How Can the Mining Industry Overcome Unprecedented Challenges and Reverse its Downward Spiral?
Since reaching a peak in profitability in 2010, the mining industry has faced unprecedented challenges and disruptions. Mining today is lagging behind other industries and facing an increasing risk landscape with volatility on multiple fronts, and new demands from shareholders and other stakeholders. The challenges can become opportunities for companies willing to capitalize on the industry‘s changes and prepare for transformation.
Mining companies face both internal and external challenges
Internally, mining companies face an overwhelming focus on short-term operations as opposed to long-term sustainability and transformation. The industry faces a growing talent shortage, and new calls for social responsibility and sustainability. Transportation logistics add a new layer of difficulty.
Externally, China, the world‘s largest consumer of coal, is actively moving away from coal consumption in favor of natural gas and other cleaner alternatives. Renewables now account for one-fourth of all electric generation and environmental, social and governance (ESG) concerns are driving the need for greater transformation throughout the industry.
The gold mining industry is also facing new risks and pressures, as concerns over the coronavirus spreads throughout all industries. Gold prices have hit a seven-year high, largely because investors worried about the coronavirus impacting the Chinese portion of companies‘ manufacturing supply chains are moving to “safe haven“ investments. As a result of the higher gold prices, gold mining companies are raising dividends and doing more stock repurchases, even though new exploration projects have fallen behind.
In addition, mining companies are already facing a need for greater transparency in the supply chain, not just for the purpose of greater efficiency in sourcing, but also for compliance with the EU‘s Conflict Minerals Rule, which takes effect in 2021 and mandates a new focus on responsible sourcing.
Creating new sources of value creation
Simple cost-saving measures to counter these trends are inadequate. Long-term sustainable improvements can only be achieved with a new focus on transforming operations, eliminating the traditional silos of operation that have hindered the industry, and greater risk preparation and mitigation, visibility and transparency through Total Value Optimization™ (TVO), our framework which allows mining companies to capitalize on changes in the industry, bring about positive transformation and address internal and external disruptions while positioning themselves well against competitors who are still stagnating with last-century operational processes and short-term thinking.
Understanding the disruptions and challenges, creating a strategy and a vision and then acting on it has resulted in big wins for the mining industry. Some of our successes have included:
- Creating a Management Operating System (MOS) to improve productivity by 12 percent for a value of $15.9 million
- Improve management of rail operations for a leading producer of concentrated phosphate and potash for an annualized savings of $11.7 million to $15 million
- Creation and implementation of a plan to guarantee the ability to ship higher quantities while realizing freight rate savings of $6.2 million to $9.5 million
New risk factors like the coronavirus, trade wars and a pressing need to face up to the new realities of the mining industry leaves mining companies with an imperative for change and transformation. Now is the time to re-evaluate and prepare for the inevitable industry transformation, address current limitations and identify new opportunities.
If you would like more information, please contact Maine Pointe for a discussion of how we can enable value creation and improved productivity:
About Maine Pointe
Maine Pointe, a member of the SGS Group, is a global supply chain and operations consulting firm trusted by many chief executives and private equity firms to drive compelling economic returns for their companies. We achieve this by delivering accelerated, sustainable improvements in EBITDA, cash and growth across their procurement, logistics, operations and data analytics. Our hands-on implementation experts work with executives and their teams to rapidly break through functional silos and transform the buy-make-move-fulfill digital supply chain to deliver the greatest value to customers and stakeholders at the lowest cost to business. We call this Total Value Optimization (TVO)™.
Maine Pointe‘s engagements are results-driven and deliver between 4:1-8:1 ROI. We are so confident in our work and our processes that we provide a unique 100% guarantee of engagement fees based on annualized savings. www.mainepointe.com