed,” says Philip Hop­wood, Mining Sec­tor Leader, Deloitte Global. “These com­pa­nies will re­quire strong leadership, greater col­lab­o­ra­tion and adop­tion of a long-term view to pro­pel the in­dus­try for­ward.” An­drew Lane, Africa Mining Leader, Deloitte brings it closer to home say­ing that: “Gov­ern­ments of re­sourcerich coun­tries are grap­pling with the is­sue of how to eq­ui­tably dis­trib­ute the re­turns from their re­source en­dow­ments to in­vestors, gov­ern­ments and com­mu­ni­ties. “There are no sim­ple an­swers to this. The an­swer lies in ef­fec­tive en­gage­ment and pro­duc­tive di­a­logue.” Lane fur­ther notes: “As we look to the fu­ture in­no­va­tion in mining is not just about di­ver­si­fy­ing rev­enues, but cre­at­ing vi­able, sus­tain­able streams for both share­hold­ers and other stake­hold­ers as mines ap­proach end of life.” The 2017 edi­tion of Track­ing the trends ex­plores these is­sues and in­cludes a range of case stud­ies, which show­case how mining com­pa­nies are bring­ing new so­lu­tions to life.

Un­lock­ing pro­duc­tiv­ity through in­no­va­tion

In an in­creas­ingly com­plex world driven by new tech­nolo­gies, mining com­pa­nies are turn­ing to in­no­va­tion to fuel suc­cess. In re­cent years, the mining sec­tor has in­vested in tech­no­log­i­cal in­no­va­tions such as driver­less trucks, sen­sors and ad­vanced an­a­lyt­ics to re­duce cost, stream­line equip­ment main­te­nance and pre­vent safety in­ci­dents. To­day, new tech­no­log­i­cal ad­vance­ments are rapidly driv­ing the next wave of pro­duc­tiv­ity gains. Tech­nolo­gies such as drones, real-time mod­el­ing and geo-cod­ing are cre­at­ing real-time, pro­duc­tive and func­tional im­prove­ments. “To get to the next layer of ef­fi­ciency gains, com­pa­nies should not only adopt the tech­nol­ogy, but cre­ate a cul­ture of in­no­va­tion that lever­ages in­sights be­yond the mining in­dus­try,” said An­drew Lane, En­ergy and Re­sources Leader, Deloitte Africa. “By adopt­ing in­no­va­tions from sec­tors such as man­u­fac­tur­ing, au­to­mo­tive and phar­ma­ceu­ti­cals, the mining in­dus­try can en­joy the full range of ben­e­fits new tech­nol­ogy of­fers.”

Ad­di­tional is­sues iden­ti­fied by Deloitte Global in­clude: Im­prov­ing share­holder value:

His­tor­i­cally, the mining in­dus­try has un­der­per­formed in this space, with to­tal share­holder re­turns in steady de­cline since 2011. Op­ti­miz­ing port­fo­lios, strength­en­ing M&A pro­cesses, sus­tain­ing fo­cus on cost and mak­ing long term in­vest­ments are key to im­prov­ing this per­for­mance.

Oper­at­ing in an ecosys­tem:

For the sec­tor to re­al­ize ma­jor break­throughs, com­pa­nies will need to shift from a go-it-alone men­tal­ity, to one that rec­og­nizes the value of oper­at­ing within an ecosys­tem. Adopt­ing new forms of col­lab­o­ra­tion in­clud­ing turn­ing ven­dors into part­ners, col­lab­o­rat­ing with com­peti­tors and build­ing ex­tended part­ner­ships can help com­pa­nies achieve this goal.

Dig­i­tal rev­o­lu­tion:

While there are a num­ber of ben­e­fits to em­brac­ing dig­i­tal ca­pa­bil­i­ties, min­ers must fig­ure out how to turn po­ten­tial ben­e­fits into re­al­ity. To thrive in the fu­ture, com­pa­nies must em­bed dig­i­tal think­ing, pro­cesses and struc­tures into the en­tire or­ga­ni­za­tion.

Map­ping the threat land­scape:

As tech­nol­ogy per­me­ates all in­dus­tries and sec­tors, mining is not im­mune to the ac­celer- at­ing threats of cy­ber­se­cu­rity. Mining com­pa­nies are sub­ject to a wide range of risks, and with an evolv­ing threat land­scape, lead­ers must strengthen their cy­ber­se­cu­rity pro­grams.

Cre­at­ing a shared vi­sion for the sec­tor:

To foster a shared vi­sion for the mining sec­tor, com­pa­nies and gov­ern­ments could ben­e­fit from find­ing a mid­dle ground that aligns in­ter­ests and en­hances co­op­er­a­tion when it comes to reg­u­la­tions.

Re-earn­ing the so­cial li­cense to op­er­ate:

Win­ning a so­cial li­cense to op­er­ate is es­pe­cially dif­fi­cult for min­ers in light of a num­ber of re­cent, cat­a­strophic mining ac­ci­dents and as com­mu­ni­ties con­tinue to raise con­cerns about the in­dus­try’s im­pact on the en­vi­ron­ment. By less­en­ing their en­vi­ron­men­tal foot­print, min­ers can foster the com­mu­nity trust needed to re­gain their so­cial li­cense to op­er­ate.

Sup­port­ing strate­gic pri- ori­ties:

While com­mod­ity prices have be­gun to re­cover since they be­gan fall­ing in 2011, fol­low­ing years of record prof­its in­dus­try lead­ers now un­der­stand the im­por­tance of adopt­ing oper­at­ing mod­els that can help them re­spond to in­dus­try chal­lenges and mar­ket volatil­ity. Com­pa­nies that took steps to strengthen their bal­ance sheets in the lat­est round of cost take-outs are now con­sid­er­ing how to align their oper­at­ing mod­els against these choices so they can po­si­tion them­selves to meet their strate­gic ob­jec­tives and sus­tain their new, lower cost po­si­tions.

Cre­at­ing healthy and in­clu­sive work­forces:

Pro­duc­tiv­ity im­prove­ment has been el­e­vated to a mining in­dus­try mantra fol­low­ing the com­mod­ity price weak­ness of re­cent years. Com­pa­nies, how­ever, need to rec­og­nize that pro­duc­tiv­ity goes be­yond re­duc­ing costs and stream­lin­ing pro­cesses: men­tal health, well­ness and di­ver­sity should also be con­sid­ered and ad­dressed.

Adopt­ing an in­te­grated ap­proach to re­port­ing:

With gov­ern­ments de­mand­ing greater lev­els of trans­parency, the sec­tor is work­ing to strengthen com­pli­ance and dis­clo­sure prac­tices. By stan­dard­iz­ing in­for­ma­tion, con­sid­er­ing the ben­e­fits of over­re­port­ing and re­view­ing IT sys­tems to en­sure con­sis­tent data mea­sure­ment and re­port­ing ca­pa­bil­i­ties, com­pa­nies can adapt to a step change in the re­port­ing en­vi­ron­ment. “As com­pa­nies recom­mit to a new set of strate­gic pri­or­i­ties, they will also need to adopt the next gen­er­a­tion of op­er­a­tional ap­proaches,” said Hop­wood. “The time is now for mining com­pa­nies to con­sider new strate­gic ap­proaches, trans­form­ing the way mining op­er­ates across the board.”

Mining com­pa­nies now face key choices about where to in­vest and how to po­si­tion them­selves in the com­ing years.

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