The global downturn hit mining and metals companies hard. Today, most are preparing for another round of growth — but some may wait too long.

Mining and metals companies have survived tremendous price volatility over the past year. Now they wait anxiously for someone to make the first move for growth. Worldwide, mining and metals companies are focused most on two issues: containing costs and preparing for growth.

The mining and metals landscape has changed faster and more dramatically than anyone thought possible. This has presented a range of challenges and opportunities specific to each operator’s particular set of circumstances.

But across the spectrum, general priorities have morphed from boom-related production constraints to back-to-basics efficiency gains, made in part through better capital and cash flow management and heightened risk awareness.

Business as usual is gone, replaced with business as it needs to be

The unpredictability of the market is perhaps the biggest challenge mining and metals companies now face. The global financial crisis led to unprecedented volatility in commodity prices and destocking in the supply chain.

Companies need to factor this volatility into their business practices and create new ways to work with it, because it is not going to disappear.

Back to basics, nimbly

On the contrary, the frequency of the dips and spikes is likely to accelerate. Companies need to be nimble to protect assets and ensure growth as the upturn begins. And so they have returned to basics. They are analyzing cash flows and costs, and cutting the costs that spiraled out of control during the boom.

Enter: new capital sources

Cash has become the strategic differentiator, with access to capital a strong second priority. The financial crisis placed renewed importance on a reliable supply of fresh capital to the sector. As this supply was severely constrained during the crisis, more innovative ways of sourcing capital have manifested.

Top performers in the sector are asking themselves what the market has taught them. They are examining their financial models and looking at how to change their hypotheses to reflect expected growth, production and risks in their decision-making framework.

They are looking at financial, commercial, strategic and operational risks as they pull together these new world scenarios. Risk is no longer just a compliance function, but a part of how they do business.

M&A opportunities knock …

With their houses now in order, many companies are looking at the market, deciding on their next move. The top companies have grown more strategic in their thinking on acquisitions. Today, they are making considered decisions on what they will buy and when. They look for a strategic acquisition when the time is right, not resource replacement at any price.

But the financial crisis has stripped market players of their prior confidence. They wonder: are recent increases in demand only restocking depleted supply chains?

Companies are no longer making big deals and bringing on new production without careful consideration. The result is that many are waiting for a competitor to make the first move — to bring production back on, or make transactions to expand capacity.

… do companies have the confidence to answer?

They are waiting for a signal that the market is safe again. Depending on the durability of the recovery, this level of caution is keeping them stuck. Given the long lead-time required to develop new mines and new markets, companies should act soon to seize opportunities before this unusual door of opportunity shuts.