NEWS RELEASE: Productivity, capital decisions, social license earn top three spots on mining risks list: EY report

Access to water and energy new to mining business risks list this year

(Vancouver, September 10, 2014) EY’s annual Business risks facing mining and metals report reveals productivity, capital decisions and social license to operate as the top three risks facing the sector this year.

“Productivity claimed the top spot on this year’s mining risks list as boards and CEOs begin to realize that regaining lost productivity will be critical for long-term profitability,” says Bruce Sprague, EY’s Canadian Mining & Metals Leader. “Capital decisions and social license to operate challenges also continue to weigh heavily on the minds of mining and metals executives here and around the world.”

The complete 2014 top 10 strategic business risks list includes:

1 Productivity (2 in 2013)
2 Capital dilemmas – allocation and access (1)
3 Social license to operate (4)
4 Resource nationalism (3)
5 Capital projects (7)
6 Price and currency volatility (6)
7 Infrastructure access (9)
8 Sharing the benefits (8)
9 Balancing talent needs (5)
10 Access to water and energy (new)

Steady progress has been made by the major industry players on capital management and optimization following a spate of asset write downs in 2013. However, at the other end of the sector, little has changed in the past 12 months for many juniors and explorers when it comes to capital challenges.

While capital risks improved over last year, social license to operate is more acute. The number and size of projects being delayed or stopped by community and environmental activists continues to rise.

Access to water and energy is the only new entrant to this year’s risks list. Burgeoning energy costs and competing water demands in many regions, particularly Chile, Peru, South Africa and Mongolia are starting to have a bigger impact on costs and companies’ ability to operate.

Mining companies spent US$11.9 billion on water infrastructure globally last year alone — a 250% increase over 2009. And global energy prices have leapt 260% since 2000.

“Risks in the sector continue to shift in ranking but they all remain key priorities for companies,” says Sprague. “Understanding these risks and their impact is crucial to remaining competitive.”

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