Trend 1: Building resilience amid volatility

While scenarios are merely stories of what the future may be like rather than predictions of what will happen, these hypotheses can help leaders open their eyes to new opportunities and hidden risks:

• The passing storm presumes that, after a slow start, the COVID-19 pandemic is met with an increasingly effective health system and a strong political response. The virus is eradicated earlier than expected due to coordinated measures by global players to spread awareness and share best practices. Public institutions’ competence in the crisis renews trust in them. The pandemic has long-term economic impacts. Fiscal and monetary stimulus blunt the shocks but cannot reverse the losses that small businesses and lower and middle-income individuals have begun to experience. Tensions sharpen between socioeconomic classes.
• Good company presumes the COVID-19 pandemic persists past initial projections, placing a growing burden on governments around the world, which struggle to handle the crisis. A surge of public-private partnerships emerges as companies step up to be part of the global solution. New “pop-up ecosystems” arise as companies across industries—including mining—partner to respond to critical needs and drive much-needed innovation. Social media companies, platform companies, and tech giants gain new prestige. Ultimately, companies shift further toward “stakeholder capitalism,” with a more empathetic stance on how they can best serve their customers, shareholders, and employees to rebuild after the crisis.
• Sunrise in the east postulates that the COVID-19 pandemic is severe and unfolds inconsistently across the world. China and other East Asian countries manage the disease more effectively, whereas Western nations struggle with deep and lasting impacts—human, social, and economic—driven by slower and inconsistent responses. The global center of power shifts decisively east as China and other East Asian nations take the reins as primary powers on the world stage and lead global coordination of the health system and other multilateral institutions. The ability of China, Taiwan, and South Korea to contain the outbreak through a strong, centralized government response becomes the “gold standard.”
• Lone wolves posits that the COVID-19 pandemic becomes a prolonged crisis as waves of disease afflict the world for longer than expected, resulting in a growing death toll, social unrest, and economic freefall. Paranoia grows. Nations put strict controls on foreigners and make supply chains domestic in the name of local security. Countries become isolationist. Government surveillance is commonplace, with technology monitoring people and their movements.

In assessing how these scenarios may play out, trust figures prominently. In many ways, an effective recovery hinges not only on citizens’ ability to trust in government, communities’ ability to trust in companies, and employees’ ability to trust in their employers’ leadership, but also on the trust of investors to deploy capital.

Layering in industry megatrends

To determine how these scenarios might play out in the mining sector, we considered their impact on five industry megatrends, which have been illuminated because of the COVID-19 pandemic. Depending on which scenario plays out over the next three to five years, some of these trends can be accelerated, while others may slow down:

• Supply chains. Geopolitics, the rise of nationalism, and cross-border supply chain risks are expected to reshape global supply chains. This could result in mining companies strengthening the resilience and agility of their supply chains and, in some cases, regionalizing the supply chains of critical inputs, to mitigate risk and drive more local employment.
• Government power. Governments may be less able to provide public services (e.g., health care, education) due to increased indebtedness, resulting in greater reliance on mining companies to fill the gap. This would present companies with an opportunity to create value beyond compliance by partnering more deliberately with governments and host communities.
• Future of work. As the crisis highlights the importance of operating safely, the already ongoing shift to remote and virtual working environments could accelerate. This may see miners focus more on the automation of work, deployment of different talent models, and a transition to remote operations.
• Automation and digital. In the more severe pandemic scenarios, mining companies could accelerate investment in automation and digital technologies to allow for remote operations and people and equipment tracking. Individuals would likely be more open to new technologies, from wearables to AI, as long as they provide benefits to personal security and health.
• Decarbonization. As the crisis highlights the trade-off between short-term economic recovery and long-term environmental impact, companies can seek a balance between prioritizing the economic recovery and increasing support for environmental issues, particularly decarbonization. Underlying drivers could include a less attractive business case in a low oil price environment, the imposition of carbon taxes, and investor/community pressure around environmental, social, and governance (ESG) commitments.

Applying the scenarios to the mining sector

By lining these megatrends up to our four scenarios, we get a sense of how the global landscape might unfold in the next three to five years (figure 2).

Scenario 1: The passing storm

Scenario 2: Good Company

Mining companies could be forced to step up to the plate (figure 3). Companies can volunteer their resources to support and supplement containment, treatment, and recovery efforts. They would also be increasingly expected or required to make direct financial investments into their local communities to maintain their social license to operate and avoid a backlash from communities, governments, and the media. At the same time, mining companies would need to adapt to new realities by investing more heavily in areas such as wearables, virtual reality, AI, and 3D printing to combat significant supply chain shifts and workforce social distancing requirements.

Scenario 3: Sunrise in the east

The severe and long-lasting impacts of the crisis would see mining companies prioritize and accelerate the implementation of digital technologies (see figure 4). Particularly in remote areas and developing countries, companies could develop programs in and around their operations to provide public services that highly indebted governments cannot afford. East Asian countries could take a central role in acquisitions and consolidating some sectors. Some governments may turn to nationalization to help their finances. Mining companies could shift away from decarbonization efforts and toward business models lighter in assets.

Scenario 4: Lone wolves

In response to the impacts of the crisis, mining companies could see drastic disruptions to their production and supply chains. With strict social distancing and tracking measures, companies could be forced to halt production or to suffer large productivity declines. If countries adopt isolationist policies and global supply chains are cut, companies would likely seek local suppliers and customers (figure 5). The strength of local supply chains could determine who will survive. In regions with strong local demand, companies could thrive; in regions where metals are heavily exported, companies could struggle.