Keep calm and carry on

Reuben Saayman, Deloitte, Australia.

As mining companies around the world – and certainly those in the business of coal – continue to grapple with challenging market conditions, key activities, such as driving productivity, embracing innovation and getting more adept at balancing short-term investor expectations with long-term business imperatives, are becoming more important than ever.

Price volatility, geopolitical turmoil, rising costs, declining grades and a general lack of financing will make this year another one of challenges – but also opportunities – for the sector. And with this in mind, a number of trends are likely to occupy minds in 2015, a year that will be characterised by ongoing changes in industry dynamics.

The top 10 trends

Now in its seventh year, the Deloitte’s “Tracking the Trends” takes a global look at the following pressing trends facing miners in the year ahead and offers strategies they can employ to adapt to changing industry dynamics:

1. Back to basics: to heighten operational excellence, re-think traditional operational processes and consider cultural approach to costs.
2. Innovation is the new key to survival: overcome traditionally conservative tendencies by embedding innovation into corporate DNA.
3. The new energy paradigm: consider a new approach to energy and its cost, including the more efficient use of energy through innovation, using technology and culture change.
4. Dwindling project pipelines: to avert future supply constraint risk, find a better balance between meeting short-term investor/analyst expectations and maintaining project pipelines.
5. Financing’s great disappearing act: while solutions are limited, juniors may be able to avert disaster by wooing foreign investors, pooling resources and exploring alternative financing.
6. urvival of the juniors: to capitalise on shifting ownership patterns, juniors should take steps to get their assets in order and consider options such as joint ventures, sale and consolidation.
7. Seeking new skillsets: attract new skills, commit to diversity, explore new talent management systems, get better at recruiting talent in high demand and invest in more targeted training.
8. Riding the waves of geopolitical uncertainty: response strategies include lobbying for greater policy clarity, becoming more risk intelligent and planning for myriad scenarios.
9. Rising stakes around stakeholder engagement: work to build win/win platforms, communicate in new ways and leverage the power of social media.
10. Engaging with government: to counter regulatory uncertainty, work to build better government relationships, become more vocal and help to set the policy agenda.

No one in the coal sector needs to be told that they operate in a complex environment, or that the imperative is to adapt to changing market conditions and produce more for less cost. But in a world where volatility has become the norm, the key to future success certainly lies in the first two of these trends: in driving operational excellence via cost containment and productivity; and truly embracing innovation and technology.

Back to basics (and the pursuit of operational excellence)

With commodity prices where they are, sustainable productivity improvements and a relentless focus on cost management remain critical, while achieving sustainable operational excellence requires both a long-term commitment and a willingness to embrace new cultural norms.

In an environment of zero tolerance for underperformance, companies must rethink not only their traditional approaches to mining operations, technology deployment and trading and marketing, but also their underlying cultural approach to costs.

A range of strategies can help here, including:

• Getting serious about data analytics: across areas, such as workforce planning and talent management, supply chains, maintenance schedules and asset performance.
• Creating transparent information flows between head office and disparate mine sites by using enterprise-wide operational management systems.
• Shoring up capital by streamlining inventory, optimising working capital, divesting non-core assets and strengthening focus on portfolio management.
• Streamlining management and governance structures and reducing internal red tape, from mining methods and planning to quality, health and safety, and environmental performance.
• Being prepared for anything and having robust scenario planning capabilities in place that position an organisation to adapt to a wide range of potential future outcomes.

Innovation is the new key to survival (and it’s about more than just cost control)

When incremental improvements toward addressing market realities are no longer enough, the innovation imperative becomes more compelling than ever – and this is certainly the case for coal miners.

At its most basic, innovation presents an optimal strategy for sustainably controlling costs. Yet it’s rapidly becoming clear that innovation can do much more than reduce capital intensity. Approached strategically, it also has the power to improve productivity, reduce energy intensity and increase mining intensity.

The key is to think of innovation as much more than technology solutions around particular processes or technologies. True innovation should include:

• Embedding innovation into corporate DNA in everything you do.
• Leveraging emerging technologies, such as 3D visualisation, social media and technologies covering processing, production and logistics.
• Becoming part of an innovation ecosystem through alliances and joint ventures with technology providers and others who are already taking steps to harness organisational intelligence.

Written by Reuben Saayman. Edited by Jonathan Rowland.

About the author: Reuben Saayman is a Deloitte Assurance & Advisory Partner based in Brisbane and the National Mining Leader – East.

Read the article online at: https://www.worldcoal.com/special-reports/03022015/keep-calm-and-carry-on-deloite-tracking-the-trends-coal1839/