Mining and geopolitical risk: A global breakdown – by Cole Latimer (Australian Mining – March 17, 2015)

Australia has always had an insular view of the mining industry.

It is often forgotten that many of the mining companies that operate here have a large suite of overseas operations, or are simply headquartered here but operate solely overseas.

There is more to the resources industry than what is happening on our island tucked away in the corner of the Pacific, and the vagaries of overseas machinations that affect it.

Yet, the mining sector has always viewed itself as a global industry, and one of the most important aspects of maintaining its ability to operate is remaining closely abreast of the constantly changing geopolitical landscape.

However as Deloitte points out: “As the pace of change accelerates it’s getting harder to predict the impact of these (shifting geopolitical) trends.” “It is becoming eminently clear that mining companies face rising regulatory, geopolitical, economic, and technological uncertainty.”

It goes on to state that despite best planning, much of the time miners will have to continue embracing uncertainty, essentially planning for the worst but hoping for the best.

“Given mounting levels of volatility and change, miners need to take a broader view of risk management and scenario analysis,” Deloitte Southern Africa mining leader John Woods said.

“This includes taking a much greater range of variables into account to inform their decision making,” he said.

There are four major international areas that Australian miners are looking to for growth opportunities and future development: Asia, Africa, South America, and Eastern Europe/CIS.

Despite the mining boom coming off the boil and Chinese demand waning as its rampant growth levels off, Asia is still the major market for Australian resources ranging from iron ore and coal through to rare earth minerals, but the money that once drove it is no longer available.

According to Deloitte: “Chinese investment, which has long fuelled the resources sector, appears to be dwindling.”

“At the same time slowdowns in industrial production, fixed asset investments and retail sales are already threatening China’s 7.5 per cent GDP growth target, contributing to ongoing commodity price weakness.”

Much of this is driven by the nation’s shift from a ramp-up building phase into one of consumption, according to BHP CEO Andrew Mackenzie.

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