Emerging Mining Risk of 2013: Cost Containment and Control in the Mining Sector

Emerging Risks

The “strike contagion” following the tragic events in South Africa in 2012 is a clear indicator of the employment cost pressures mining groups are facing across many countries around the world.

Emerging Risks 2013
This post was part of What Risks Will Emerge in 2013?, published January 23, 2013. The special feature also covered emerging risks in these fields:

In addition, government pressure to derive more income from national resources is increasing across the globe. Right now, there is clear evidence of this in the likes of Venezuela, Peru, South Africa, Ghana, Cote d’Ivoire, Tanzania, DRC, Mongolia, PNG, and Australia. All these countries either have increased taxes and royalties, or are considering doing so.

Cost of workforce is up, cost of mine licensing is up, cost of mine construction is up, taxes are up, royalties are up, and operating costs generally are up.

On the flip side of the coin, demand is down—especially for coal.

So productivity is down, earnings are down, costs are up and government pressure to increase taxes and royalties is not helping an industry which is struggling to make ends meet.

Cost containment and control is the order of the day—workforces are being cut, mines are being closed down, projects are being delayed, scaled down significantly or cancelled, and orders for new plant and equipment are being deferred or reduced.

It’s a challenging environment which is resulting in tough financial times for miners large, medium and small. When miners look to obtain the capital they need to continue to operate and invest in their business—for:

  • growth
  • risk management
  • risk improvement and loss mitigation
  • process efficiency
  • skill improvement in the workforce
  • project development
  • infrastructure debottlenecking
  • supply chain management

—they are struggling to obtain the support they need which has potentially long-term negative implications for the industry as a whole.

Categories: Mining

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