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Top ten risks facing the mining industry in 2013

World Coal,

Deloitte has recently released its Tracking the Trends 2013, setting out its views of the challenges facing the global mining industry next year. Among the top 10 challenges highlighted in the report are the rising costs of doing business, managing demand uncertainty and capital project deceleration.

Quality over quantity

In response to the report, Deloitte Australia consulting partner, Mike McNulty, said that shrinking margins were presenting challenges for project owners, but a new mantra of “quality over quantity” would help the mining industry remain buoyant well into the future: “Major miners have responded to recent changes in market conditions by deferring major projects and looking at alternate ways to both finance and develop these projects,” McNulty said in a press release.

“There has undoubtedly been a history of significant cost blowouts on most major capital projects over recent years,’ he continued. These have been compounded by relatively poor productivity, the recent rapid escalation in costs and the shortage of key skilled workers required to manage these large and complex projects.

But the mining industry’s long-term prospects are bright

It is not all bad news, however: “There is real opportunity in the market now for producers who can develop a clear strategy to achieve profit and productivity, while also being able to keep their nerve and stay the course while the current uncertainties in the market play out,” concluded McNulty.

Glen Ives, Deloitte’s Americas Mining Leader, concurs: “Despite near-term tapering demand, the world remains at risk of long-term supply constraints. This danger will grow as companies halt production in the face of capital cost increases and growing shareholder demands for more immediate returns. Although companies are hesitant to invest aggressively, one thing is clear: failure to replace depleting assets will result in higher future commodity prices. Significant rewards will be available to the companies that invest today.”

Tracking the Trends 2013: the top ten

The complete top ten issues identified in Tracking the Trends 2013 are:

1. Counting the costs: Paying the price of bullish behaviour.

2. Managing demand uncertainty: Conflicting market indicators magnify volatility.

3. Capital project deceleration: Quality trumps quantity in the project pipeline.

4. Preparing for the M&A storm: Market indicators point to rising deal volumes.

5. Governments getting greedier: The cash cow is bleeding amid heightened resource nationalism.

6. Combating corruption: Miners are being held to higher standards.

7. Climbing the social ladder: A new level of responsible behaviour.

8. Plugging the talent gap: Long-term skills shortages still loom.

9. Playing it safe: Looking beyond historical data to improve safety outcomes.

10. At the IT edge: Getting the most out of emerging—and existing—technologies.

The complete Tracking the Trends 2013 can be downloaded here.

Adapted from press release by Jonathan Rowland.

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