Technology to play crucial role in disrupting mining future
Technology to play crucial role in disrupting mining future
Originally published by Australian Mining.
Volatility and disruption have always posed threats to mining.
However, the risks they present to the industry have evolved as the pace of change in mining has accelerated.
Volatility has historically risen from fluctuations in commodity prices, and how this movement affects operational strategies and financial performance.
Disruption, in recent times, has stemmed primarily from the technology that is transforming sites, including their equipment and operations centres that run the mines.
Nothing has changed in this regard – if anything, the microscope on these factors has only intensified.
But mining now also increasingly contends with changing community standards and the complex attitudes towards the industry.
The spotlight on the industry has expanded and the expectations of a broader range of stakeholders have become critical.
This combination of factors makes it imperative for mining companies to clarify how they drive value into the future, Deloitte points out in its 2019 Tracking the Trends report.
Deloitte urges mining companies to more clearly demonstrate to these stakeholders how they plan to respond when prices inevitably fall again.
Producing at the lowest costs possible remains a vital measure of operational performance.
According to Deloitte, however, others measures include a focus on the role of individual assets in portfolios, re-imaging the path to value creation, finding balance between risk and return, and understanding how a company can differentiate itself.
Technology, predictably, will be a key part of building the value foundation, Deloitte Australia national mining leader Ian Sanders tells Australian Mining.
“It is going to continue to cause disruption as companies join up to the digital supply chain, that’s where we are not just looking in isolation at autonomous drilling or trucks, or at robotic process automation,” Sanders says.
“How will all of that come together? And how will that collection of data and data-related assets get used within an organisation?”
Sanders sees a technological divide potentially forming in the industry, where some companies will have a fully integrated digital supply network set up, while others will only have small pieces of the supply chain in place.
He says the new insights that are being driven by data are forcing companies to re-assess their digital ecosystems and collaborative partners.
“That has become really important … the companies that don’t leverage that intangible asset of data are going to miss out.”
The disruption being caused by changing community and social standards is not limited to the mining sector, but the broad spectrum of industries.
Now we have better information and data than we’ve ever had before so organisations are really able to evaluate, and evaluate on a regular basis, not just annually, their portfolio of choices.
For example, the Royal Commission into banking in Australia brought attention to the role of large corporations in the financial sector.
In mining, however, Sanders says there has been a major shift in what companies need to do to satisfy a vast range of stakeholders.
He refers to communities, customers, suppliers and governments as the key stakeholders that now sit alongside company shareholders as groups companies must aim to appease.
“How mining companies join up all of those stakeholder expectations is becoming increasingly difficult because sometimes those expectations don’t align with everything they have planned in their strategic objectives,” Sanders says.
“Getting that balance right, reporting transparently around what you are doing in terms of social licence or social outcomes is really important in terms of that communication.”
Deloitte’s opening trend in 2019, ‘Rethinking mining strategies’, outlines its first set of recommendations that help companies prepare for the accelerating rate of change.
Despite the problematic no-so-distant approach of the past to base strategic planning around producing the highest volumes of ore at the lowest possible costs, Deloitte believes companies are still grappling with their transition from this legacy.
Deloitte states that companies have not yet sufficiently broadened their strategic outlook to take a range of critical industry shifts into account.
But as Sanders indicates, this outlook can be transformed through a mindset switch that will allow companies to better use the opportunities now available to them.
“Now we have better information and data than we’ve ever had before so organisations are really able to evaluate, and evaluate on a regular basis, not just annually, their portfolio of choices,” he says.
“So it’s really critical that we have got that ability to do that on a regular basis. In that portfolio of choices we need to consider all stakeholders.”
Sanders points to Rio Tinto’s exit from the coal industry and increasing focus on building its copper portfolio over the past two years as an example of how this approach has been put into practice.
Rio Tinto completed the $2.69 billion sale of its Hunter Valley-focused thermal coal business Coal & Allied to Yancoal in September 2017.
In 2018, the mining company divested several coal assets in Queensland to multiple buyers, including Glencore and EMR Capital.
At the same time, Rio Tinto has increased its exposure to future supply of copper, a crucial ingredient found in electric vehicles, with exploration activity in Western Australia and a joint venture in Peru.
“That translates to taking out potential future earnings to appeal to environmentally friendly stakeholders, including investors,” Sanders says.
“That was good messaging put out by Rio in that regard – a really strategic portfolio choice by them.”
Sanders is convinced mining companies can start to rethink their strategies on a regular basis to support changing stakeholder demands instead of taking the common periodical approach that has become archaic.
“It is no longer good enough to look at your portfolio over a tenure of the chief executive officer or the current executive leadership team. It needs to be done on a regular basis with much richer information and intelligence than we’ve had before,” Sanders concludes.
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