Deloitte Global mining and metals report explores key trends shaping the industry’s future

• The mining industry is at a critical juncture as a key player in the energy transition, but needs capital, talent and the support of communities and host governments.
• Mining leaders need to position their organisations and industry for success while focussing on addressing the trust deficit that exists with many key stakeholders.
  
• Looking beyond the impact of COVID-19 the report addresses longer-term trends in the industry and what new trends might be emerging.

NEW YORK, NY, USA, 1 February 2021—Released today, the 13th annual edition of Deloitte Global’s mining and metals report, Tracking the Trends 2021, explores key trends facing mining and metals companies as they navigate the impacts of the pandemic and the need to rebuild trust among stakeholders in their pursuit of renewed productivity, financial discipline, operational excellence, and future growth. The report takes a look at what the mining sector is doing right and what needs to improve, as well as offering best-practice examples.

"This is a critical moment for mining," says Andrew Swart, Deloitte Global Mining & Metals sector leader. "The industry is charting a path out of a pandemic where the impacts varied greatly depending on what commodity is mined, and where the company is located, therefore resiliency is one of the most important tools. At the same time miners need to rebuild trust among stakeholders, including investors, the workforce, and the local communities, as success in the future will be based on factors beyond just financial performance."

Overcoming the “trust deficit”

The World Economic Forum released a report in July 2020 that identified a “trust deficit” as being the most important risk facing the mining industry. Addressing this challenge is causing mining leaders to redefine their strategic objectives, reconnect and recommit to their stakeholders, and reset their priorities.

This year, we share our perspective on what mining companies need to do to rebuild trust among their extended ecosystem of stakeholders, from their investors and employees to the communities and societies where they operate.

As miners navigate the new normal, resiliency is imperative, so it’s not surprising that we kick off this year’s trends with four divergent scenarios of how the world might play out over the next three to five years. COVID-19 has accelerated many trends, but the world remains uncertain and these scenarios will be key as firms navigate different stakeholder needs to close the trust deficit.

From an investor perspective, this means winning back confidence by finding new ways to deliver consistent shareholder returns, particularly as transactional activity picks up, and closing the supply chain gaps that the pandemic brought to the fore. Many miners are also taking this opportunity to recalibrate for the future by shifting towards integrated operations to drive more predictable returns.

To rebuild trust across their talent network, companies are redefining leadership, adapting the workplace culture, and recommitting to the goal of zero harm.

They are also revisiting their commitments to local communities, and to society at large, by enhancing their environmental, social, and governance (ESG) performance. This has seen them working to get serious about decarbonisation and turn their corporate governance frameworks into a competitive advantage—initiatives that will drive value for their broader stakeholder groups as well. Mining companies are also working to link their social investments to sustainable outcomes and playing an active role in the world’s transition to a clean energy future.

Top industry trends

Deloitte Global has identified ten trends as defining the present and near future of the mining industry. Each of these trends has a role to play in guiding companies to success beyond the pandemic, and in re-establishing trust with stakeholders.

• Building resilience amid volatility. COVID-19 has had a range of impacts on mining companies, depending on commodity and geography. To help understand this fluid situation, Deloitte Global highlights four divergent scenarios of how the industry can play out over the next 3-5 years. The pandemic has impacted some megatrends in the market and how these unfold may be quite different in each of the four scenarios.

“Planning for a range of outcomes is key as leaders build resilience in their organisations,” adds Swart. “To do this, leaders should reconsider the assumptions of their current strategy, determine how they will respond if an unexpected scenario occurs, and pay attention to local, regional, and global indicators about where things are heading.”

• M&A in an altered world. M&A activity is increasing as mining companies seek to strengthen their portfolios and develop commodities. Companies lost investor trust during the peak of the last cycle, when numerous M&A transactions lost value rather than created it. To build investor confidence mining companies need to address some key table stake issues while at the same time look at the strategic opportunity around M&A as the industry undergoes some structural changes.
• Getting serious about decarbonisation. Mining companies are under strong pressure from investors, regulators, and local communities to move beyond environmental risk identification and mitigation and instead execute on fully developed decarbonisation agendas. Companies are making net-zero commitments in line with the 2015 Paris Agreement and starting to shift to execution.
• Linking social investments to sustainable outcomes. As mining companies are called upon to play a greater role in remote regions, an opportunity exists to build trust with communities by creating value beyond compliance, collaborating more effectively with host governments and linking activities and long-term investments to sustainable outcomes.
• Corporate governance adding to competitive advantage. Companies have often relegated governance to a backstage role, opening the door to potential missteps followed by reputation damage and loss of market value. Miners are strengthening governance processes, especially around issues such as human rights, ethical conduct, cybersecurity, and social impacts.
• Creating an agile supply chain. The pandemic put the supply chain in the foreground of concerns. Companies need to mitigate supply chain risks by illuminating the multiple tiers in their supply chain and reconsidering their inventory strategies. Geopolitics, the rise of nationalism, and cross-border supply challenges will also reshape global supply chains.
• The path towards integrated operations. Mining companies can better respond to external events and internal variables by breaking down silos and driving towards integrated operations by empowering their people to make the best decisions for the company as a whole. This will help combat the inherent inefficiency embedded in organisations, but requires firms to leverage technology, redesign processes, rethink workplace design and shift culture
• Advancing the future of work. The events of the past year have prompted many companies to review labour routines, institute more remote and virtual work, and to experiment with outsourcing key roles. Some are already taking the next steps, which include redefining the role of and expectations for leadership, and enabling the creation of a new workplace culture. These are central to building trust in a talent starved sector.
• On the road to zero harm. While safety has long been a focus in the mining industry, there is a key opportunity for the industry to more actively collaborate around data pooling, addressing the interoperability of wearables and harness the power of predictive analytics.
• Meeting demand for critical minerals. As the world converts to renewable energy sources and adopts electric vehicles, demand for some commodities will rise. Candidates include copper, nickel, lithium, and cobalt, but no one is certain which ones will eventually see the most demand, and there is a scramble to lock in supply.