Mining industry battles to recover Covid losses

As the global fight against COVID-19 continues well into its second year the pandemic continues to have significant impact on the world economy. As many countries continue to practice social distancing, impose business restrictions, and limit travel, assessments of the economic impacts of COVID-19 continue to spread doom and gloom across the planet.

The International Monetary Fund predicts that 2021 will see global economic activity contracting by about 5%, with varying degrees of impact across industries and geographies. Mining is one sector that is set to be significantly affected.

Mining received a direct hit early on in the pandemic, particularly in certain geographies where mines were forced to shut due to general lockdowns. In South Africa, this impact was particularly acute. An estimated 15% to 25% of last years output was lost. In addition, the medium-term holds significant uncertainty for commodity demand and prices as the recovery of end-use sectors continues to be marked with uncertainty. Mining companies in South Africa and abroad will have to adapt their operating models to ensure safety and sustainability.

An analysis by Boston Consulting Group reports that in order to turn around the South African mining growth trajectory and rebound stronger from the COVID-19 crisis, a core set of collaborative actions are required from all key stakeholders, including government and labour. “We see three key sets of actions: fighting COVID-19 spread in mining operations, reforming the investment environment for competitiveness, and finally, strategically transitioning toward climate change resilience,” says the BCG report.

It goes on to say that the immediate priority action of government and mining companies should be to avoid a disaster scenario of further spread of COVID-19 across multiple mines. In an operating environment where miners generally live in the same community and mines are operated in close proximity, a disaster scenario is probable if the right precautions are not taken. COVID-19 workforce protection should focus on preventing the infection from reaching mining sites, containing the spread within a site, and managing a suitable response to widespread outbreak.

 Numerous digital and other solutions, especially for contact tracing, can be applied— even in the South African mining environment. Additionally, in the short-term, managing cash flows and liquidity is also vital. Developing strategic “war rooms” in companies can assist to monitor inventory, supply chain, and financial health. A healthy vehicle fleet with a genuine parts supply is a vital basic necessity.
A total of 64% of South African mining output falls on the high half of the global cost curve. Through technology, mechanisation, and digitisation, mines can improve operational performance, cost efficiency, safety, and productivity, thereby extending the life of the mine, increasing production, and creating new and improved job opportunities.

Technology is the key to unlocking cost competitiveness for South African mining, and the industry should proactively look at opportunities for the appropriate in- vestments. Special effort should also be made to bring all stakeholders along on this process, which we believe could be mutually beneficial for all involved.

 License to operate remains a particularly thorny issue in South Africa. Many mining companies face challenging relationships with local communities, particularly where basic service delivery is not fully functional. It is proposed that all new projects are conceived with inputs from government, industry, and communities, build- ing long-term development plans on what communities should look like in the future. Then, individual projects should feed into long-term community development plans that can be rigorously tracked over time. Mining companies should also prioritise the up-skilling of local communities to create long-lasting empowerment.

BCG says the progress of the South African mining industry is currently undermined by negative perceptions of the industry globally. South African mining has challenges with investor branding. It advises the industry to maximise the impact of actions aimed at improving competitiveness, government and says industry should work together to improve global perceptions.

To better position themselves, mining companies in South Africa should begin to ramp up exploration for commodities that are expected to be in higher demand because of climate change, says the report. Although deposits might exist, significant investment will be necessary to explore for such deposits. Companies could also intensify their market development efforts related to the use of platinum group metals in fuel cells (for vehicles and energy storage), which would partially compensate for catalyst system demand losses.

Post published in: Business

Leave a Reply

Your email address will not be published. Required fields are marked *