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Top 5 business risks facing the mining industry in 2018

Each year, the mining industry begins to turn its attentions to the future and in particular, the specific business risks that are on the horizon.

Ernst & Young has released its research into the 10 Business Risks facing mining and metals 2017-2018, and up there with some of the biggest concerns is cyber risk, digital effectiveness in an increasingly digital world and the ever-growing risk surrounding regulatory policy.

Here are five of the biggest risks:

5 | Access to and optimization of energy

Mining and minerals-processing operations require a large quantity of electricity. Remote area mining operations have unique challenges in developing, maintaining and operating stand-alone power systems. To minimize fuel price volatility and ensure supply, companies are opting for a mix of energy sources – fossil fuels, hydroelectricity and renewable energy.

The decision on energy sources has reputational and social implications for organizations that are facing increased scrutiny on the extent of their emissions and water usage.

4 | Regulatory Risk

The regulatory space in the mining industry is forever changing and with change comes challenge. More and more governments the world over are looking, demanding, far greater returns from the natural resources sectors in their jurisdictions. Ministries such as the Ministry of Mining in SA have been up in arms recently, seeking new and improved ways to govern the industry, which has been met with some resistance and this will only look to continue as we head into 2018.

3 | Cyber

Arguably the biggest risk that will only continue to grow. As companies become more and more data focused, through IOT and Big Data, ultimately, they become more reliant on these digital processes and this in turn breeds a culture of cyber-attacks. Having a clear digital road map will prove key, one that fully incorporates cyber threat programs to meet and head-off these risks.

2 | Competitive shareholder returns

Balancing short-term shareholder returns with long term value can be both difficult but key.

Cash across the mining industry is being generated at significant levels again and in turn, this has seen an exponential increase in competitive shareholder returns. Shareholder activism is also increasing and companies need to differentiate themselves by making good capital investments and getting good returns. Companies must become leaders in the industry in order to attract capital.

1 | Digital Effectiveness

Mining companies should focus on using digital to solve the most urgent business problem; improving productivity and margin across the value chain.

Digital mining, as EY points out, is not a new concept, but there is a disconnect between the potential form digital transformation and the poor track record of successful implementation. As the need for technology shifts, it won’t always be a case of productivity, companies risk falling being by competition unless they remain at the forefront of this technological change.

5 | Access to and optimization of energy

Mining and minerals-processing operations require a large quantity of electricity. Remote area mining operations have unique challenges in developing, maintaining and operating stand-alone power systems. To minimize fuel price volatility and ensure supply, companies are opting for a mix of energy sources – fossil fuels, hydroelectricity and renewable energy.

The decision on energy sources has reputational and social implications for organizations that are facing increased scrutiny on the extent of their emissions and water usage.

4 | Regulatory Risk

The regulatory space in the mining industry is forever changing and with change comes challenge. More and more governments the world over are looking, demanding, far greater returns from the natural resources sectors in their jurisdictions. Ministries such as the Ministry of Mining in SA have been up in arms recently, seeking new and improved ways to govern the industry, which has been met with some resistance and this will only look to continue as we head into 2018.

3 | Cyber

Arguably the biggest risk that will only continue to grow. As companies become more and more data focused, through IOT and Big Data, ultimately, they become more reliant on these digital processes and this in turn breeds a culture of cyber-attacks. Having a clear digital road map will prove key, one that fully incorporates cyber threat programs to meet and head-off these risks.

2 | Competitive shareholder returns

Balancing short-term shareholder returns with long term value can be both difficult but key.

Cash across the mining industry is being generated at significant levels again and in turn, this has seen an exponential increase in competitive shareholder returns. Shareholder activism is also increasing and companies need to differentiate themselves by making good capital investments and getting good returns. Companies must become leaders in the industry in order to attract capital.

1 | Digital Effectiveness

Mining companies should focus on using digital to solve the most urgent business problem; improving productivity and margin across the value chain.

Digital mining, as EY points out, is not a new concept, but there is a disconnect between the potential form digital transformation and the poor track record of successful implementation. As the need for technology shifts, it won’t always be a case of productivity, companies risk falling being by competition unless they remain at the forefront of this technological change.

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