Costs and productivity are the big mover on EY’s annual top-10 list of mining business risks and opportunities, jumping from tenth to fifth spot on the back of “soaring inflation and talent costs [that] are significantly increasing mining costs, squeezing productivity and delaying expansion plans”.
The list of key issues for miners in 2023 is based on a global survey of mining and metals executives between June and August this year.
EY said global conflict and US-China trade tensions, and resource nationalism, had pushed geopolitics from fourth back to second on the ranking, with ESG staying top. Water stewardship was the main ESG risk for 76% of survey respondents.
“With many geopolitical factors beyond the control of mining and metals companies, this is a difficult risk to mitigate. The greatest opportunities may lie in forging closer ties with government, increasing collaboration with stakeholders, including trade and sector groups, and exploring the potential of government incentives and co-investments,” the accounting firm’s report authors said.
On productivity and costs, EY said while only about 20% of survey respondents reported lower asset or labour productivity in 2022, costs were likely to remain high and more innovative approaches to managing variability would be needed. Improved modelling and digital twins could unlock “genuine productivity gains”, it said, while switching to renewable energy and creating strategic joint ventures to optimise economies of scale were “sustainable” cost-saving measures.
Meanwhile, “supply chain” was new on EY’s top-10 radar.
“Global disruption to trade is hitting the sector particularly hard, and in 2023, miners will be under pressure to fast-track the supply chain transformation that was underway before the COVID-19 pandemic,” the report said.
“Miners are considering more innovative, sophisticated approaches to mitigating supply chain risk, including through stronger relationships with suppliers and collaborative contracting.”
EY Global mining and metals leader Paul Mitchell said digital innovation and new business models presented “opportunities for differentiation” in the mining industry.
“We still see some miners taking a siloed approach to implementing technology,” Mitchell said.
“An integrated, business-led approach to digital transformation can identify more opportunities to solve some of miners’ biggest challenges, including ESG, climate risk, productivity and costs.
“Companies that scrutinise and shift business models now, can get an edge on competitors, as demand and expectations change.”
Mining and metals executives surveyed said data mining and automation, as well as the introduction of an ESG platform to track metrics and reporting, would be the focus of digital investment over the next one to two years.
Digital and data would play a key role in supporting miners to execute sustainability roadmaps, including through providing greater visibility across asset performance and operations, and better monitoring of energy and water consumption, the report said.
Governance and assurance of sustainability data and ESG reporting also needed attention.
“As compliance and statutory requirements increase, miners will need to adopt a more formalised approach to how they govern and audit sustainability data, as they do with data in other parts of the business, such as health and safety,” the report said.
Asked about “exciting” new technologies, survey respondents nominated AI and collision avoidance, dry stack tailings and solvents allowing mining without cyanide, decarbonisation options such as hydrogen-fuelled trucks and carbon sinks in mine closures, mobility for connected workers (5G), and new leaching and ore sorting developments for mineral extraction.
In terms of potential new business models, the report said increased orebody complexities and talent shortages were driving a move to a mining-as-a-service model.
“Workforce” was number seven on EY’s list of 2023 business risks/opportunities.
“Mining and metals companies face their greatest ever talent shortage following a massive wave of retirements and resignations,” the report said.
“Replacing these workers and finding talent with critical skills will require a radical rethink of the sector’s approach to attracting, retaining and nurturing talent.
“With younger workers deterred by mining’s image, companies must double down on efforts to build a purposeful brand that aligns with today’s values.
“The EY survey found mining leaders recognise the need to re-skill and upskill workers, but few are embracing this opportunity. A greater focus on training existing workers and sector newcomers in different skills can fill talent gaps and build a more flexible, agile workforce.”
EY said at the time of compiling the report, the mining sector in Australia had more job vacancies “than at any time in its recorded history”.
“In May 2022, the US mining sector had 36,000 jobs to fill, up from 27,000 a year earlier.
“Empirical evidence suggests that the sector is struggling to attract students to study mining relevant fields. According to a survey by the Society for Mining, Metallurgy and Exploration [SMME], enrolment in US mining engineering programs dropped 46% between 2015 and 2020. The same impact has been felt across other significant mining countries, including Canada, South Africa and Australia.
“The sector’s slow adoption of technology, particularly in frontline operations, is also a deterrent for new, younger potential employees who expect their work environment to reflect their digitally enabled everyday life.”