e n e s s 9 Top 10 business risks facing mining and metals 20172018 Exploration

E n e s s 9 top 10 business risks facing mining and

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e n e s s
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9 Top 10 business risks facing mining and metals 2017–2018 Exploration was the first cost to be cut as prices declined but hasn’t been the first to be reinstated. It is, however, essential for future sector growth. was spent for 11 discoveries. In 2015, just under US$2b was spent for a single discovery. 10 To overcome some of these challenges, in addition to increasing exploration spending, mining and metals companies are: • Forming strategic partnerships with junior miners to expand their reserve base, e.g., Newmont has invested in Canadian and Australian properties owned by junior explorers to strengthen its long-term growth pipeline 11 Entering joint ventures, e.g., Goldcorp and Barrick have partnered to develop gold mines in Chile 12 • Acquiring existing projects or mines • Improving technology to achieve higher exploration success rates Over the last five years, capex spent on resource replacement has declined by 66% from US$20.5b to US$6.8b due to lower commodity prices and returns. 9 Now that growth is back on the agenda, mining and metals companies are allocating more sustaining or growth capital to get the most out of current projects. However, we have yet to see a significant increase in exploration capex. And while recent data shows that global drilling has increased, budgets are still off levels at the peak of the supercycle and aren’t evenly spread across regions or minerals. Exploration has also become more expensive as reserves are harder to access, more remote or on environmentally sensitive land. In the gold sector in 1995, some US$1.4b was spent for 19 discoveries, and in 2005, around US$1.6b 9 “World exploration trends: A Special Report for the PDAC International Convention,” S&P Global Market Intelligence , March 2017. 10 “Strategies for gold reserves replacement,” SNL Metals and Mining , July 2016. 11 “Junior thinks big,” MiningNews.net , 18 September 2018, “Newmont Secures Rights to Explore and Develop Prospective New Yukon Gold District,” Newmont press release, 6 March 2017. 12 “Goldcorp spends nearly $1 billion to get into Chilean joint venture with Barrick Gold,” Financial Post , 28 March 2017. Resource depletion is a concern — we’ve stopped spending on exploration. This is equivalent to technology companies not spending on innovation. Key thought Resource replacement (New) 08 10 1 2 3 4 5 6 7 8 9 A c c e s s t o a n d o p t i m i z a t i o n o f e n e r g y S o c i a l l i c e n s e t o o p e r a t e C a s h o p t i m i z a t i o n R e g u l a t o r y r i s k N e w w o r l d c o m m o d i t i e s C y b e r C o m p e t i t i v e R e s o u r c e r e p l a c e m e n t s h a r e h o l d e r r e t u r n s M a n a g i n g j o i n t v e n t u r e s D i g i t a l e f f e c t i v e n e s s
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Top 10 business risks facing mining and metals 2017–2018 10 Miningand minerals-processing operations require a large quantity of electricity. Remote area mining operations have uniquechallengesin developing, maintaining and operating stand- alone power systems. Operations fortunate enoughto have major grid suppliesare often significant customers in the electricity system such that their
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