How the mining industry can overcome its setback
Despite increased production, boosted cash flow, and high-profit returns of the global mining industry, the industry has continually failed to adequately inculcate safety standards and totally eliminate environmental accidents, raising concerns among investors and stakeholders.
According to PricewaterhouseCoopers (PwC), investors and stakeholders concern stems from the industry’s perception on vital issues such as safety, the environment, technology and consumer engagement. They question whether the industry can responsibly create sustainable value for all stakeholders, especially with its challenges. These concerns are also shared by commercial banks which continue to see the industry as a high risk.
PWC Nigeria's Mining Sector Head Advisory Lead, Cyril Azobu, stated that in Nigeria the existence of multiple regulations is reducing investor confidence as the cost and requirements have contributed to a seeming lack of interest in the industry. The uncertainty has put further pressure on the mining industry to create sustainable value in the future. When talking about carbon emissions, the industry comes top of mind because miners are high users of energy. For that, any misstep results in significant reputation risk and impacts the entire industry’s social licence to operate.
2018 was really a challenging year for the global mining industry as was hit by trade wars, geopolitical crises and climate change, causing uncertainty. Although the sector was majorly hit at the end of December 2018, when commodity prices and emerging economy exchange rates decreased substantially.
In 2018, the gold industry all around the world witnessed a lot of challenges such as a shrinking pipeline of projects, fewer gold discoveries and high-grade deposits, combined with a lack of funding for junior developers and shedding of holdings in gold-backed ETFs (exchange-traded funds). Despite all these challenges, the industry soared high in the value of deals secured. Gold transactions increased from 8 percent of the total Top 40 deal value in 2017 to 25 percent in 2018 and are tracking at close to 95 percent as at end April 2019.
However, to dispel any concerns investors or stakeholders may have, mining companies need to show that they have what it takes to respond to the rapidly changing world, by working towards a low carbon, high technology and consumer-centric future.