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The mining industry is capital intensive , investment heavy , and delivers return on investment through decades-long life-of-mine plans . Given this , one would expect stability and predictability , but the opposite is true – miners often lurch from boom and spend , to slash and save , while mine outputs often disappoint against plans and guidance .
The fortunes of mining and mineral companies inevitably largely follow the commodity price cycle . This is a longestablished reality , yet between executives and their shareholders , there seems to be a perpetual expectation of over-performance , which inevitably drives a short-term focus and becomes the very opposite of a good mining strategy .
There are , as always , companies in the sector that take the volatile nature of such changes in their stride , but in my experience , there are as many who seem to act as though the downturn is a complete surprise and react in the short term with a narrow focus .
The impact of project disruptions
When things are good , mining companies invest in technology , better practices , and equipment . However , the challenge is that given the complex nature of technology and ore bodies , these investments require a long-term view . Yet often we find a project stopped , or critical maintenance postponed , as executives bow to the needs of the market to deliver profit performance .
For instance , a large mining company starting a major transformation project to rebuild a refining process , or deliver a mechanical optimization , might easily approve a budget of £ 100 million to start the initiative , only to stop the project in a downturn , when its very nature is to sustain the business through the cycle . Then the same project is re-awakened when the cycle improves – but now they have spent more ( maybe £ 150,000 ) and taken longer , while delaying the benefits and often putting critical processes at risk .
What we must remember is that given the sheer scale of mining volume and revenue , marginal improvements have enormous impacts . A cost improvement of one-to-three percent adds a lot of additional benefit – but it must be seen through to completion – and not linked to the price margin , which will fluctuate wildly .
This is not just limited to cost . Because of the way commodity markets work , many miners still work with a ‘ mine it and they will buy it ’ ethos . This is no longer the case , and there are some real examples where clever players have got closer to customers and identified ways of adding value through
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