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Here Are The Biggest Risks Facing Mining In 2018

Kitco News

Here Are The Biggest Risks Facing Mining In 2018

(Kitco News) - The mining industry faces new challenges on a daily basis, but the number one risk threatening companies this and next year is digital effectiveness, advisory company Ernst & Young (EY) said in a report.

“Our number one risk this year is digital effectiveness,” stated the report titled ‘Top 10 business risks facing mining and metals 2017–2018’.

EY believes there is a “disconnect” between the potential digital evolution offers and the actual implementation of new technologies.

“Digital transformation will be a critical enabler to address the sector’s productivity and margin challenges. Companies risk being left behind by their competition if they are not at the forefront of this,” the report noted.

EY’s top ten risks include some never-before-seen issues, such as competitive shareholder returns, which is listed as number two on the report.

“Mining and metals companies need to differentiate themselves — by investing capital properly and getting a good return compared with the rest of the market. Ultimately, they need to be a leader in the market to attract capital,” EY said.

EY's Top 10 Risks

The advisory company also bumped up cyber risk to a third spot due to increased digitalization as well as the convergence of information technology and the operational technology, which leave companies more vulnerable to rogue activity.

“And as the sector increasingly moves toward digital transformation, the attack surface is also becoming larger and it is critical that mining and metals companies accelerate their cybersecurity program,” according to the report.

The fourth item was the new world commodities risk, with a focus on sustainability.

“The end of petroleum cars will impact a significant part of platinum demand: almost half of global platinum production is used in catalytic converters to remove diesel pollution. Other commodities, such as cobalt, lithium and nickel, will benefit from the increased demand for battery storage.”

The other items included on the list were regulatory risk, cash optimization, social license to operate, resource replacement, access to and optimization of energy, and managing joint ventures.

Aside from listing potential concerns, the report also noted a positive momentum developing in the market.

“Volatility has eased off in a number of commodities, and balance sheets are in a better position. It is now all about how you stay ahead of the competition,” said Paul Mitchell, global mining & metals advisory leader.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.