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Jun 29 2021

Key challenges and opportunities for the mining and materials sector in 2021

The mining and materials sector goes through regular periods of boom and bust. Most recently, for example, record high iron ore prices have driven a boom in Western Australia due to demand from China and supply interruptions out of Brazil. Navigating the waves of increasing and decreasing demand, however, is just one, albeit crucial, part of working in the sector.

As an industry that must adapt quickly to change, there is a range of challenges and opportunities that mining and materials companies need to consider in 2021. In this article, we outline some of these challenges and opportunities and how businesses can future-proof their operations with better systems and technology.

Challenges in the mining and materials industry

There are particular challenges in the mining and materials industry that have been top of mind for the sector in recent years. The growing prevalence of technological development and environmental corporate and social governance (ESG), however, indicates that these are areas that need to be addressed in the short to medium term.

Environmental corporate and social governance

Mining is a capital-intensive industry. With institutional, wholesale and retail investors increasingly aware and focused on a company's approach to environmental corporate and social governance (ESG), companies need to ensure their strategy and operations meet today's ESG standards.

According to PwC's report, Mine 2021: Great expectations, seizing tomorrow, companies with higher ESG ratings have had stronger shareholder and market value over the long term. This demonstrates that what can be a challenge, especially in terms of restructuring the way a company operates, also presents opportunities for long-term gain.

Health and safety

There are many health and safety risks that mining and materials companies need to address. Common risks include exposure to coal dust, noise and whole-body vibration (WBV). While companies have risk mitigation plans in place to ensure the safety of their people, legacy systems and processes such as the use of manned machines still leave frontline workers exposed to these risks. This is a challenge and opportunity for mining and materials companies as it can be used as a basis to drive innovation in extraction activities through using technology to make mining more process-driven while reducing health and safety risks.

Technological advancement

Innovating through technology can be a big challenge for companies operating on legacy systems, especially if these systems seem to be doing the job well enough. For people looking to drive technological advancement from within a company, or investors demanding that companies drive efficiencies through technology, it's critical that mining and materials overcome the challenges of developing and implementing new technology. Key technologies becoming increasingly popular in other industries include the Internet of

Things (IoT), Artificial Intelligence (AI) and data analytics. The mining and materials sector is no different.

Some companies, for example, are using AI to optimise their exploration activities. This is done by using predictive analytics and pattern matching to map the terrain much faster than traditional exploration processes. The use of AI in mining exploration can help to drive a better return on investment.

Lois for Mining and Materials

Opportunities in the mining and materials sector

As most business owners and leaders will attest, a challenge can also be an opportunity to learn and grow. For that reason, the challenges outlined above also represent key opportunities for the mining and materials sector. Three specific areas of potential change and opportunity, and what businesses can do, are outlined below.

Environmental corporate and social governance

Policymakers and business leaders alike have set lofty environmental goals, namely net-zero targets on relatively tight timeframes. Businesses looking to improve their ESG and diversify their projects could look to M&A opportunities in ESG. These M&A opportunities may include investment in companies that provide access to the necessary inputs for more environmentally sound mining practices and diversification into projects focused on the extraction of "clean energy" minerals.

Data and analytics

The more a business can properly integrate technology into their strategy and operations, the better placed they are to use their data to proactively improve and grow the company. Machine learning, for example, becomes more valuable and predictive the longer the technology is in place. Deloitte's Future of mining with AI report highlights that extensive data analytics can provide the insights necessary for stronger decision making. Driving better decisions through data can strengthen a company's strategy, while the predictive nature of the technology also provides efficiencies at the operational level.

Advanced machinery

Drones and autonomous machinery have become a powerful tool for mining and resources companies in recent years. With a wide range of applications, businesses are using technology such as drones for better visibility of their mining operations. These include functions such as monitoring quarries and waste piles, environmental problems, infrastructure and retention and leaching ponds.

Using machine learning with drones and autonomous machinery allows the data captured through the imagery to determine next steps in a process. Further, these technologies provide 24/7 access and visibility over a site, and the ability to view projects from a range of heights and angles — both of which are more difficult, time-consuming and costly when using man-powered monitoring technology.

Balancing internal and external factors to chart the path ahead

There are many inputs and processes that go into all stages of a mining project. And with ESG becoming an increasingly important factor in determining shareholder and market

value, a balance between internal and external factors needs to be reached as a company moves ahead. Of course, it's easy to pinpoint from an external point of view how a company may not be keeping up with its peers in areas such as technology and ESG, but this is where it becomes important for organisations to clearly articulate their strategy and vision for the future.

Mining and resources companies not only need to demonstrate they are aware of the challenges in their industry but looking at how these challenges can become opportunities for growth and change can provide a competitive edge. Not only does the business need to be addressing key concerns internally, but the company's external communications must be clear in articulating how its strategy and operations are progressing. This becomes particularly important around periods of major announcements and financial reporting.

Moving ahead: Don't wait to address ongoing industry challenges

Addressing latent challenges and capitalising on opportunities in the short to medium term is critical for mining and materials companies to ensure their strategy and operations are not only profitable but reflective of growing ESG standards. While it can seem like a daunting task, particularly when balancing internal and external factors, those companies that strategise and continue to innovate in all areas will be well placed to continue growing.

At Quadrent, we can help you access the latest technology and systems to swiftly take advantage of any potential opportunities without taking a hit on your CAPEX or using up your debt facility. To learn more about how to do this you can find more information here.