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Top Issues in Mining 2011: talent and regulation


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Wednesday 22 December 2010: In his review of Deloitte’s third annual global mining report, “Tracking the Trends 2011: The top 10 issues mining companies face in the coming year,” Deloitte Australian Mining Leader, Tim Richards believed that of all ten issues identified, two of particular importance to Australia in 2011 will be the challenges of finding skilled labour to replace the aging population and the ‘taxes, regulations and new governments’ category.

The War for Talent rages on

The effect of the changing demographics on the mining industry is a key consideration. “The industry simply cannot replace retiring workers fast enough,” said Mr Richards. He cited The Minerals Council of Australia figures, which estimated that by 2020 the mining industry will need an additional labour force of 58,000 people to maintain current levels of production.

“Despite moves by mining executives to draw new workers to the industry, to enter into partnerships with educational institutions and to encourage higher levels of migrant or temporary employment, few of these activities are attracting the coveted 30 to 50 year old generation to the industry, and aging demographic issues are fast looming on the horizon,” said Mr Richards.

Regulatory environment

Mr Richards said that an even greater groundswell of regulatory activity for the Australian mining industry is likely in 2011.

“Australia has seen substantial changes in its tax regime and legislative environment over the past 12 months, inviting the question of how other countries around the world will respond,” said Mr Richards.

“Mining assets in Australasia have traditionally been most actively targeted by Chinese acquirers. However, this could change: in an earlier Deloitte survey* (conducted in August before MRRT was announced) the largest proportion of respondents (76%) named Africa as the region expected to witness the bulk of outbound activity going forward.”

While regulatory change in Australia has been widely debated, the “Tracking the Trends 2011” report showed that other countries that have quietly imposed new levies of their own recently include Chile, South Africa, Zambia, Tanzania and Burkina Faso (West Africa).

Mr Richards also pointed to a range of new key political agendas faced by mining companies in the coming 12 months. The report cited ‘plugging government deficits’, ‘asserting nationalistic claims’, ‘fighting corruption’, ‘promoting transparency’ and ‘championing environmental change’ as five key regulatory and political matters to be featured on the boardroom agenda in 2011.

“The effect of overseas regulation is continuing to flow through to Australian mining companies,” said Mr Richards. Government intervention around the world has increased in the past year and is currently on the rise in the form of new taxes and royalties, more stringent anti-corruption legislation, and rising expectations related to environmental protection.

Australian outlook for 2011

Overall, Mr Richards said that the Australian mining industry has moved from its focus on cutting costs and addressing financing concerns in 2009 to this year trying to balance growth against the continued volatility of demand and supply.

Commodity prices continue to achieve historic price highs. According to Datastream figures, gold has achieved a 194% price rise in the five years to November 2010, and silver 248%. Base metals such as copper and tin are also strong.

“Demand for commodities is skyrocketing, yet market forces today are far from typical,” said Philip Hopwood, Global Mining Leader, Deloitte Touche Tohmatsu Limited. “Increased governmental intervention in the form of mining industry nationalization or new tax and royalty regimes, coupled with inadequate infrastructure and a dearth of skilled talent, have made it exceptionally difficult for companies to build new mines or expand existing ones to boost available supplies. These trends are creating a supply shortage that challenges mining companies to rethink their operational strategies.”

“But today’s demand drivers are significantly different than they were in the past and mining companies need to change the way they pursue growth if they hope to keep pace,” he said.

The top 10 global issues mining companies

Last year global mining companies were most concerned with securing supply, managing commodity price volatility, and ramping back up in response to rising demand. This year, top priorities are attracting financing, finding new supply markets, and engaging local stakeholders in an effort to secure a license to operate. The report also highlights that government intervention around the world has increased in the past year.

The ten top issues Deloitte believes will most influence the global mining sector next year (in order of priority) are:

  1. The fickle face of financing: International investment fuels the sector
  2. When supply can’t match demand: Volatility is the new normal
  3. Securing a social license: Engaging stakeholders takes centre stage
  4. New taxes, new regulations and new governments: Political agendas take centre stage
  5. How to invest more strategically: Hint, you’ll need a long-term plan
  6. The lost generation: The war for talent rages on
  7. At the end of the rainbow: Maintaining the search for that elusive pot of gold
  8. A tough environment: Climate change disclosure and adaptation are getting harder
  9. Working with no backbone: Inadequate infrastructure hampers growth
  10. Rethinking industry fundamentals: Exploring new revenue opportunities

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Contacts

Name:
Karina Randall
Company:
Deloitte Australia
Job Title:
Corporate Affairs & Communications
Phone:
Tel: + 61 2 9322 3778, Mobile: +61 414 823 712
Email
karandall@deloitte.com.au
Name:
Tim Richards
Company:
Deloitte Australia
Job Title:
Lead Audit Partner and Mining Leader – Western Australia
Phone:
Tel: +61 8 9365 7248, Mob: 0437 009 416
Email
atrichards@deloitte.com.au

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