Deloitte’s analysts have released their top 10 key trends set to affect the mining industry and its licence to operate in the near term.
When experts are asked about the economy of the future, it’s climate change that looms large over their answers. By almost universal acclaim, we’re heading for a low-carbon, low-waste, purpose-driven future.
So, what on earth does that mean for mining?
Analysts at Deloitte have been asking that exact question, recently releasing a report of their findings, listing 10 key trends set to affect the mining industry and its licence to operate.
The take-out? While mining’s core objective remains unchanged (extracting and providing metals and minerals for downstream processing), mining companies will need to “reorganise, generate new value, and forge partnerships to create a more responsible and attractive future for the industry”.
In short, it’s time to pivot. Here’s what Deloitte’s experts think that could look like over the next decade or so.
Investing in environmental and social governance
Environmental and social governance (ESG) have become buzzwords in business in recent years and mining has not been exempt in its enthusiasm for it. Deloitte’s analysts point out that many companies have announced efforts to cut various types of emissions, for example. Some have even released net zero targets.
The tricky part is going to be delivering on these promises. Doing so requires the careful allocation of capital to a diversified portfolio of investment opportunities.
“Building a portfolio of businesses, initiatives, and projects that are strategically sound, value-creating, resilient and sustainable will minimise risk in the face of significant future uncertainty and boost the aggregate value of a company’s holdings over time,” Deloitte’s analysts suggest.
Careful consideration of the value chain
In laying the foundations for a low-carbon future, mining companies should also “think about the impact of their operations and products across the value chain, and how that will change with the transition from linear to circular pathways”. That is to say, to incorporate metals reprocessing, recycling and urban mining to their portfolios.
This kind of thinking is already happening. Deloitte points out that BHP, for example, is divesting its oil and gas business and realigning as a mining major focused on the energy transition. Some miners, including Rio Tinto, are adding to their portfolio the rare-earth commodities that will be vital to our green energy future. Fortescue Metals has established a renewable energy, green hydrogen and green ammonia business, to supply the needs of its own operations.
Navigating the new “resource nationalism”
Soaring commodity prices and global political and resources industry pressures are leading to an increase in various forms of “resource nationalism”. Roman Webber, Deloitte’s Mining and Metals Leader for Europe, said that in the past, resource nationalism had mainly taken the form of direct or indirect expropriation of assets.
“This time, we’re seeing more sophisticated methods, and mineral taxation is one way that host governments are looking to exert more control or gain better returns on their resources,” he said.
“In many cases, the mining sector will be a key source of tax revenues for countries going forward. So, it’s unsurprising that we’ve seen local governments, for example, Chile and Peru are looking to increase tax on these companies specifically.”
Creating operating models that support ESG commitments
Without having the proper internal structures in place, Deloitte’s analysts argue companies will find it hard to make effective progress towards achieving ESG targets and standards.
“At a practical level, this requires an operating model that facilitates visibility, accountability and collaboration between departments, along with a clear governance structure,” the report states.
Expect to see more vice presidents of sustainability popping up over the next few years.
Giving workers what they want in a competitive labour market
If there’s one challenge Australia’s mining companies understand, it’s the difficulties of an extremely competitive labour market. Deloitte argues that mining needs to position itself as “an attractive sector and employer, capable of meeting evolving priorities”.
What does that look like? According to Deloitte’s experts, it’s about much more than remote working and flexible hours.
“The push for decarbonisation and renewable energy sources provides an opportunity for organisations to reinvigorate their purpose and, in doing so, speak to untapped sources of talent,” Deloitte claims. “Greater diversity, equity and inclusion are crucial to breaking down prejudice and discrimination, and unleashing individual and team potential.”
Embracing both tech and a new leadership culture will also be key.
Creating a new paradigm with Indigenous stakeholders
“Mining companies are now under pressure from multiple angles to rethink their strategies and set the stage for future relationships” with traditional landowners “that offer economic and social prosperity for all,” the Deloitte report argues.
“It’s clear that Indigenous communities around the world no longer want to be positioned as stakeholders in transactional-style relationships. They are keen to establish a new type of connection and understanding with all entities that participate in their environment, including mining companies, about responsibility for the landscape.”
Embracing change and being led by innovation
Traditional mining companies are structured for stability, rather than for embracing change and innovation. But Deloitte’s experts say it’s time for that to change. There are three reasons for this assertion:
- Covid-19 has forced a lot of change, including digital and remote work practices
- Innovation in core processes is going to be needed if companies are to decarbonise
- It’s easier to fund innovation when commodity prices are high, as they are right now.
Using data to drive the long view and unlock value
While there’s been plenty of focus on introducing new digital technology into mining in recent years, Deloitte’s analysts argue the data that technology creates is not being leveraged to its full potential.
Data provides insights that allow you to optimise systems and production. Understanding the data may encourage different decisions being taken, including decisions that help a company meet its ESG commitments.
Closing the vulnerability gap between IT and operational tech
The acceleration of digitisation in the past five years has produced a lot of efficiencies, driven down miners’ costs and created exciting new business opportunities. But it has also generated risk, and one of the areas of vulnerability is the security gap in the interaction between data systems and operational systems.
In other words, take your data security seriously, both in the front office and the back office.
Preparing operations for climate change
We started by mentioning climate change and it’s perhaps no surprise we’ve circled back to it at the end. But this time we’re not talking about ESG commitments and decarbonisation; we’re talking about direct risks to business. Mining companies need to be building climate resilience into their businesses and operations.
“Physical risks resulting from climate change can be event-driven (acute) or longer-term shifts (chronic) in climate patterns,” Deloitte’s report explains. “Both can carry financial implications for organisations, such as direct damage to assets and indirect impacts from supply chain disruption.”
To read more, including Deloitte’s recommended solutions, you can find the full Tracking the Trends report here.
Mining People International has more than 27 years’ specialist experience helping mining companies uncover the best candidates for their executive and leadership roles. Find out more about our executive search service, here, or get in touch directly.