Challenges facing mining in 2016/17
According to Neil McKenna, Director of Venmyn Deloitte there are four big challenges facing mining for the 2016 – 2017 period.
McKenna said the first challenge to affect mining will be the market oversupply as big companies continue to produce to drive out competitors. Also to impact mining is the efficiency and cost cutting – smaller miners will struggle to cut both costs and investments while still remaining viable
Furthermore he highlighted that stakeholder demands will also be increasing difficulty balancing stakeholder demands from shareholders, governments and labourers.
“Financial challenges – high debt levels are placing companies under greater pressure at a time when they need support the most,” he added.
Meanwhile, looking ahead, with the predictions for the mining sector, he said that short to medium term pressure across the sector will occur. According to McKenna, consolidation as companies with strong balance sheets take advantage of market pressure on smaller operators and a shift in the source of demand with India taking over from China will occur.
“It is common and in fact sensible for miners to focus on operational and cost optimisation, particularly in times of suppressed commodity prices,” he added.
However, despite best efforts McKenna said this is not always enough. “In the current market, many miners are finding themselves faced with the harsh reality that unless drastic changes are made such as closing unprofitable mines, or cancelling development projects, their businesses will simply not survive.”