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Deloitte identifies 10 trends shaping global mining sector in 2020

The mining industry is undergoing a wave of changes while facing intense pressure from a range of stakeholders, a new report from multinational professional services network Deloitte highlighted.

Miners are looking to modern technologies and new ways of doing business as economic uncertainty looms. At the same time, the sector is under a significant amount of pressure from investors, local communities and more, according to the Deloitte Insights report released Feb. 3.

"To steer their companies through uncertainty, transform in the face of disruption, and solidify relationships with increasingly dispersed stakeholder groups, leaders should communicate transparently, empower their people, and discover how to turn risk into opportunity," Deloitte's report said. "One of the biggest challenges for the industry has been to articulate the value that mining brings to wider societies and why investors should favor this sector."

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While a wide range of economic development depends on mined materials, trust in the mining industry is low in many parts of the world. Deloitte's report aimed to share real-world case studies and examples of how mining executives can best position their companies for the future.

"I've had the opportunity to test this particular report with executives over the past couple of months," said Andrew Swart, global mining and metals leader at Deloitte. "We feel pretty confident about the trends this year, and we've had a very good reception so far with the executives and boards we tested so far."

Deloitte compiled the report from insights gathered around the world and from mining companies of all sizes, Swart said.

Appealing to the socially conscious investor is among the report's top trends in mining. Like many sectors, the rise of major investors taking things such as environmental, social and governance factors into account is having an impact on the mining industry.

"We have seen the pressure mounting on mining companies, in terms of how they think about the value they actually bring to the community," Swart said. "We've seen this pressure sort of manifest itself in the form of government and local community, but what we highlight in this year's report is the pressure that investors are now putting on the mining companies. Failure to square to ESG principles at your organization really excludes you from a significant portion of the capital base."

Similarly, the report identified decarbonization as a trend, with Deloitte saying mining companies will need to mitigate risks associated with climate change. The report points to several benefits of prioritizing decarbonization, including the cost benefits of generating power from renewable energy resources.

Mining companies also face the challenge of implementing new technology in operations. That includes learning lessons from the sector's progress in implementing "intelligent mining" technologies, modernizing core systems and preparing to manage the mining workforce of the future, according to the report. Dealing with the indirect implications of an increasingly automated workforce also presents challenges.

"For several centuries, the value proposition for mining, the mining company in the community has really been around job creation," Swart said. "And so if you are not producing jobs or producing fewer jobs, what is that value proposition to that particular community and to that host government?"

The study also examines mining companies' aims to build useful partnerships and joint ventures, manage risk strategically and handle tax concerns related to "transfer mispricing" issues. All of those trends must be dealt with as miners are encouraged to prepare for the next economic downturn and find opportunities despite uncertainty.

"We are seeing heightened volatility. We've seen heightened uncertainty. That uncertainty could be protectionism, it could be through trade wars, the rise of populism, or in the last couple of weeks, the impact of coronavirus which is going to have an interesting impact on some of the commodities," Swart said. "Companies really need to take a more forward-looking view of risk. They need to harness big data and anticipate what that risk looks like and really use artificial intelligence in far more strategic ways than they probably have in the past."