Top five risks every mining executive should avoid in 2023

Have you ever wondered what the top risks for the mining industry are?

If so, you are not alone. Several leading consulting firms, including EY, KPMG, Voconiq and others have grappled with this question for years now.

Contrary to common belief, is it not surprising that the biggest risks have nothing to do with the role of your insurance company? The risks have everything to do with what social performance professionals should and can handle.

After the recent publication of the top ten risks in the mining sector by KPMG and EY, I have analysed both publications, looking at their methodologies and presented interview results of top executives to find the Top 5 based on averages.

I have engraved these risks on scrolls, kept neatly at the inner chambers of my heart. They are the secret recipe for the survival and longevity of every mining undertaking going into 2023. We will only get another round of research this time next year. Today, I present the top 5 of those risks, while the remaining six to ten will be reported in subsequent issues. The risks are analysed in this newsletter, in relation to the Wits Mining Institute Seminar presentations help from the 27th to the 29th of September 2022. The Seminar looked at “Turning research curiosity into 21st century minerals industry performance, relationships, and technology”

As EY put it “This presents a rare opportunity for miners to analyse where optimal value can be found — and to redefine business models to capture that value. Companies that do this successfully will future-proof their business model to better deal with disruption and changing commercial relationships, and ultimately win competitive advantage”

The scroll marked 1- Community relations and social licence to operate

Community relations and social licence to operate is top on keeping mining executives awake at night. Both, the KPMG, and the EY reports rank it position 4 out of the top ten risks. It is one of the five risks that were identified in both reports.

The role of community relations and licence to operate is supported by recent calls by industry and academics to watch out for angry people in mining communities. This was specifically highlighted by the CEO of Sibanye Stillwater at the recently concluded Wits Mining Institute Seminar on Mining and Technology, in Johannesburg, South Africa. Speaker after speaker, highlighted the need to always create a mining industry which is a “force for good” in mining communities.

One way to do that is through genuine stakeholder engagement. The central role of technology was highlighted through ongoing research at Masters, PhD and postdoctoral level by Wits Mining Institute candidates and through presentations by scholars and captains of industry.

The scroll marked 2- Environment, Social and Governance

The ESG scroll speaks of the central role that the environment, social and governance issues are taking. The call for accelerated energy transition speaks to the urgent need for decarbonisation to keep the environment safe for us and for the future generations. Mr Neal Froneman, the CEO at Sibanye-Stillwater illuminated the importance of ESG- deliverables when he spoke about the need to behold “an angry planet”.

Unpredictable climatic swings are a sign of the tipping point at which the planet finds itself. EY report ranks ESG as the number one risk while KPMG ranks it number 5. Ahsan Mahboob, the Research Centre Lead at Wits Mining Institute’s DigiMine spoke of the central role of technology based ESG research and application at WMI DigiMine. Duncan Lee of Ramjack Technology Solutions highlighted how they are deploying technology for managing tailings storage facilities (TSFs). There is extensive room for innovation in the ESG space. For example, Reality Capture Southern Africa (Leica Geosystems) uses modern technology for capturing reality in the field and underground. This has potential for deployment in communities to monitor rehabilitation efforts and community circumstances.

The scroll marked 3-Political Instability

The war in Ukraine, and political manoeuvrings in the Asia-Pacific regions cast a somewhat gloomy shadow on global peace. Peace is a critical ingredient in economic development, specifically for the mining industry to thrive.

Although KPMG ranked it eighth, EY ranked it second as the most pressing risk facing the industry. It is therefore crucial for the industry to be on the lookout as we approach 2023, in terms of where to invest, but also how to engage in different jurisdictions. The Sibanye Stillwater CEO, talked widely about disruptions, including wars and pandemics such as the COVID 19 pandemic.

The scroll marked 4- War on talent

The other burning risk for the industry today is to do with workforce. While EY ranked it seventh, KPMG ranked it third. This means that there is a fierce competition for the best talent. The surging rate of mine modernisation has largely been seen as leading to job losses. However, this must be accepted with a realisation that mostly unskilled labour is affected. When it comes to expertise, there is surging demand for talent.

What aggravates the situation is the fact that mining is now competing with several other industries as a career option. Technology specialists are easily attracted by other industries. We still have less youngsters joining the mining sector as a career option.

It is important to note that the few experts available to take the mining industry to the next level are now more aware of the importance of ESG as consideration for whether to join organisations. Organisations with bad ESG ranking will increasingly find it hard to attract talent. According to Mr Mehdi Safari of Mintek, some of the top skills needed for the future mine are mining engineer, mechanical engineer, chemical engineer, social performance specialist, Geologist, communication, environmental engineer.

According to Prof Glen Nwaila, the Director at WMI, to boost research talent, the Mandela Mining Precinct, Department of Science and Innovation, CSIR, Minerals Council South Africa, and the Wits Mining Institute joined hands to support Masters, PhD and Postdoctoral research candidate to do research under Real Time Information Management (RTIMS) and Successful Application of Technology Centred Around People (SATCAP). The research feeds into the WMI Skills Accelerator program, which delivers skills development in the mining industry.

The scroll marked 5- Supply chain risk

The emerging trend is for one supply chain to compete against other supply chains. Competition is no longer one company against the next company. As such, supply chain risk proves to be a major risk. In fact, a supply chain is as strong as its weakest link.

We have had serious supply chain disruptions in recent years, caused by war, natural disasters, or global pandemics. These events compound the already strained supply chains. Although risks, such as those outlined above, are quite disruptive, the social licence to operate further complicates the ability of supply chains to flourish. To deal with this challenge, minerals traders are putting emphasis on responsible sourcing and supply chain visibility.

The future mine will need to address the fundamental risks as exposed by ongoing research.

For a detailed collection of WMI Seminar presentations, visit WMI Seminar Presentations - Google Drive