How can mining companies position themselves for growth and strategic diversity?
Positioning mining companies (in fact, any company), for growth and strategic diversity was the topic of the last Mining People International (MPi) Boardroom Forum.
Well actually, it was the initially proposed topic, but during the planning sessions with our two excellent panelists, we resolved it should be changed from “positioning companies for growth and strategic diversity”, to “positioning companies for growth through strategic diversity”.
It might seem like a small adjustment but if you think it through, it is huge. It suggests we shouldn't be chasing diversity as an end goal, but as a strategic tool, to enable us to enhance and accelerate growth.
It was an excellent event, with two very different co-presenters who complemented each other wonderfully, drawing on their diverse experiences and points of view. We had a further ten attendees, ranging from Chief Executives, Non-Executive Directors and Chair’s, all contributing to an excellent discussion.
A summary of the discussion is below but with no reference to individuals, given we operate the event under the Chatham House Rule.
Australian mining and an entrepreneurial culture
As the facilitator, one question I posed was: The title of these sessions often suggests there is a problem that needs to be fixed. If you agree, what is the more important issue confronting the mining industry right now? Is it:
- A lack of growth options
- A lack of willingness to truly embrace diversity in all its forms, or
- If you somewhat disagree with the proposition, is it something else?
For brevity, I have confined the comments to how they applied in Australia.
The general view (and I have summarised a lot of discussion here) was that cash flows of the producers are improving, equity capital is available for the explorers and developers, but our conservative culture and hyper-inflated regulation were stymying risk-taking.
It was noted that many good Australian resources assets were picked up by investors from other parts of the world where a more entrepreneurial culture existed.
There were also other resources facing financial markets in the world, where investors encouraged promoters to take risks and didn’t immediately pan them for an entrepreneurial failure.
It was also noted that after the bruising fallout after the mining boom ended, many boards were still being run conservatively and little in the way of diversification was being pushed. Where boards did have diverse talent at their disposal, they often either didn’t know how to engage with it, or were simply reticent to let it loose.
The costly déjà vu of the Australian mining cycle
Questions and answers were often framed by statements like “if you do the same, you get the same results”. In other words, do we need a competitive advantage?
Every previous “up” cycle created the same results — higher commodity prices, resulting in a bigger number of companies chasing lower-quality assets, paying more for everything from projects, to people, to parts. Eventually, that all reduces margins until there is rapidly escalated leverage to risk and, sooner or later, a “black swan” event and then, quite often, failure.
Rather than following the herd, what are some specific things a mining company can do to create a competitive advantage and ensure things are different this time?
Once again there were many ideas but, in summary, it was felt to truly do things differently required a different mindset — and that was unlikely to come from simply telling someone to “think differently”.
It was also remarked that telling a CEO to “get more innovative” was counter-productive when often the CEO bore all the pressures of implementation, with the need to manage costs, risk and often stifling regulation.
It was felt that innovation was more likely to come by applying the skills of people from different industries, different countries and different cultures.
One positive idea was that the battery metals industry could be a really positive trigger here, as technologically savvy companies like car makers and energy companies become shareholders in mining companies. This could be really exciting if we embrace it.
Where we are and where we should be headed
It seems in Australia we retain a relatively conservative culture that doesn’t naturally encourage risk-taking in industries like resources, but rather defers to managing risk through the heavy application of rules.
We have more on that here, where we released the results of our poll into health and safety culture in the Australian mining sector. Almost 600 mine workers responded. It was fascinating stuff.
I hope you enjoyed this very much condensed version of what was a wide-ranging two-hour discussion.
It really was a fantastic day, made successful by our two excellent panelists and the willingness to contribute by a wide range of other senior executives (all conducted under the safety net of the Chatham House Rule). Lastly and very importantly, we relaxed the need to reach consensus and focused instead on simply exploring the issues affecting our industry.
We conduct only two to three MPi Boardroom Forums a year and if you have an interest in attending, drop us a line. Of course, if you have an idea for a topic, we’re also keen to hear from you.