The mining industry needs to urgently address crucial commercial issues if it is to continue to meet the insatiable demand from Asia in the current commodity super cycle, according to professional services firm, Deloitte.

Bhavesh Morar, Deloitte’s Mining Lead Partner, said skills shortages, infrastructure and logistics planning are three key issues that threaten the mining industry’s production levels. 

He added that current strategies to combat these issues will take several years of implementation before the results are seen.  They continue to remain an immediate focus of the industry to continue its unprecedented earnings growth that’s driving the Australian economy.

“There are a number of pressing issues confronting the mining sector and strategic thinking is required to ensure the industry continues to enjoy the boom cycle in the longer term,” Mr Morar said. 

“One of the most important is to address the skills shortage issue.  All companies involved in the mining and construction fields are competing globally for an ever dwindling supply of people.

“While we are currently continuing to attract overseas skills migration, this may not last.  The key is to ensure we have appropriate planning strategies for qualified people being developed domestically.

“There needs to be a clear focus in this area.  Higher education institutions have a role to play with industry to ensure we continue to meet the demands from the domestic pool of available workers.”

Deloitte’s leader of the energy, infrastructure and resources group in Australia, Phil Hopwood said “it is one aspect of the global consolidation that is now happening in this sector.
 
“The top mining companies compete for the best talent leaving smaller businesses at risk of not having the people they need to drive their businesses forward,” Mr Hopwood said.

Infrastructure is the second area the industry needs to focus on, emphasised Mr Hopwood.  He stressed that the Federal Government’s budget allocations were a good first step, however there needs to be clarity about where intervention is required to ensure critical infrastructure investment is made. 

Mr Morar added that corporates also need their own infrastructure plans to address worker accommodation, mining equipment and other logistical needs. 
Accommodation shortages in remote regions have also led to a dramatic increase in property prices in mining towns, according to Mr Morar.

“Mining towns haven’t been immune from the property boom of the last decade and it is getting harder for mining workers to find housing,” he said.

One other serious infrastructure need that is threatening the industry’s capacity to fuel growth is the lack of mining equipment.  The lead times for sourcing of equipment supplies is delaying and leading to cost blow outs in production start up or expansion.

Mr Morar said mining companies have indicated that the wait for drag lines for coal mines and large haul trucks is as long as three years.

“Mining companies need to make crucial planning decisions.  They need to assess whether they need to begin purchasing forward production slots for mining equipment where mines are currently in the pre feasibility stage to accelerate mine development,” Mr Morar said.

“There is no doubt the impact on fleet replacement programs and new projects are enormous.  Mining companies are now forced to ensure their forecasts are long term and robust.”

Mr Morar added that “addressing the infrastructure bottle necks is crucial, not just to meet demand, but to also keep costs down.  We can’t afford to allow costs to rise as a result of the lack of supply for equipment,” he said.

“Mining companies need to envisage how the industry will look like in five years’ time.  If the boom continues, will the situation regarding the labour, infrastructure and logistics requirements be met?

“The mining sector has managed to avoid some of the issues that have impacted on other industries.  For the sake of the Australian economy, it needs to ensure that it continues to be the major contributor to our exports potential,” Mr Morar concluded.