The Imperative Case for Innovation in the Mining Industry

"The case for innovation in the mining industry has never been more compelling—whether you believe the industry is in a sharp dip in a significant ‘sawtooth’ cycle or in the midst of a bust — the imperative is the same. Despite record production levels and still above-average prices compared to the lows of 2000, the industry is struggling to make profits and provide the returns on capital that investors are seeking. This represents a large-scale destruction of value over the last 15 years.The last 10 years have seen a sustained rise of operation expenses and capital development costs while there has been a rapid decline in productivity. This trend is unsustainable especially against other key structural challenges and forces shaping the future of the industry:1. Despite short-term fluctuations, there is longterm sustained demand for commodities.• Demand is driven by relentless urbanization, population growth and a rapidly growing middle class.2. Environmental concerns continue to mount.• Existing mining methods and their environmental footprint are becoming increasingly unacceptable to society.3. Geopolitical pressures and community activism are growing.• An estimated $25 billion worth of projects are on hold due to community activism.• Increasing nationalism tendencies and government expropriations of close to $30 billion.• Social license to operate is being challenged.4. Finding, building, operating and closing a mine just keeps getting harder and more expensive.• Costs have been increasing at an annual rate of 10 to 15 percent for the last 10 years.• More assets are stranded as they become uneconomical to mine under current mining methods, e.g. Olympic Dam.• Ore grades continue to decline.• Declining productivity at an annual rate of more than 10 percent for the last 10 years.5. The industry has consistently underinvested in technology and innovation."