• 2 hours Are Copper Naysayers Missing The Big Picture?
  • 5 hours Jerome Powell's Impossible Challenge
  • 24 hours Economists Call For Recession In 2021
  • 1 day Hong Kong Billionaire Loses Big On Canadian Energy Play
  • 1 day Trade Tensions Weigh On South Korea, Japan Relations
  • 2 days Lithium Hype Can't Live Up To Supply Realities
  • 2 days Tesla Scrambles To Salvage Its Stumbling Solar Business
  • 3 days Why Silicon Valley Is Moving To Toronto
  • 3 days Hong Kong Residents Are Fleeing To Taiwan At A Record Pace
  • 3 days Trickle Down Tax Cuts Aren't Helping Bolster GDP Growth
  • 4 days Wealth Gap Widens Between Baby Boomers And Millennials
  • 4 days How Investors Are Playing Uncertain Markets
  • 4 days Demand For Cash Is On The Rise
  • 4 days The Best Way To Ride The Gold Rally
  • 5 days Corn Industry Reeling After Shocking Ethanol Decision
  • 6 days Gold Miners Eye Further Upside
  • 6 days Alibaba Exec Sets Record With $3.5 Billion Brooklyn Nets Purchase
  • 7 days Smart Contracts: The Tech Reshaping Entire Industries
  • 7 days Protests Threaten $5 Billion Peruvian Copper Mine
  • 8 days Why Wealthy Kids Are Getting Into College For Free
Demand For Cash Is On The Rise

Demand For Cash Is On The Rise

As manufacturers and customers scramble…

The Telecom M&A Game Is Heating Up

The Telecom M&A Game Is Heating Up

Media and telecom tie-ups are…

  1. Home
  2. Investing
  3. Other

The Mining Industry Is Staging A Comeback


During the mining industry’s heydays – the mid-2000s – capital projects were global mining investment hotspots, and the pace of projects in exploration and construction in the pipeline was staggering.

But the commodity price meltdown changed that, as many investors got burned on over-funded projects that yielded sub-par returns.

As a result, capital expenditures in new developments by 2017 fell by almost two-thirds compared to the $80.8 billion peak of 2012, Deloitte’s Tracking the Trends 2019 report found.

“Burdened by years of cost overruns and impairment charges, many mining companies opted to concentrate on maximizing output from their existing operations rather than investing in new mine supply and exploration,” Deloitte said.

Capital projects were also overshadowed when investors turned their attention to the emerging and controversial cryptocurrency and cannabis markets.

But the crypto and cannabis hype has died down, and the capital project concept is seeing resurgence as the world realizes the need to mine the minerals of the future to meet the inevitable demands of the electric era, and feed the EV supply chain.

While major mining projects fell to the wayside, the world began to see a surging need for metals like lithium, cobalt, and copper.

“With the cycle turning mining companies will need to engage in a new wave of capital projects to offset production declines and meet demand,” Deloitte reports.

Supply shortages for commodities such as copper, zinc, cobalt, lithium and gold now loom and the amount of current deposits will not cover the shortfall, Deloitte reports.

Despite their concerns about realizing sustainable returns miners cannot avoid putting off capital project investments indefinitely, Deloitte asserts. Related: Why Have Americans Stopped Moving?

But Deloitte says the foundations that the capital projects of the future are built on must be strengthened by mining companies.

“They must learn from the mistakes of the past by approaching capital projects with a new frame; one that sees them honing stronger organizational capabilities across their entire portfolio of projects rather than reinventing the wheel and assembling new teams on a project-by-project basis,” the report states.

Deloitte’s analysis, based on company capex guidance and market sentiment, indicates that capex is increasing. Even with a modest growth rate, investment could exceed $40 billion in 2020, according to S & P Market Intelligence.

As capital projects begin to pick up again, mining companies will need to avoid the mistakes of the past by rethinking their delivery models, adopting appropriate governance processes and ensuring they have the skills in place to manage performance across the entire project lifecycle, Deloitte warns.

To overcome these challenges, Deloitte says mining companies must build: Delivery Models that should determine the project team’s set up, where accountability lies, and how risk should be shared among delivery partners; Data and Technology that should have the capacity to capture a wealth of project information, as siloed information systems hamper their efforts to effectively share this data across the supply chain; Project Controls that must be adopted not only during a project’s execution phase, but also during pre-feasibility and feasibility studies, and during the transition to operational readiness; License to Operate as success also hinges on corporate willingness to deliver shared value to local communities and supply chain partners; and Collaboration – to better share risk and drive innovation, mining companies should aim to expand their partnership ecosystem by pursuing grassroots partnerships with juniors and entering into joint ventures to discover new deposits.

Examples of technologies adopted by miners to optimize efficiencies include image recognition, sensor data, text mining, and machine learning and data visualization to enable predictive maintenance for its rail infrastructure. This allowed miners to remediate emerging issues in a controlled fashion – increasing rolling stock availability, optimizing asset performance and reducing risk of accidents, Deloitte says.

“After the challenges faced during the last down cycle, there is a palpable sense of optimism for mining companies as commodity demand picks up.”

Deloitte says that while it won’t happen overnight, companies that focus on putting the right capital project capabilities into place can strengthen their capacity to adjust supply in response to shifting demand patterns.

And the shift back to the capital mindset is already beginning to show in the mining markets.

Darren Stralow, chief development officer for Australian gold miner Northern Star Resources, sees bigger business projects ramping back up, and signs of a big capital project comeback into the industry. Related: Beijing’s Plan To Disrupt Rare-Earth Exports

Northern Star has two mining operations in Western Australia, and last year branched out and bought a mine in Alaska. The miner now operates on two continents and is producing about 850,000 to 900,000 gold ounces per year.

When it comes to investing in capital projects, Stralow says the timing is right.

“We’re at a stage where Iron ore prices are relatively strong, gold prices are pretty much at all-time highs, and there’s a big demand for base metals, for battery metals, the lithium industry has just keyed up a notch with new projects.”

“In any market, there’s opportunity, and one of the things we’ve done as a starter is buying assets from majors and turning them around, operating them in a different way and in a way that’s efficient, and turning them back around into world-class assets again,” Stralow says.

Craig Rice, a PhD candidate from UBC’s Faculty of Mining Engineering, is also a consultant who helps corporate clients plan and execute capital projects from developing schedules to helping implement project control systems.

“What I see is that they’re spending money, but they’re looking at adding to existing operations, [where] there’s less risk for every dollar spent and better possible returns.

Rice says there are capital projects coming down the pipeline; they are just coming down at less velocity than in the heydays.

Ruan Brown, recruitment specialist at Xenco Services is currently working on capital projects in Australia and Mongolia.

“Obviously capital projects in mining died off for a number of years now, but there’s a bit more money flying around the industry and it has started to pick up again,” he says.

Brown sees the capital investment focus is leaning towards sustainable mining for the metals of the future and moving away from the old models of the past.

He points to Rio Tinto’s Oyu Tolgoi mine in Mongolia as an example. Rio started construction on Oyu Tolgoi in 2009, a period when the market was down, and now are investing billions to be one of the world’s leading copper businesses.

Likewise, Brown notes lithium, a crucial component in battery cell structures that will fuel the EV era, is a rapidly emerging market in Australia, and sees the majors developing lithium plays in North Western Australia.

Brown cites examples of companies like Pilbara Minerals, and Altura. Brown worked with Altura In 2011, when they were a coal player in Indonesia.

“In 2014 or 2015 they acquired some assets and [are] now a lithium producer, and completely transformed their business model from being a fossil fuel/coal business to a lithium business, which is a more forward-looking approach.”

Marc Borbas, VP, Talent Solutions at Edumine, is making the connection between a skills gap as it relates to capital projects, and a widening pool of available talent following the rapidly modernizing mining industry.

“We have over 350 qualified professionals with capital projects experience and 400 qualified professionals with battery metals experience looking for positions right now on CareerMine,” Borbas notes.

By Mining.com

More Top Reads From Safehaven.com:

Back to homepage

Leave a comment

Leave a comment