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Deloitte tracks the trends in the mining industry – Part 3

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World Coal,

Deloitte has released its 6th annual Tracking the Trends report, examining the top ten issues affecting mining companies around the world. Topping the list for the third year in a row was the rising cost of mining, followed by low commodity prices caused by a supply/demand imbalance. The need for innovation to solve the industry’s challenges rounds off the top three, while at number six – but set to have a much bigger impact for the coal sector – is increased regulatory and environmental pressure being put on the mining sector from local communities.

The last part of this article considers the growing role regulatory and environmental pressure is having on the coal industry.

Power to the people
Where previously, winning a social licence to operate meant gaining national government approvals, local communities are becoming more sophisticated and demanding of mining companies. Indeed, in emerging markets, local community engagement is now one of the most pressing issues facing operators with particular emphasis on water and land access rights, environmental protection, local economic development and jobs.

In the coal industry, environmental regulation is a particular concern down the supply chain to the power plant, as governments and regulators around the world are tightening regulations on emissions.

This is creating a “perfect storm” for the coal industry, says Reuben Saayman, national mining leader – East Coast at Deloitte Australia, where “increased regulation and environmental pressure makes it very difficult to be in business and justify the effort, given the very low returns (if any) on investment as a result of the low prices and high production costs.”

To work through this, Deloitte argues the mining industry must move away from its caricature as chronic introverts and become more willing to communicate key messages and work with local suppliers and labour – not just in the mine construction phase but throughout the life of the mine. For example, miners in British Colombia collaborated to establish an Aboriginal Mine Training Association to help train local populations to meet critical industry still gaps.

The gloves are off
As this year’s Tracking the Trends makes clear, the mining industry – and the coal sector in particular – is facing some tough challenges. But there are ways through for those willing to innovate to change their business paradigm. As Deloitte notes: “Although the […] coal industry does no seem in danger of immediate collapse, shifting fundamentals do call for the development and execution of new long-term strategies.”

The first part of this article can be read here; the second, here. More from Reuben Saayman’s conversation with World Coal, can be found here.

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