Photo by: Bloomberg
TORONTO (miningweekly.com) – Professional services firm EY on Wednesday said its yearly ‘Business risks facing mining and metals’ report had revealed that productivity, capital decisions and social licence to operate were the top three risks facing the sector this year.
"Productivity claimed the top spot on this year's mining risks list as boards and CEOs begin to realise that regaining lost productivity will be critical for long-term profitability. Capital decisions and social licence to operate challenges also continue to weigh heavily on the minds of mining and metals executives here and around the world,” EY's Canadian mining and metals leader Bruce Sprague said.
The report found that the major industry players made steady progress on capital management and optimisation, following a spate of asset write-downs in 2013.
However, at the other end of the sector, little had changed in the past 12 months for many juniors and explorers when it came to capital challenges.
While capital risks improved over last year, social licence to operate was more acute. The number and size of projects being delayed or stopped by community and environmental activists continued to rise.
Access to water and energy was the only new entrant to this year's risks list.
Burgeoning energy costs and competing water demands in many regions, particularly Chile, Peru, South Africa and Mongolia, were starting to have a bigger impact on costs and companies' ability to operate.
Mining companies spent $11.9-billion on water infrastructure globally last year alone – a 250% increase over 2009. Global energy prices had also leapt 260% since 2000.
"Risks in the sector continue to shift in ranking but they all remain key priorities for companies. Understanding these risks and their impact is crucial to remaining competitive,” Sprague said.
The 2014 top ten strategic business risks list:
Productivity (which was in second position in 2013);
Capital dilemmas – allocation and access (first);
Social licence to operate (fourth);
Resource nationalism (third);
Capital projects (seventh);
Price and currency volatility (sixth);
Infrastructure access (ninth);
Sharing the benefits (eighth);
Balancing talent needs (fifth);
Access to water and energy (which is new to the list).