JOHANNESBURG (miningweekly.com) – Many projects in Africa have stalled as a result of low commodity prices and companies’ reluctance to build new projects in a low-price environment Eaton – Global Mining, Metals and Minerals Industry Manager David Durocher said on Monday
Speaking at a conference at Electra Mining Africa 2016, in Johannesburg, he noted that capital expenditure (capex) in the mining industry had decreased by about 30% every year for the past three years.
He pointed out that many miners were carefully managing their capex in the current environment.
“Large global mining companies have been disappointed by capex projects. Many big projects have been delayed and cancelled because of cost overruns. That has been part of the driver for the capex slowdown,” he said.
He added that in some cases engineering, procurement and construction (EPC) firms were managing scope changes which resulted in project delays and cost overruns.
Durocher said Eaton had seen some of the major miners are looking at shifting their focus and moving away from EPC’s, toward a model where major suppliers take on more project responsibility, an effort to streamline processes and reduce total project costs.
Business leaders want to ensure their projects are on time and under budget, Durocher noted.
“Most miners will manage the business and not spend a lot of money on capex unless they are sure that it will return profit.”
He said a major challenge for the industry was that it was countercyclical - “. . . for example, [the] gold [price] goes up and people want to open a new gold mine; it takes two to three years to open a mine, and by the time you open one, maybe [the] gold [market] has changed”, he said.
OUTLOOK
Durocher said the mining industry is expected to face volatility in 2017; however, commodities such as gold, uranium and lithium will deliver solid growth.
He expects acquisitions on the equipment front to continue, while top tier miners will continue to shift towards a handful of select commodities.
Regulations and energy costs will continue to put pressure on the bottom line, while technology will continue to drive business improvement.
He noted that the global mining industry had a constant need to reduce costs and improve operating efficiency and saving energy offered the duel benefit of offsetting rising costs and reducing emissions.
“Utility service providers should be included as a part of any energy initiative. Often, the serving utility will offer incentives to reduce the energy footprint,” he said.