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Raising the industry’s bottom line;

Turning to radical efficiency to raise profits

by Peter Bryant and Satish Rao

Recent news regarding profitability at most          slashed its capital and exploration budget from     Innovation has
     mining companies continues to be grim.          $19 billion in 2012, to just $5 billion expected    become increas-
The new chief executive officer of Rio Tinto,        in 2016. Anglo American announced that it is        ingly important
Jean-Sébastian Jacques, recently stated in           abandoning its diversification strategy by exiting  for mining com-
the Financial Times that all commodities are         six commodities to focus on producing just three    panies to survive
currently over supplied, and that price pressure     – diamonds, copper and platinum.                    in turbulent times.
and volatility are here to stay for the foreseeable
future. Along with this discouraging forecast,           But even with these measures, chief
profits at Chile’s Escondida Mine, the world’s       executives in the mining sector must ask
largest copper mine, plunged 47 percent in           themselves this basic but urgent question: How
the first quarter of 2016. Low copper prices,        can we raise our bottom lines sufficiently, amidst
currently at US$2.20/lb from nearly $4.50/lb in      market and economic setbacks?
2011, is an influential factor, as well as water
shortages.                                           Innovation: A missed opportunity

    While these drops in price from the highs        Mining company
are noteworthy, the most salient point is today’s
prices are at least two times higher than 15         leaders have profitable      Peter Bryant, member SME, is
years ago. Yet, the industry’s profits and returns   growth on their agenda.      managing partner at Clareo,and
on capital are significantly lower due to lower      They are focused on asset    an advisory board member for the
grade ore and inefficiencies that have crept into    and commodity strategies,    World Economic Forum’s Mining
production over time. This is why business as        lowering debt and curbing    and Metals in a Sustainable World
usual is no longer sustainable.                      capital expense. However,    2050 initiative, Satish Rao is a
                                                     these actions are not        partner at Clareo where he focuses
    Mining companies have taken drastic              sufficient. They perpetuate  on growth through new markets,
measures to address this new normal. Rio Tinto       the current state of the     products, channels and creating
and BHP Billiton abandoned their progressive         industry and merely shift    sustainable competitive advantage
dividend policies in 2016, and BHP Billiton has      the finance and ownership    through innovation,
                                                     of assets between industry   email pbryant@kinglobal.org.

www.miningengineeringmagazine.com	                                                Mınıng engıneerıng    september 2016 1