Africa’s mining industry has been challenged to take an urgent, dramatic and catalystic approach to dumping the sector’s cyclical nature and act more as a single unit rather than a project-by project or country-by- country approach in order to make mining sustainable, says a Deloitte expert.
And front and centre is an appeal to ditch multiple mega scale individual mine, rail and port projects for one or two company owned mines and opt instead for single systems able to be used by major and minor interests within the local footprint.
The current strategy of pumping extra tonnages into the market place, causing price slumps, has also been questioned as barely beneficial for the sector and its players.
Addressing the third and final day in Perth last week of the Paydirt 2015 Africa Down Under Conference, Deloitte’s Partner, Australia Africa Services Group Leader, Jacques Van Rhyn, said people talked of “survival” and “awaiting for the upturn” but the global downturn in mining, and the hard hit Australian and African sectors, had been created by little more than over supply and its subsequent price crash impacts.
“The question we have to ask is whether it has to be like this. Do we have to have these major cyclical changes in the industry?” Van Rhyn asked.
“Is there not a better way, something that creates a more stable and consistent industry?
“We are creating the cyclical nature of the industry by working in isolation from each other, worrying about our own individual mines, putting more product on the market than it can sustain and therefore creating oversupply.
“A more sustainable mining industry can deliver a better return to shareholders and community.”
Van Rhyn said while “innovation was the new “saviour” buzz word in mining, the reality was that 90% of innovation happened in isolation and would not solve the problems of the broader industry.
“We need to consider “whole of system” including social enviro impacts and longer term cycles and how all of that fits into the global economy,” Van Rhyn said.
“Therefore we need to consider looking at the industry differently as mining is like the circle of life – it works when all components are there as they are connected and interdependent and it all has value.
“But take out pieces, as evidenced from the current commodity prices coming off highs, and we see the sector chasing tonnages at any cost.
“When things are going well, we do not sweat the small things, overlooking the connectivity and interdependence – but when miners’ circle of life becomes unbalanced, when its equilibrium is disturbed through such events as capital austerity, all we see are staff reductions, the drying up of capital, less government tax revenue and increased jobs and social welfare pressures.
“Amid all of this, whatever available capital is left for mining takes flight along the route of least resistance – often not to return.”
Van Rhyn said the outcome, as evidenced across Australia and Africa, was the demise of many mining companies with the “proverbial good” from mining disappearing altogether.
“If we do not work together, we cannot build a sustainable mining future,” he said.
“We need to acknowledge the need for change, have the courage to make it.
“Gone are days when we should be building mega plants and dedicated rail and port facilities for one project. We have to consider the fate of other nearby mines.
“Marginal mines can then focus on extraction rather than processing and transportation, giving them a future.
“In the US, collaboration has shown that bigger plants and economies of scale come from one plant servicing multiple mines or projects and this reduces the cost of capital as it is lower than that for a single project.
“We have to move to considering mines in close proximity, enter into cost contribution arrangements and jointly develop infrastructure.
“There needs to be serious government collaboration across regions, between the public and the private sector and government macro plans for regional area development.
“We need to assist land-locked countries get their mineral commodities to the coast and in that way, these countries can then contribute to building the necessary infrastructure so it is not having to be borne by one country alone.
“Mining companies need to be prepared for divergent future scenarios where collaboration is a key component and consider how to move from business of today thinking to business of tomorrow success”.