Photo by: Duane Daws
JOHANNESBURG (miningweekly.com) – The mining industry, which is facing tumultuous times in terms of funding, collapsed project pipelines and the ever present issue of resource nationalism, needs to develop an innovative strategy to ensure its sustainability and relevance going forward, says professional services firm Venmyn Deloitte MD Andy Clay.
Delivering a keynote address at the Southern African Institute of Mining and Metallurgy Surface Mining conference, on Wednesday, in parallel to the Electra Mining Africa Exhibition, he highlighted the issue of low commodity prices for industrial and bulk minerals.
If this trend continues, marginal producers will become even less attractive and only lower cost mineral companies are likely to survive.
To overcome this, mining companies will need to optimise their mineral portfolios and target higher grades with less complicated geology. In this case, Clay believes surface mines are at an advantage in terms of lower costs.
In terms of project funding, he has seen a shift away from developers seeking funding from banks and private financial institutions to developers approaching private equity funders for financing.
However, unless mining companies can demonstrate positive returns to the private equity-providing shareholders, the shareholders are unlikely to recapitalise.
ALTERNATIVE PROJECT INNOVATORS
To remain ahead and relevant in the mining industry, Clay advises mining companies to consider mine plans that initially require surface mining followed by underground mining later on in the project life.
He also points to the need to consider mining high-grade areas initially to fund the project through self-generated funds.
Further, mining companies should also consider establishing a processing plan that includes a pilot plant that can initially process small volumes of material but later be scaled up in a modular fashion as and when needed.
Meanwhile, in terms of energy, which is a massive constraint facing mining companies in South Africa, becoming self-sustainable is important. Clay says partnerships with independent power producers are being considered in the mining industry, while some mining companies are also considering installing baseload power plants.
He warns that if mining companies do not heed the warning to innovate, there will continue to be a downturn in the industry going forward. “Unless we start to change the ways in which we mine through innovation, the future looks bleak,” he says.