The four biggest challenges facing mining in 2016/2017

1. Market oversupply as big companies continue to produce to drive out competitors
2. Efficiency and cost cutting - smaller miners will struggle to cut both costs and investments while still remaining viable
3. Stakeholder demands - there will be increasing difficulty balancing stakeholder demands from shareholders, governments and labourers
4. Financial challenges - high debt levels are placing companies under greater pressure at a time when they need support the most

Looking ahead – predictions for the mining sector

• Short to medium term pressure across the sector
• Consolidation as companies with strong balance sheets take advantage of market pressure on smaller operators
• A shift in the source of demand with India taking over from China

“It is common and in fact sensible for miners to focus on operational and cost optimisation, particularly in times of suppressed commodity prices. However, despite best efforts this is not always enough. In the current market, many miners are finding themselves faced with the harsh reality that unless drastic changes are made such as closing unprofitable mines, or cancelling development projects, their businesses will simply not survive.

Many such decisions may become irreversible and it is therefore critical that miners find the right balance between cost cutting and investing in the future so they can remain competitive when the market turns. And it will turn,” says Venmyn Deloitte director Neil McKenna.

Submitted by Deloitte