Given the right levels of investment, significant gains are possible through innovating mining and processing methods, says EY.
RENO (MINEWEB) – Global mining productivity has been declining on a volume and cost basis since 2000 as miners have chased production growth during the commodity boom, said EY Global Mining & Metals Advisory Leader Paul Mitchell.
Mining productivity in Australia has declined about 50% since 2001. Despite massive investment in new equipment and automation, Australian mining capital productivity has declined by 45% compared to 22% in all industries, says a new EY report, Productivity in mining: A case for broad transformation.
Labor productivity in the U.S. coal sector has declined nearly 30% from 2009-2012, while in the South Africa gold sector, labor productivity is estimated to have declined 35% since 2007.
Many companies have been dealing with the plunge in productivity through a series of cost-cutting exercises or point solutions, observed the EY report. “However, the size of the problem is too large for point solutions to solve on their own and often they have the effect of simply moving the problem further down the supply chain.”
“Real and sustainable productivity gains will only come from broad business transformation,” EY stressed.
Productivity is needed to regain ground lost over the commodity super cycle, EY and the University of Queensland in Australia determined during in-depth interviews with senior mining executives. “Behavioral change is critical given that many mine managers, frontline engineers and operations supervisors appointed to these positions during the super cycle have never operated under a marginal environment,” the report advised.
EY found that many mining economies relied on currency movements to retain their competitive advantage. “With lower prices and stubbornly sticky exchange rates, producer countries have begun losing their competitive advantage, and hence producers in these countries need to innovative in order to become more competitive and reach new levels of productivity,” said the study.
“Given the right levels of investment, significant gains should be possible through innovating mining and processing methods, perhaps in conjunction with original equipment manufacturers (OEMs),” EY suggested.
To boost productivity, mining companies also need to counteract rising real wages, the study advised.
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