No Match Found
The world’s big mining companies must find a new formula for success. The era of critical minerals has arrived, and it’s the most momentous change the industry has seen in decades. Miners can no longer depend on yesterday’s portfolios and practices to create value in this newly dynamic and fiercely competitive landscape. And mining CEOs seem to know it: of those polled in PwC’s 26th Annual Global CEO Survey, 41% don’t think their companies will be economically viable in ten years if they continue on their current path. The era of critical minerals must therefore be an era of reinvention.
One shift that demands a response is the emergence of an important new player in the critical minerals market: government. After seeing rapid demand growth and risky levels of supply chain concentration, governments have formed alliances, instituted new policies and mobilised funding to secure access to critical minerals. These moves will change the mining business. The inflow of public funds, for example, means that miners must rethink the rates of return they can expect on mining or supply chain assets. Miners will also need to contend with heightened investment risk and greater competition as governments alter the playing field with incentives and interventions.
Then there’s the urgent task of decarbonisation. Miners will have to ramp up production to meet rising demand for the critical minerals and other commodities that are required for the energy transition. But they also know they must reduce their carbon emissions. More than one-third of mining CEOs see their company as highly or extremely exposed to climate-related risks. The good news is that decarbonisation can help miners create value at all points along the value chain. More and more, we’re seeing miners boost efficiency with low-carbon technologies and methods, partner with processors to produce the “green metals” that customers increasingly want, and access sustainability-linked financing.
The transition to renewable energy and a low-emissions economy will not, however, be straightforward—and neither will changes in the mining industry’s makeup. The Top 40 mining companies posted strong financial performance in 2022; total group revenue of US$711 billion nearly matched the highs of 2021. Their balance sheets are robust, and debt remains low. But EBITDA (earnings before interest, taxes, depreciation, amortisation and impairments) margins decreased, as predicted, amid swelling costs and economic uncertainty.
What’s more, the mix of revenue from mining commodities shifted. Surging demand made coal the biggest contributor to the Top 40’s revenue for the first time since 2013, a sign that coal miners still have a role in meeting the world’s energy needs. Nonetheless, the long-term trajectory for coal revenue clearly runs downwards.
These trends mean miners need to reposition themselves for long-term growth—and the merger and acquisition deals they struck in 2022 showed that they’re using their financial resources to do so. Critical minerals dominated deal activity in 2022 as miners big and small raced to remake their portfolios for the global transition to clean energy. Large companies went for joint ventures and transformational deals, but some smaller ones made multibillion-dollar plays, too. Facing further consolidation, increased price volatility and continued government action, miners must act swiftly to capture dwindling deal opportunities.
Miners will need more than financial positioning to achieve ongoing success: the Top 40 must also attract workers. Tech talent, especially, is essential to the mining world’s increasingly automated, digitised, AI-enabled operations. But mining companies simply need more workers overall, which requires them to create environments that are open and inclusive towards people who might not see themselves as potential miners. It will take reimagined workforce strategies for miners to attract employees in the future—just as it will take the reinvention of many other parts of the mining business. Only by transforming can the Top 40 create value and help bring about economic prosperity and a low-carbon future.
The era of critical minerals has arrived, bringing opportunities for miners—along with concerns about the supply shortfalls that could occur amid booming demand. As national governments have moved to secure access to copper, lithium and other critical minerals, they’ve reconfigured the competitive landscape. Now, miners must reckon with a whole new set of industry dynamics.
Last year’s edition of Mine highlighted the emergence of critical minerals as the commodity that will define the future of mining. Twelve months on, interest in the category has only grown, as nations have recognised the importance of these minerals to clean energy and defence. Geopolitical uncertainty has complicated the picture, sowing doubts about where critical minerals might come from. In response, governments around the world have taken swift action to form alliances, craft policies and laws, and fund initiatives that will stabilise their supplies of critical minerals. Their moves have altered the playing field for miners, intensifying competition and risk.
Over the past 12 months, more and more governments have sought to secure their access to critical minerals through reinforced strategic alliances or new trade deals. Most of these agreements have only just been struck, so their full impact has yet to be felt. But the implications could be immense. Reconfiguring existing supply chains will require enormous levels of new capital, and it could cause supply disruptions and price volatility.
Recently, many countries have introduced legislation addressing critical minerals production, processing and manufacturing. Canada updated its Critical Minerals Strategy (December 2022), the EU released its Critical Raw Materials Act (March 2023), the UK refreshed its Critical Minerals Strategy (March 2023) and Australia is due to release an update to its existing strategy in 2023. But the most significant of these is the US Inflation Reduction Act (IRA), the largest piece of climate-focused legislation in US history.
With approximately US$370 billion in spending and tax credits to support clean-energy industries and supply chains, the IRA significantly increases the volume of public capital available for critical minerals investments. (Complementing the IRA are other US laws and policies, such as the CHIPS and Science Act and various “made in America” provisions.) The IRA presents vast opportunities for big mining companies. Though miners can’t physically move their mines to the US, they can make changes to their operating processes, investment plans, offtake arrangements, processing routes and workforces to capitalise on the IRA’s incentives.
Another recent trend has seen governments establish funds to invest in critical minerals projects and supply chains. For example, Australia’s export credit agency, Export Finance Australia, set up the Critical Minerals Facility to fill gaps in private financing for critical minerals projects. In 2022, the agency agreed to lend Australia miner Iluka Resources US$1.05 billion to build a fully integrated rare earths separation facility in Western Australia. The Australian Government is also directing a portion of its US$15 billion National Reconstruction Fund to critical minerals companies that build processing, refining or manufacturing capacity in the country.
The US Government, too, is providing significant funding for critical minerals projects. The Department of Energy’s Loans Program Office, for example, has extended a US$2 billion conditional commitment to US battery recycler Redwood Materials for the construction of a battery materials campus in the state of Nevada, a conditional offer of US$700 million to US mining company ioneer for the development of the Rhyolite Ridge lithium and boron project in Nevada, and US$102 million to Syrah Resources for the development of a graphite processing facility in the state of Louisiana.
These moves by governments are rapidly changing the competitive landscape for critical minerals companies, and miners more broadly, in five main ways. Miners must adjust now to stay ahead of their rivals.
1. Greater demand for critical minerals. As more governments try to secure supplies of critical minerals in tightening markets, we are seeing countries emerge as buyers. The concept of a strategic reserve has precedent in materials that are essential for traditional energy systems; examples include the United States’ strategic petroleum reserve and uranium reserve. As governments consider their future needs for critical minerals, they may seek to establish strategic stocks of these resources, too, as evidenced by government-backed procurement activity in the EU and India.
2. A changing financial picture. Due to lower interest rates on government borrowings, the financing cost available to the public sector is lower than that available to the private sector, even for companies with the highest credit ratings. Government-backed funds are likely to have nominal (or inflation-linked) return requirements that are lower than the usual expected returns on investment for a mining company or its shareholders. As more governments use their capital to finance critical minerals and supply chain projects, miners may need to lower their target rates of return to compete.
3. Higher investment risk. Government interventions in critical raw materials markets are steadily increasing in the form of export restrictions and, in some cases, resource nationalism. This development mirrors a larger trend: the Organisation for Economic Co-operation and Development (OECD) has observed a fivefold increase in export restrictions on industrial raw materials over the past decade. But in critical minerals, government actions have been especially pronounced. Uncertainty about future government action will likely require miners to reassess country risk profiles, which may affect investment and deal activity.
Developments in Canada and Chile highlight the risks that companies can face. In 2022, Canada’s Government announced restrictions on investments by foreign state-owned companies in its critical minerals sector and stiffened its criteria for whether a transaction is of ‘net benefit’ to Canada. The Government is also forcing some foreign state-owned entities to divest their critical minerals assets. And in April of this year, Chile announced intentions to nationalise its lithium industry. Given that Chile is the world’s second-largest lithium producer and hosts the largest lithium reserve base, the proposed interventions would likely affect global supplies of lithium. The Chilean Government has also indicated that any private company must partner with the state to mine lithium.
4. More competition. Over the past year, we’ve seen more original equipment manufacturers (OEMs) and end users partnering with miners and processors through joint ventures, partnerships and offtake agreements to secure supplies of critical minerals. And as governments offer incentives for the production and processing of critical minerals, we expect OEMs to make more direct investments in mining and processing assets, vying against mining companies for growth assets and mergers and acquisitions. Overall, these trends amount to a power shift away from buyers of critical minerals and to sellers.
5. Stricter environmental standards. Climate policy in major markets such as the US and the EU should give operators ever greater incentives to decarbonise. So far, we’ve seen little evidence that mineral buyers are willing to pay a “green premium,” a price premium for products made with comparatively low or net-zero carbon emissions. But government legislation is creating new financial incentives—and penalties—for mining companies to achieve carbon reduction or environmental, social and governance (ESG) benchmarks. For example, the EU has introduced the Carbon Border Adjustment Mechanism (CBAM), a border tariff on imports of carbon-intensive goods such as aluminium, iron and steel. Legislation of this nature will force companies to meet carbon standards if they want to compete in a given market. And as we explain below, advances in technology are giving miners more options to meet ambitious climate goals.
Even as they increase output of critical minerals to support the energy transition, miners know they must reduce their carbon emissions to avoid risks such as market barriers, fines and loss of social licence to operate. But decarbonisation can also help miners create value. By accelerating their decarbonisation plans and extending them to their supply chains, mining companies can realise cost savings, partnership opportunities and favourable financing terms.
Because many mining operations are in hot, dry, remote environments, mining leaders know the pressure that climate change can create. In PwC’s 26th Annual Global CEO Survey, 35% of mining CEOs said their companies are highly or extremely exposed to climate risks arising in the next five years. It’s also clear that mining and metals production, as practised today, results in substantial carbon emissions.
At the same time, leaders recognise that mining plays a crucial role in the energy transition by providing commodities for renewable-energy and climate technologies. Indeed, achieving global emissions-reduction targets will require more mining products, according to the International Energy Agency (IEA): more steel for wind turbines, more copper for transmission lines and electrical components, more lithium for batteries, more rare earth materials for electronics.
As a result, mining companies face a dual imperative: to increase output of conventional and critical minerals while decarbonising mining, refining and production processes. And progress towards that imperative is underway. Existing technology and methods can already decarbonise a significant proportion of mining, processing and production activity. Still better news is that these technologies and methods can be applied across the mining and metals value chain to unlock greater cost-savings and value-creation opportunities.
Source: PwC’s 26th Annual Global CEO Survey
Mining processes account for 4 to 7% of global greenhouse-gas emissions, according to GlobalData. Mineral and metal production adds significantly more; for example, steel manufacturing accounts for around 7% of global emissions and aluminium manufacturing for around 2%. Miners and processors have access to a range of lower-emissions technologies and methods to help them decarbonise. Among the most cost-efficient options are direct electrification, efficiency improvement and renewable energy, followed by hydrogen power for applications that can’t be electrified. The following examples show how companies are using some of these options.
Efficiency improvement. The Sibanye-Stillwater mine, in South Africa, has cut the energy consumption of its ventilation systems by 62% by better controlling fan speed and air circulation. Rio Tinto’s Gudai-Darri mine in Western Australia has introduced driverless vehicles, which have been shown to increase output by 15 to 20% while reducing costs and fuel consumption.
Renewable energy. The falling costs of solar and wind power have made renewable energy one of the most reliable ways for miners to decarbonise while also reducing their energy costs, which tend to be higher than average. Installing renewables near mine sites, which are usually remote, also helps improve their energy security. For example, Chilean copper miner Codelco is reducing emissions by 15,000 tonnes of CO2 and saving US$2 million per year by using solar power. As the costs of batteries and electrolysers continue to fall, we should see rapid growth in the use of renewables and hydrogen in mining in the near future.
Hydrogen-powered transport. Anglo American’s Mogalakwena mine in South Africa has begun using hydrogen-powered trucks, which can reduce CO2 emissions by more than 2,000 tonnes per vehicle per year. By replacing its diesel trucks and using hydrogen produced onsite, the mine is on track to significantly reduce its direct (Scope 1) emissions.
Hydrogen-powered steelmaking. The standard method of processing iron ore relies on coal or other fossil fuels and produces significant CO2 emissions. A new technique being tested in Sweden, direct reduction of iron, uses hydrogen as the reducing agent instead, eliminating 60 to 90% of CO2 emissions per tonne of iron. Applied at full scale, the technology could help Sweden reduce its total CO2 emissions by 10%. Saarloha, a steel producer based in India, used the same technique to produce the country’s first commercial low-carbon steel in December 2022, achieving emissions from the refining process that are 80% lower than traditional methods.
By partnering with processors, miners can share project-related risks, gain economies of scale and ensure quality control from the mine to the finished product. The hydrogen-powered approach to steelmaking mentioned above is one example of such a partnership. Called Hybrit, it is a collaborative effort among mining company LKAB, steel producer SSAB and power utility Vattenfall to produce green steel for automotive OEM Volvo. The project touches all segments of the value chain and is expected to produce fossil-free steel at commercial scale by 2026.
Another example is Rio Tinto’s ISAL aluminium smelter in Iceland. Through a partnership with the local power company Landsvirkjun, the plant uses 100% renewable electricity to produce 202,000 tonnes of aluminium annually at one of the lowest carbon footprints in the world. Such efforts help mining and metals companies not only to meet their emissions targets but also to command higher prices. S&P Global Platts’s green aluminium index, for example, shows that low-carbon metals are priced higher than conventionally produced metals.
For Top 40 miners, opportunities like this can be found around the world. One example is the proposed collaboration between the Republic of Zambia and the DRC Battery Council to use hydroelectricity in producing low-carbon cobalt. Leading miners will scope these opportunities now, for lead times can be long and competition is rising.
When it comes to accessing capital, the energy transition is creating both opportunities and risks for big mining companies. On the downside, as investors divest fossil-fuel assets, miners may find it hard to obtain capital from traditional sources. But on the upside, the volume of sustainability-related bonds and other financing mechanisms is rising—providing miners with new, attractively priced sources of capital. Globally, green bonds grew from around US$150 billion in 2017 to US$450 billion in 2022 and are expected to grow a further 30% in 2023. In 2021, Newmont issued US$1 billion of sustainability-linked bonds, and in 2022, Anglo American issued €745 million (US$741 million).
Multilateral organisations are also getting involved. In 2019, the World Bank launched the Climate-Smart Mining Initiative, a fund dedicated to supporting sustainable mining practices. As the Top 40 miners seek to decarbonise their activities and expand mines to meet the world’s future minerals needs, sustainable capital can help them meet their financing requirements.
Source: S&P Global
The economics of decarbonisation will drive business decisions in mining for decades to come, as mining executives come to grips with significant challenges and opportunities. To create value, leading companies are focusing their decarbonisation strategies on initiatives that help them save costs and access new end markets. Our experience suggests that the fundamentals of such strategies include the following.
The next five years
In 2022, the Top 40 mining companies once again reported strong financial results. Their revenue remained near the high point of 2021, and their 2% increase in market value exceeded the gains of benchmarks such as the S&P 500. However, softening commodity prices and rising operating costs hurt cash flow and margins. Amid continued economic uncertainty, big miners should consider using their strong balance sheets to seize the growth opportunities afforded by increasing demand.
The Top 40’s total revenue of US$711 billion in 2022 was broadly consistent with last year’s top-line result. However, the share of revenue from different mining commodities changed. For the first time since 2010, coal was the largest contributor to total revenue across the Top 40, rising from 23 to 28%. This increase was largely price-driven, with average spot prices in some cases doubling across the year. Copper revenue remained largely the same, with increasing volumes offset by a slight decrease in price. Iron ore saw declining volumes and prices, as economic uncertainty and covid restrictions across China pushed down global steel demand. Gold prices held relatively steady, but gold revenue fell due to a decline in the number of gold companies in our Top 40. Critical minerals other than copper account for a small share of our Top 40’s revenue, with increasing production volumes but volatile prices.
As predicted in Mine 2022, rising costs took a toll on the Top 40’s financial performance. A 6% increase in operating expenses over the year, combined with slightly lower revenue, lowered EBITDA margins from 32% to 29%. This result would have been worse if not for increased trading revenue. Nevertheless, balance sheets remained strong overall. Net debt across the group remained low at US$93 billion (down from US$104 billion in 2021), with positive working capital and net assets. Given their minimal debt, the Top 40 were largely insulated from the impact of rising interest rates in 2022 and recorded only a small increase in borrowing costs.
In 2022, coal accounted for more of the Top 40’s revenue than any other mining commodity, as governments chose to add coal-powered generation capacity amid a global energy crisis. According to the IEA, coal-fired power generation increased in 2022, which suggests that the world may struggle to achieve a steady reduction in the use of coal despite the many commitments by governments and businesses to reduce carbon emissions.
To achieve emissions-reduction targets set by signatories to the Paris Agreement, many countries have declared they will reduce their use of all fossil fuels, including thermal coal. However, the IEA has forecast that the reduction will not be even. It expects that global coal-fired power generation will level off from 2023 to 2025, with increases in Asia-Pacific and decreases in the Americas and Europe playing out as global power generation from renewables goes up. This pattern would imply a continued need for thermal coal until alternative energy sources are reliably embedded in the global energy grid. Metallurgical coal, too, will continue to be the primary energy source in steel and cement production until suitable substitutes can be implemented at scale.
Governments and businesses will likely continue to seek a balance between environmental protection and energy security. The market dynamics of 2022 indicate that coal miners still have a role to play in meeting energy demand as the world makes uneven progress towards net zero.
Amid surging demand for minerals and metals, the Top 40 reported higher spending on exploration than at any point since 2013. In 2022, gold topped exploration spending globally, and spending on the search for critical minerals such as copper, lithium and cobalt also grew significantly. Given projected supply shortfalls of critical minerals, continued investment to discover these deposits will be essential to sustain the energy transition.
Larger mining companies accounted for most of the total exploration spending, and we expect this trend to continue through 2023 as juniors struggle to obtain financing in challenging capital markets. This will make it all the more important for miners to meet criteria for government incentives. We expect total exploration spending to decline through 2023 as earnings soften. Though smaller exploration budgets could exacerbate shortages of critical minerals, spending on exploration should grow over the long term as miners seek to meet increasing demand.
The outlook for the Top 40 in 2023 is mixed. We expect softening prices for many key mining commodities and, as a result, we forecast a 9% fall in revenue. Revenue from coal is expected to fall by at least 20%, and the commodity is unlikely to be the industry’s main revenue source next year, which could lead to a change in the composition of the Top 40.
We expect the 2022 trend of rising costs to stabilise through 2023, as lower shipping and fuel costs offset some inflation pressures. Our outlook—higher costs and lower revenue—points towards a decrease in EBITDA margins, from 29% in 2022 to 28% in 2023, and towards negative net cash flow. Given the challenging economic conditions, we believe overall capital spending will also decline, though spending on critical minerals and decarbonisation should increase. Payment of dividends is still expected to be high, although down from 2022 levels.
To ensure longer-term resilience, the Top 40 should focus on responding to evolving trends even as they temper spending. With continued free cash flow and strong balance sheets, these miners are well-positioned to take advantage of new opportunities.
Critical minerals transactions dominated deal activity in 2022 as miners big and small raced to reposition themselves for the energy transition. Miners now face an intensely competitive environment for critical minerals assets. As opportunities dwindle, mining leaders must act with urgency to acquire the assets that will power their companies’ future growth.
Though the total value of Top 40 M&A activity was steady in 2022 compared with the previous year, the composition of those deals changed significantly. The value of critical minerals deals increased by an impressive 151% from 2021, accounting for 66% of all deal value in 2022. Gold deals, on the other hand, fell by 50%, marking the end of the precious metal’s dominance of M&A for the past several years. Copper was the year’s hot commodity, representing 85% of all critical minerals transactions and 56% of the Top 40’s M&A activity. As a key metal that enables electrification and renewable energy, copper should be in high demand during the years ahead.
It’s no surprise that companies with critical minerals businesses have become acquisition targets, given the substantial demand for these commodities and the long lead times required to bring new mines into production. Among the Top 40, several trends in critical minerals deal-making have emerged in the past several years. The first is a preference for outright ownership rather than joint ventures, illustrated by Rio Tinto’s full acquisition of Canada-based Turquoise Hill Resources in December 2022.
The second trend is an increasing appetite for transformational deals, as the largest members of the Top 40 seek to unlock value within existing portfolios, acquire strategic assets, achieve operational efficiencies and improve resilience. An example is Glencore’s US$22 billion-plus offer for Teck Resources. The offer, which was rejected, would have reshaped the mining industry—first combining the companies, and then splitting them into two mining powerhouses, one focused on base metals and the other on coal and carbon steel materials.
Another example is Vale’s effort to sell a 10% stake in its base metals business before carving out the entire base metals unit. Though these deals don’t always work out as contemplated—and face some scrutiny from investors, governments and other stakeholders—they indicate that Top 40 companies are looking to reinvent themselves.
Though the Top 40 accounted for more than half of the value of all critical minerals deals in 2022, other mining companies also made moves to reshape their portfolios for the future. Key deals outside of the Top 40 include Lundin’s US$950 million offer for 51% control of the Caserones Copper Mine in Chile and Albemarle’s US$3 billion-plus bid for Liontown Resources, which owns one of the largest and highest-grade lithium deposits in the world. More recently, lithium producers Allkem and Livent announced that they would merge, in a deal that would form a US$10.6 billion company and create the world’s third-largest lithium producer.
Mining companies aren’t the only players in the race for critical minerals. Sovereign wealth funds and pension plans have shown increasing interest in critical minerals companies. And, as noted above, OEMs—particularly those in the automotive sector—have been entering into strategic partnerships with miners.
Although the value of gold M&A fell between 2021 and 2022, the sector still saw plenty of deal activity. The largest transaction, worth US$4.8 billion, was Agnico Eagle Mines and Pan American Silver’s acquisition of Yamana Gold. The deal closed in March 2023 at the end of a long process that began in May 2022, when Yamana paid a US$300 million termination fee to Gold Fields, the original announced buyer. The Yamana Gold deal, which will significantly expand Pan American Silver’s operations in Latin America, demonstrates that gold miners are capitalising on current market conditions to author the next chapter of the industry’s consolidation story.
And gold miners show no signs of slowing down their deal-making. The beginning of 2023 brought news of a potential megadeal that could go down in history as the industry’s largest: Newmont’s attempt to reunite with Newcrest after almost a quarter of a century apart. The proposed acquisition, which could be valued at up to US$20 billion, would provide Newmont with assets in familiar locations, potentially leading to greater efficiency and resilience. As gold miners navigate a complex, changing market, M&A still offers a means of building scale, optimising portfolios and unlocking synergies. We expect to see continued M&A activity in the gold sector, including mid-tier consolidation and a megadeal every few years.
Emissions regulation and the energy transition mean that coal assets are under increasing scrutiny, with investors exiting the sector and mining companies reorganising portfolios. Some large investors, including BlackRock and Fidelity Investments, have publicly committed to phasing out their stakes in thermal coal producers, underscoring the challenges that miners with coal assets can face. Teck Resources’ initial plan to separate its base metals and coal businesses, and Glencore’s subsequent proposal to merge with Teck and then divide their combined holdings into a base metals company and a coal company, both resemble recent portfolio overhauls by other Top 40 mining companies.
Whether through M&A or decommissioning, coal assets will remain at the forefront of change, and Top 40 miners will likely continue to reorganise their operations in line with the shift to a low-carbon economy.
As demand for critical minerals grows, miners will face continued pressure to establish competitive positions with respect to geographic footprint and asset balance. We also anticipate that stakeholders’ expectations on sustainability will shape the future of the critical minerals segment, as buyers across all sectors look to demonstrate responsible sourcing. For miners, finding the right value-chain partners will be important, whether through partnerships, acquisitions or consolidation. When assessing deals, the world’s large mining companies should plan for:
Deal strategy will be central to the Top 40’s long-term success. Large miners must closely monitor deal opportunities and value propositions as the M&A market becomes more competitive. Those that act now will reap the benefits in the next five to ten years.
For mining companies, the talent shortage is becoming a nearly existential challenge. Miners must attract more workers, including those with coveted technology skills, to achieve their strategic objectives. Yet many of the most sought-after workers do not see the industry as attractive. The Top 40 need to rethink their workforce strategies to appeal to a wider range of employees.
The world’s big miners have a talent problem. Mining companies need talent to meet the growing demand for minerals and metals. They especially need talent who can work with the advanced technologies that are integral to modern mine operations. But many workers don’t want mining jobs. Young workers are emblematic of this. In a survey by the Mining Industry Human Resources Council of Canada, 70% of 15- to 30-year-olds said they probably or definitely would not consider a career in mining, the highest proportion of all industries. The mining workforce also exhibits wide gender gaps: according to the International Labour Organization (ILO), approximately 14% of mining jobs are held by women.
The talent problem is complex, and there are no straightforward solutions. Nevertheless, miners must act quickly to avoid the long-term consequences of a growing shortfall in skills. According to PwC’s 26th Annual Global CEO Survey, almost two-thirds of mining CEOs believe that skill shortages will have a large or very large impact on profitability over the next ten years.
Just as mining workers at large companies no longer work with picks and shovels, the workers of the future will not be driving trucks and loaders. (Between May 2021 and May 2022, the number of autonomous haul trucks in operation globally grew from 769 to 1,068, an increase of 39%.) Rather, their skills will be in robotics, automation and data analytics. Indeed, when a 2020 World Economic Forum survey asked mining executives which skills are in high demand at their organisations, respondents named technology-use skills more often than any other kind. Meeting the need for workers with technology skills won’t be easy; after all, companies in every industry want to hire them, too. Besides recruiting beyond the traditional mining talent pool, leaders must also retrain existing workers.
Some mining companies have tried to reach tech workers through graduate programmes and other incentives, but the sector has struggled to bring in the necessary talent. In the World Economic Forum survey noted above, 57% of the surveyed companies said that they see the inability to attract specialised talent as the biggest barrier to the adoption of new technology. A more formidable problem may be the availability of such workers: 73% of the surveyed companies named skills gaps in the local labour market as the biggest barrier to adopting new technology. With many mine sites operating in remote locations, successful retraining of local workers is likely to be critical.
Source: World Economic Forum
As it is, though, some workers lack confidence that even their current employers are training them in the use of technology. In PwC’s Global Workforce Hopes and Fears Survey 2022, 38% of workers at metals and mining companies said that they’re concerned about not getting sufficient training in digital and technology skills from their employer.
To attract the talent they’ll need at tech-enabled mining sites, miners should consider the following approaches.
A strong diversity, equity and inclusion (DE&I) culture is critical for attracting talent. A recent US study by CNBC showed that 80% of respondents find inclusion important when choosing an employer. What’s more, inclusive companies benefit from diversity of experience and diversity of thinking—two valuable qualities in an industry undergoing change. In the mining industry, though, diversity is lacking across a wide range of workforce characteristics. Here, we focus on gender imbalance, which continues to be an issue.
The case for gender diversity in mining is solid. One recent study by BHP showed that teams composed of both men and women were more productive and more engaged, and that they operated more safely. Such teams delivered an average of 67% lower total recordable-injury frequency and saw improved company culture, with a 21% greater sense of company pride, than teams composed solely of men. What’s more, the Top 40 mining companies are largely aligned around the idea of increasing gender diversity. In a review of the most recent sustainability reports published by the Top 40, we found that around two-thirds had set targets for the representation of women at some level of the organisation.
Nevertheless, significant gender gaps persist at all levels of many mining organisations. According to S&P Global, women hold only 14% of executive positions and 12.3% of board positions at mining companies worldwide. And though focusing on the executive level is important to shift the industry’s gender imbalance, so is increasing women’s participation at an operational level, given that operational roles represent the bulk of the mining industry workforce.
But strengthening DE&I in the workplace isn’t as simple as setting hiring quotas. As mine workers know from their long experience in prioritising physical health and safety by setting targets, reporting against goals and holding management accountable, changing workplace practices and culture requires policies, incentives and long-term strategies. Mining companies among the Top 40 have taken such steps as establishing requirements to seek diverse candidates during recruiting and tying executive compensation to diversity targets.
Some have also established training programmes to raise awareness of discrimination and harassment and to promote a more inclusive and open work environment. According to PwC’s Global Workforce Hopes and Fears Survey 2022, almost two-thirds of workers at metals and mining companies said they frequently or sometimes have conversations at work about social and political issues. They were also more likely to say that these conversations have a positive impact than a negative one.
To attract diverse talent and achieve the benefits of an inclusive workforce, miners should consider these action steps.
Partner, PwC Chile
Tel: +56 2 2940 0000
Energy, Utilities & Resources Lead Advisor, PwC Indonesia