August 2019

To maintain growth, Australia’s mining companies must adapt

  • By Chris Dodd, Australian Mining Leader, Partner, PwC Australia

By reading between the lines, Australia’s mining sector can learn a lot from the latest results from the world’s Top 40 mining companies. Growth and profitability can only be maintained by adapting to stakeholder expectations.

The saying ‘All that glitters is not gold’ derives from a play written more than 400 years ago, but for the mining industry it still rings true in 2019. William Shakespeare’s point in The Merchant of Venice was that appearances can be deceiving and that is certainly the case when you look at today’s Top 40 global mining companies.

On the surface, there were some sparkling performances among this year’s mining giants:

  • they increased production, boosted cash flow, paid down debt, and provided returns to shareholders at near record highs
  • they increased capital expenditure for the first time in five years 
  • they delivered significant value to stakeholders (employees, governments and communities)
  • they supplied the raw materials that underpinned global economic growth. 

Those achievements are commendable and should not be underestimated. However, these positive results won’t continue unless mining companies adapt to the world around them. Stakeholders remain unconvinced about mining’s position on vital issues such as safety, the environment, technology and consumer engagement. 

Stock markets are famously futures markets, not present markets. When investors look at the longer term, they’re asking whether the mining industry can responsibly create sustainable value. 

PwC’s new Global Mine report examines the window of opportunity that’s open for mining companies now and in the future. With strong operating fundamentals in place, Australian miners are indeed well placed to adapt to the growing and changing expectations of stakeholders. 

The industry needs a reputation overhaul. It needs to transform the perception it has of being ‘converters of dirt’ to prominent builders of both economic and societal capital. Prioritising green and customer-centric strategies, enabled by technology, will help earn the trust of stakeholders and enable miners to create sustainable value into the future.

To set themselves up for future growth and profitability, Australia’s mining companies (or key industry bodies) must address three fundamental steps.

1. Act on carbon 

The Australian public knows that many mining companies produce fossil fuels and consume a lot of energy. Any misstep can result in reputational damage, limiting the industry’s social licence to operate. While the global Top 40 miners are performing strongly in terms of sustainability reporting, stakeholders have made it clear that disclosure is not enough. Direct, measurable and visible progress is required for trust to be regained and maintained.

Climate denial is not an option, and indeed a generation of Australians will be unlikely to hear any message to the contrary: ‘Brand Mining’ has simply become ‘Bad Mining’. Millennials will protest coal mines on their mobile phones (made up of mined metals), blame power plants for creating the power that they use, and enjoy the accumulated conveniences of modern living. It is indeed a convenient protest, enjoying the spoils of mining yet protesting its existence. 

When it comes to carbon reduction, Australian mining companies must consider the impact of their activities as well as telling the stories of the downstream uses of their commodities. By investing in more environmentally friendly solutions, miners may maintain licence to operate – but this is not a guarantee. 

2. Accelerate and expand technology adoption 

The world’s leading miners are harnessing automation and digitisation to reduce the cost of maintenance and extraction. But compared with many other industries, mining’s level of technological maturity remains relatively low. More importantly, the ability to attract ‘Tech Talent’ is impeded by Brand Mining. What do you think looks more attractive to a recent graduate: Silicon Valley or a remote mine site?

Australian mining companies must look beyond their own backyard to learn from the best of digital and Industry 4.0. They must also take a broader view of technology adoption to encompass sustainability, safety and changing consumer sentiment. 

Mining companies should take the opportunity to push research and innovation into the downstream application of their products too. Considering technology in the context of the whole supply chain not only demonstrates responsibility but reinforces a culture of innovation.

‘Australian mining companies must look beyond their own backyard to learn from the best of digital.’ 

3. Engage with consumers

Australian mines will have to increase the supply of the raw materials behind technology and products that consumers love. Yet many consumers aren’t fully aware that mining supports and underpins their choices.

Australian mining companies must proactively address the awareness gap between the brand of mining and the benefits of mining. In doing so, they need to clearly articulate the essential role that they play – and will play – in meeting changing consumer needs. Realistically, this is the collective role of industry bodies, amplifying messages from our biggest participants.

Seeing beyond the bottom line

Australian miners would do well to heed Shakespeare’s message in The Merchant of Venice. The Prince of Morocco allows his love of lucre to distract him from his quest to win the hand of Portia. Instead Bassanio marries her, because he aspires to something greater than financial reward. Similarly, Australian mining companies must look for purpose beyond profit if they are to thrive in the years ahead. 

To learn more, download PwC’s Global Mine report.

Image: metamorworks/

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