As the global economy emerged from the 2009 landslide, business re-engineering, mothballing mining plant and equipment, restricting mining to high-grade areas, restructuring and retrenchments were the order of the day to reduce costs and adapt to the lower-price environment. Still, the mining industry contributed substantially to the GDP in the countries where it represents a vital industry.
Today, the industry is engaged in a battle for key resources. Not only for minerals, but for the talent that will secure its future.
Until relatively recently, dealmaking was seen as a key to securing the future of increasingly scarce resources. But activity is slowing. PwC recently reported* that metals deal activity was sluggish in 2014, with total value “less than half of that recorded in seven of the last 11 years.” In its 2014 Metals & Mining report, SNL reported that the mining sector led 73 acquisitions at an annual total of over 22 billion USD. Whilst almost double the 2013 figure of 12 billion USD, this is still the third lowest level recorded in ten years.
The frantic search for access to the five key resources (gold, iron ore, copper, fertilizer minerals and coal) has caused global mining companies to extend their operations further afield - often into new and politically unstable countries - with the accompanying risks.
The mining industry is also experiencing some discomfort from stakeholder advocacy. Community activism, too, is rising, as previously disadvantaged rural communities seek to take advantage of the quest for mineral wealth – a trend that is likely to continue unabated.
In terms of countries seeking access to mineral resources, in 2014, Canada was the main buyer of mining and metals assets in volume and one of the biggest in value, according to SNL - companies located in Canada sealed 42% of total gold and metal deals, closely followed by Australia and China. We can envisage increased competition for dwindling known mineral bodies to secure long-term supply advantage, stimulating intense exploration in remote areas of continents such as Africa - hotly contested in the scramble for mining assets – or in countries such as Colombia. Recognized as one of the world’s most under-explored countries, Colombia is a significant producer of gold, nickel, emeralds and coal. In 2013 its mining investment rose by 21% over the previous year.
The depletion of grades and the need to mine at ever-increasing depths are also creating new and interesting engineering challenges. The world’s deepest installations, situated in South Africa (Mponeng Gold Mine is now the deepest), are now mining gold at over 4000m below surface, with an intention to go deeper.
Against this background, debt in the mining industry has largely been removed from the balance sheet. There is thus a significant growth capacity that will be enhanced to secure long-term rights to key resources.
The quest for access to mineral wealth implies an ever-increasing need for qualified, experienced and loyal employees – people who can be deployed a long way from home to oversee mining activity in often tough and unfriendly environments. Worldwide, in virtually every mining geography, the industry is facing talent shortfalls at both ends of the generational spectrum. Unless it focuses collective energy on solutions, its difficulties will increase exponentially.
*PWC: Metals Deals Forging Ahead 2015 Outlook and 2014 Review