Rising commodity prices present the impression that "we are back in the heyday of the mining boom," says Glenn Ives, head of North American mining at global consultant Deloitte. Today's demand is being driven by international forces such as China's voracious appetite for commodities. It's also being challenged by increased government intervention and labour shortages. In a new report, Deloitte outlines the top 10 challenges facing miners in the year ahead.
1. Fickle financing
Miners that survived the economic meltdown are leaner and meaner. Still, financing isn't always easy to come by, especially for smaller companies. Miners may need to turn to new financiers from places such as Asia, as well as sovereign wealth funds.
2. Demand outstrips supply
Market forces today are far from typical. Miners need to be more nimble when it comes to matching changing demand with supply and be prepared for possible roadblocks such as permit problems.
3. Securing a social licence
Miners must engage with key stakeholders at each stage of the mining cycle, starting with exploration and ending with future land use once a mine has closed.
4. Mining and politics
Government intervention in mining is reaching new heights driven by such factors as higher deficits; nationalistic concerns (eg., Ottawa blocking BHP bid for Potash Corp.); and higher environmental standards.
5. Strategic investment
Over the past two years, miners have moved from selling off assets to pay down debt to sitting on hoards of cash as commodity prices soar. The new concern is how to deploy available capital.
6. Labour shortage
As the mining industry ramps up to meet rising demand it will need to be more aggressive and innovative about finding and keeping workers.
7. Going farther, deeper
Miners are going to more precarious regions to find growth and exploring new technology including mining under ice, water or within volcanic sulphur mines. Risks associated with such moves must be factored in.
8. Environment
Climate change disclosure and adaptation are getting harder and miners must address it in their overall enterprise risk management programs.
9. Aging infrastructure
Inadequate infrastructure hampers growth. Miners should continue seeking partnerships to construct railways and ports and investing in power plants.
10. Rethinking the fundamentals
Turn risks into rewards, such as turning coal into carbon offsets, investing in renewables, and recycling waste.