During this survey, KPMG gathered insights from more than eight of the biggest mining countries in the world. This included responses from various commodity companies, including:
- diversified miners
- base metals
- precious metals
- energy minerals
- other mining service providers
With the results from this survey, we are providing valuable information to companies to ultimately help them better strategize and plan for their future.
This year’s survey indicates that there are and will continue to be changes in the way mining companies are managed.
“What worked 10 years ago does not work in the current environment. Executives are keenly aware of this and are expected to continue to position—or reposition—their companies to better address potential challenges and take advantage of new opportunities.” KPMG Global Outlook for 2020
Our view of the South African mining industry is very similar to these global results, but with some key specific South African challenges and opportunities. Below are some points we extracted from the survey.
- Commodity price risk remains the top risk to the global mining industry, and we believe the same applies to South African mines. While there have been significant increases in the gold and palladium precious metals, as well as some recovery in the iron ore prices from 2019, platinum and chrome prices remain suppressed. Even though the Rand seems to be increasing profits, over and above inflation, electricity and labour increases, the introduction of carbon tax requires the mining industry to continuously reduce costs and look at hedging options should the market allow.
- Access to capital, including liquidity, has increased as a global risk. This is particularly relevant to the coal industry with increased pressure on Environmental, Social and Governance (ESG) related matters. Further, the uncertainty relating to the South African economy and credit rating, and the stability of power supply are resulting in a decline in investor and business confidence. As a result, big miners are looking elsewhere to spend their capital.
- It is encouraging to see that 75% of respondents indicate that “the industry needs to redefine success using a more holistic group of measurements that includes both shareholder and stakeholder values”. It holds particularly true in a mineral-rich country like South Africa, where companies should not only focus on mineral extraction but should also focus on sustainable benefits for all stakeholders. The increased focus on ESG is shared by those in South Africa looking to invest capital as well as the mining companies.
- The survey shows a decrease in risks relating to community relations and a social license to operate. In South Africa, this marginal downward trend is debatable. This is due to the high unemployment rate and the focus on the requirements from Mining Charter III, including the guidelines published towards the end of 2019.
- The risk relating to the ability to access and replace reserves has decreased from occupying the number 6 spot last year to number 9. With lower grades, increasing operations at depth and disruption to operations as a result of community protests widely experienced in South Africa, this risk should be a serious concern to our South African industry.
- The survey also provides a summary of the top strategies for growth in the global mining industry. Overall, we remain optimistic about the future as opportunities are set to come from changes. For South Africa, these opportunities may be in the form of innovation and technology transformation, as well as opportunities for junior and emerging miners.
This survey was conducted before the COVID-19 outbreak and as such, it is too early to predict whether this would affect the results of this survey.