http://www.vancouversun.com/index.html
Phil Hopwood is the Canadian mining sector leader at Deloitte.
Canada’s mining companies must embrace innovation and improve productivity to ensure their future success
As we enter BC Mining Week, it is an appropriate time to take an honest look at the state of the industry in the province. Mining is one of British Columbia’s vital resource industries. It contributed $9.2 billion to the provincial economy in 2012 and it is very much an industry in flux.
Historically, mining companies have waited out the storm as markets have swung, but this time it is different. We are seeing it is imperative for these companies to adjust their way of doing business if they want to survive and thrive. Mining firms continue to be confronted with the compounding challenges of cost inflation, falling commodity prices, supply-demand imbalances and decreased productivity levels.
As skilled workers retire from the workforce, and we continue to see the number of graduates in degrees such as mining engineering decline, mining companies, especially in B.C., need to embrace innovation and revise their core systems and processes while applying new approaches to financial, safety and talent management programs as well as external relations with communities, governments, shareholders and regulators. This represents a major shift in how they look at the business of their business.
The increasing cost of being in the mining business is the most dominant trend facing the industry. The process of reducing those costs, in a sustainable way, is one that requires time and innovation to address. Some companies, including those in B.C., have started to address the runaway costs through straightforward cost cutting measures.
Often, however, this is a temporary solution and costs eventually creep back up. Genuine performance improvement and increased productivity comes only when companies revise their underlying systems and operating models and embrace new solutions. Miners need to adopt new and innovative technologies to maximize their operations, creating a productivity management culture.
Ongoing global economic weakness and short-term decline of demand out of China and India has pushed down global commodity prices, resulting in share performance declines across the industry. This uncertainty in the market and weak shareholder returns has seen many traditional lenders pull back from the mining sector. While major companies are able to respond with other financing strategies, some junior companies are struggling with less access to equity. This has created an opportunity for mining companies with larger cash holdings to make key acquisitions.
For the rest of this article, click here: http://www.vancouversun.com/business/Change+challenge+mining/9832064/story.html