PERTH (miningweekly.com) – Miners are in for a volatile year in 2015, as the industry faces price volatility, geopolitical turmoil, rising costs and declining grades, advisory firm Deloitte has warned.

However, in its 'Tracking the Trends 2015' report, Deloitte noted that evidence of recovery existed alongside evidence of decline, with the outlook of several commodities improving, including that of nickel, aluminium, zinc and lead.

Simultaneously, the sector was also coming back into favour with investors, Deloitte said.

The group noted that as mining companies in Australia and the rest of the world continued to grapple with the challenging market conditions, the need to drive productivity, embrace innovation and balance short-term investor expectations against long-term business imperatives was becoming more important.

“No one in the Australian mining sector needs to be told that they operate in a complex environment, or that the imperative is to adapt to changing market conditions and produce more for less cost,” said Deloitte Australia’s national mining leader for the West Coast, Nicki Ivory.

“But in a world where volatility has become the norm, the key to future success for Australian miners still lies in driving operational excellence via cost containment and productivity, and truly embracing innovation and technology.”

Ivory said that with commodity prices where they were, sustainable productivity improvements and a relentless focus on cost management remained critical, and achieving sustainable operational excellence required both a long-term commitment and a willingness to embrace new cultural norms.

“In an environment of zero tolerance for underperformance, companies must rethink not only their traditional approaches to mining operations, technology deployment, and trading and marketing, but also their underlying cultural approach to costs.”

In its Tracking the Trends report, the seventh of its kind, Deloitte offered ten possible strategies that could be deployed to assist miners in adapting to the changing industry dynamic.

These strategies included addressing dwindling project pipelines to avert future supply constraint risk, attracting new skills, embedding innovation into the corporate DNA, lobbying for greater policy change in the region in which the miner operates, and engaging more with local governments to counter regulatory uncertainty.

“When incremental improvements toward addressing market realities are no longer enough, the innovation imperative becomes more compelling than ever, and this is certainly the case for Australian miners,” said Deloitte Australia’s national mining leader for the East Coast, Reuben Saayman.

“At its most basic, innovation presents an optimal strategy for controlling costs. Yet it’s rapidly becoming clear that innovation can do much more than reduce capital intensity. Approached strategically, it also has the power to improve productivity and energy intensity, while increasing mining intensity.”

Saayman said that the key was to think of innovation as much more than research and development around particular processes or technologies.

“Companies can, in fact, innovate in multiple ways, such as leveraging supplier knowledge around specific operational challenges, redefining their participation in the energy value chain or finding new ways to engage and partner with major stakeholders and constituencies.”

“And as operators begin to apply innovation to their full operational ecosystem, they stand to realise significant gains.”