Top trends and risks in the global mining industry
A new review of the global mining sector by KPMG has revealed a growing focus on environmental, social and governance (ESG) issues, although tech is helping companies manage the mounting pressure around climate change. A similar story appears to be unfolding in Australia.
While ESG factors are not the most pressing risks for mining companies across the globe, they are rapidly making their way up the top 10 list. At the top of risks for this year remains commodity pricing, or fluctuation thereof, followed by permitting risk. Both factors also topped the list last year.
The sector is in a state of flux globally, strongly impacted by long-term trends in the global economy such as digitalisation as well as short term challenges posed by trade wars and the latest Covid-19 (Coronavirus) disruptions.
“This is leading the industry players to focus on their own house, getting the basics in order and reducing costs or looking at technology to drive growth, productivity, and greater efficiency,” said Trevor Hart, Global Head of Mining at KPMG.
Australia is among the most prominent mining economies in the world, home to the two largest mining companies across the globe. Trends in Australia’s mining sector often reflect global trends and vice-versa, and similarly, the Australian mining sector is demonstrating signs of decarbonisation and a focus on ESG standards.
Focus on the climate
Hart: “Growing focus on ESG issues is shared by investors and companies alike. 75% of respondents say the industry needs to redefine success using a more holistic group of measures that include both shareholder and stakeholder values.”
ESG reporting standards were recently made more stringent in Australia, at a time when overall climate change activism has grown significantly more vocal. According to Caron Sugars from KPMG in Australia, these factors have had a visible impact on risk perceptions among Australian mining companies.
“This risk considers both the climate change impact on assets and operations (significant weather events, asset degradation) as well as the uncertainty surrounding society and government’s response to climate change,” she explained, adding that climate change is no longer being clubbed with other secondary risks, but is being treated as a core issue.
This uncertainty will be addressed, in part, through a shift from coal to more sustainable commodities such as copper and other battery minerals. This is part of a global drive to decarbonise mining.
“The race is on to decarbonise mining. It’s not a fad – it’s here to stay. The world’s two largest miners have announced significant funding for projects over the next 5 years designed to take carbon out of their operations with aims to be carbon neutral by 2050,” added Hart.
As the mining sector moves to address all these changes, technology is playing a key role in making operations more efficient and resilient, and versatile tech support is available for companies to experiment with new technological avenues. According to Sugars, this is key to the welfare of mining.
“Data and analytics are helping organisations understand not just what risks are being managed, but also providing signals into how they are managed including factors like culture. This is enhancing the already strong management of health and safety and extending to broader non-financial risks,” she said.
Compared to last year, mining executives have become less optimistic about growth, specifically about the growth of their own organisation. Only 38% of respondents were “more optimistic” about their company's growth compared to 55% in the prior year. Productivity improvements, cost cutting, digital investments and selected mergers & acquisitions are among the main strategies to remain successful.
