7 minute read 26 Sep. 2022

Top 10 business risks and opportunities for mining and metals in 2023

By EY Canada

Multidisciplinary professional services organization

Local contact

EY Americas and Canada Mining & Metals Leader

Client-focused leader. Actively delivering and supporting the readiness and performance of the mining and minerals sector for energy transition. Multilingual. With several publications under his belt.

7 minute read 26 Sep. 2022
Related topics Mining and metals

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  • Top 10 business risks and opportunities for mining and metals in 2023

ESG still tops the agenda for mining and metals companies, but geopolitical uncertainty, costs and supply chains also demand leaders’ focus.

In brief
  • ESG remains the top risk and opportunity, but geopolitics has soared to second place amid global conflict and uncertainty.
  • Costs and productivity have moved from 10th to fifth spot as inflation hits, and miners explore new ways to manage variability and unlock value.
  • Supply chain is new to the top 10 as companies feel the pressure to tackle multiple factors creating supply chain disruption.

How can mining and metals companies navigate immediate challenges, such as rising costs and supply chain disruption, while progressing their transformation into purpose-led, low-carbon, digitally enabled organizations?

This year’s ranking of the top 10 mining and metals risks and opportunities (pdf) reflects the competing priorities for miners in a fast-changing, volatile world. Environmental, social and governance (ESG) remains the number one challenge, but one that is broadening in scope and complexity. Meanwhile, global conflict and resource nationalism have pushed geopolitics higher up the ranking, requiring miners to develop a deeper understanding of the impact of geopolitics on strategy.

The global focus on climate change across industries has seen miners set net-zero pathways, but achieving ambitions will require a realistic and balanced strategy.

Supply chain is a new entrant to this year’s ranking. Global disruption to trade is hitting the sector particularly hard, and in 2023, miners will be under pressure to fast-track the supply chain transformation that was underway before the COVID-19 pandemic.

As we head toward 2023, the mining and metals sector is responding with more fundamental shifts to business and operating models. New business models offer opportunities for miners to reposition for a changing future, with many companies considering the benefits of strategies to rationalize, grow and transform. Companies that scrutinize and shift business models now can get an edge on competitors as demand and expectations change.

ranking radar chart

Trend 1: Environmental, social and governance

Now integral to strategy, ESG’s scope is broadening, and pressure is growing to improve reporting and transparency.

ESG remains the top risk and opportunity for mining and metals companies in 2023. The issue is now firmly integrated within corporate strategies due to its impact on almost every aspect of operations.

Some of the greatest areas for ESG improvement are not new — improving diversity, equity and inclusion is still a major challenge, and mine closures and rehabilitation require a longer-term, more strategic view.

But ESG is evolving, requiring miners to consider different issues and broaden their capabilities to manage them effectively. For example, water stewardship and biodiversity are fast becoming urgent priorities amid a changing climate. Stakeholders expect miners to better assess risks and opportunities, and articulate these through transparent, outcome-based measurement and assurance. In fact, more rigorous reporting will become critical if companies are to meet growing stakeholder expectations and avoid accusations of “greenwashing.” Miners that achieve this can get an edge on competitors in many ways — from accessing capital to securing license to operate and attracting talent.

which are the top esg issues graph

Trend 2: Geopolitics

Global conflict and trade tensions highlight opportunities to strengthen relationships.  

Geopolitics’ move up the ranking comes as miners feel the impact of the war in Ukraine, as well as US-China tensions and rising resource nationalism. Geopolitical risk should now be embedded within broader strategic planning, with clear ownership of this risk within the organization.

With many geopolitical factors beyond the control of mining and metals companies, this is a difficult risk to mitigate. The greatest opportunities may lie in forging closer ties with government, increasing collaboration with stakeholders, including trade and sector groups, and exploring the potential of government incentives and co-investments.

Trend 3: Climate change

Net-zero pathways are set, but achieving ambitions will require a realistic and balanced strategy.

An accelerated decarbonization agenda, and sharper focus on reporting emissions, creates a new urgency around better mitigating climate change risk.

This is a challenge mining and metals companies have become progressively better at managing, but there are still opportunities to improve. For example, not enough miners are taking action to minimize the physical risks of climate change, such as wildfires and flooding, which may threaten operations.

More miners are setting net-zero ambitions, but pathways to achieve these are sometimes unclear. Companies that explore a mix of options, including carbon offsets, partnering up and down the value chain and collaborating with suppliers and vendors to monitor Scope 3 emissions, can build a proactive strategy to address a risk that is likely to become even more complex.

Trend 4: License to operate (LTO)

Anchoring the brand to long-term impact can strengthen LTO.

LTO is increasingly complex — one leader described community engagement as a “big spaghetti bowl” that is chaotic and challenging to unravel.

Miners face new expectations, including around contributing to livability and protecting cultural heritage. Long-standing challenges, such as strengthening Indigenous trust, require a more concerted effort. Organizations must go beyond what’s required by law and genuinely commit to furthering truth and reconciliation.

Ultimately, miners need to reframe LTO around long-term value creation, anchoring the brand to this positive impact.

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  • Download our Top 10 business risks and opportunities for mining and metals in 2023

Trend 5: Productivity and costs

Managing variability though modeling and digital twins can help miners unlock sustainable savings. 

Soaring inflation and talent costs are significantly increasing mining costs, squeezing productivity and delaying expansion plans. But an existing focus on cost management and productivity appears to be paying off, with only about 20% of respondents to our survey experiencing a decline in asset or labor productivity in 2022.

With costs likely to remain high, more innovative approaches to managing variability, including improved modeling and digital twins, can unlock genuine productivity gains. Managing costs needs to be done with an eye on long-term value, as well as short-term gains. Sustainable cost reduction measures include, for example, switching to renewable energy, encouraging innovation to reduce costs in the longer term and creating strategic joint ventures to optimize economies of scale.

Trend 6: Supply chain

Recent disruption creates new urgency to accelerate supply chain transformation.

Supply chain disruption is new to the ranking, amid recent pressures, but it’s an issue mining and metals companies have long grappled with. Now organizations are intensifying efforts to transform supply chains, to better weather current volatility and find new opportunities to boost efficiency, resiliency and transparency.

Miners are considering more innovative, sophisticated approaches to mitigating supply chain risk, including through stronger relationships with suppliers and collaborative contracting. With the pandemic exposing weaknesses in the “just-in-time” model, we expect to see a mix of “just-in-case” and “just-in-time” supply strategies as miners find a way to balance supply chain resilience with costs.

Trend 7: Workforce

Building a purposeful brand and a greater focus on re-skilling can help overcome talent shortages.

Mining and metals companies face their greatest ever talent shortage following a massive wave of retirements and resignations. Replacing these workers and finding talent with critical skills will require a radical rethink of the sector’s approach to attracting, retaining and nurturing talent. With younger workers deterred by mining’s image, companies must double down on efforts to build a purposeful brand that aligns with today’s values.

The EY survey found mining leaders recognize the need to re-skill and upskill workers, but few are embracing this opportunity. A greater focus on training existing workers and sector newcomers in different skills can fill talent gaps and build a more flexible, agile workforce.

Trend 8: Capital

Changing demand and investor expectations are shifting capital allocation strategies.

Miners are maintaining their focus on capital discipline, but also exploring how to invest in growth and transformation. The energy transition is shifting demand, and companies are responding through more investment in “future-facing” commodities, including copper and lithium, and divesting coal assets.

Such decisions are not only motivated by a desire to adapt to an evolving market, but also to meet investors’ expectations around ESG performance. Organizations’ access to capital is increasingly linked to their ability to show how they create value beyond the bottom line.

Trend 9: Digital innovation

Investment in data capabilities will guide better, faster decisions.

Digital innovation has dropped down the ranking as miners build confidence and capabilities in this area. Companies are reaping significant cost, productivity and safety gains from the implementation of new technologies, including drones, remote operating centers and autonomous trucks.

But, despite encouraging progress, across the sector we still see a largely siloed approach to digital and innovation. A more integrated strategy across the value chain would increase ROI and help miners better tackle their most complex challenges, including ESG and productivity.

Trend 10: New business models

Rationalize, grow, transform — miners are exploring potential future strategies to capture value.

With demand for certain commodities set to increase and sustainability becoming a bigger focus, now is the time for organizations to rethink business models. We see miners analyzing where optimal value can be found, then designing their business models to capture this. Whether companies decide to reshape models to rationalize, grow and transform — or consider a strategic blend of all three — those that act now to future-proof their business will best withstand disruption, navigate changing commercial relationships and ultimately win competitive advantage.

Summary

In 2023, growing expectations around ESG, climate change and license to operate, as well as a more uncertain geopolitical environment, will top the agenda for mining and metals leaders. Global disruption will also put new pressure on costs, productivity and workforce, prompting companies to explore opportunities to reimagine business models and accelerate innovation.

About this article

By EY Canada

Multidisciplinary professional services organization

Local contact

EY Americas and Canada Mining & Metals Leader

Client-focused leader. Actively delivering and supporting the readiness and performance of the mining and minerals sector for energy transition. Multilingual. With several publications under his belt.

Related topics Mining and metals