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The Biggest Risk Facing Miners In 2019-20: Losing License To Operate - EY

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The Biggest Risk Facing Miners In 2019-20: Losing License To Operate — EY

(Kitco News) - Miners from across the globe view the possibility of losing their “license to operate” as the biggest risk for 2019-2020, according to the Ernst & Young (EY) annual survey of top ten business risks facing miners and metals.

This is an unexpected change from last year’s results, which ranked “license to operate” as the seventh risk and “digital effectiveness” as the first. 

This year’s survey, which polled 250 mining executives, showed that “digital effectiveness” was moved into the second place and “maximizing portfolio returns” to third place. 

EY explained that miners will need to work harder to keep their “license to operate,” which naturally expands their responsibilities.

“We have seen ‘License to operate’ rocket to first position, with over half of our respondents nominating it as the No. 1 risk [for 2019-2020],” EY said in its report. “License to operate has evolved beyond the narrow focus on social and environmental issues. There are now increasing expectations … Any misstep can impact the ability to access capital or even result in a total loss of license … License to operate needs to quickly become part of a mining company’s DNA in the same way as safety is.”

The second biggest threat for 2019-2020 was the lack of digital effectiveness, which is key to gaining competitive advantage in the mining industry, EY added.

“It was revealed that a significant 37% of management have little or no knowledge of the digital landscape. The stark reality is that digital is the key to achieving productivity and margin improvements,” the report said.

The third major risk for mining companies was failing to maximize portfolio returns, EY noted, highlighting a balanced approach.

“In addition to building or acquiring new mines, companies also need to consider how much capital they should be investing into innovation and transformative technologies. Over 70% of survey respondents are investing 5% or less of their budgets in digital. By increasing this to around 20%, they could be transforming their operations substantially and gain real competitive advantage,” the report said.

Other risks included in the top ten list were: cyber, rising costs, energy mix, future of workforce, disruption, fraud, and new world commodities.

The survey added that miners will be forced to deal with new risks and variables this coming year, stressing the successful adaption to change will be crucial to success.

“We believe our sector is facing an era of disruption like nothing it has ever experienced before — both from within and outside. The themes of license to operate and disruption run through this year’s risks as mining and metals companies have to deal with many new and variable factors, including societal expectations, digital transformation, and unique challenges to portfolio and capital investment decisions,” the EY report said. “[Organizations] have to use capital and collaboration to their advantage as they transform and protect themselves from disruption.”

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