THE mining sector shows early signs of adjustment to future conditions underpinned by signs of stabilizing prices over the next 12 months, but is exercising even greater caution in the operations of their businesses, according to industry leaders interviewed in the Mining Business Outlook Report released by Newport Consulting.
Last year the report found a five-year low in the sector’s confidence but this year leaders show signs of accepting tough market conditions. They have recalibrated and refocused, some resorting to an unprecedented scale of investment cutbacks and job redundancies as they focus on being globally competitive.
The report confirms green shoots appearing after a long chill in the sector with 16% of the mining leaders interviewed cautiously optimistic about their growth prospects for the next 12 months – up more than double on last year’s figures. Leaders showing no signs of optimism dropped from 93 to 84%.
Despite a slight shift in confidence, miners are not spending or investing over the next 12 months. The report finds an overwhelming 78% of leaders reducing Capex spend – up from 44% last year. In 2013, the report found 81% of mining leaders moderately or significantly increasing spend. This stark difference suggests that even if there are signs of a recovery, it is early stages and will be slow.
Newport Consulting managing director David Hand says, “Miners are doing it tough but for the first time in three years there are green shoots, a flicker of life in the sector. They are fighting back to remain competitive. Some are reducing the number of mines operating as they focus on becoming more efficient and productive while they wage war against the tough economics of doing business in Australia.”
Leaders are challenged currently by productivity (32%), remaining competitive (17%), regulations, tax and unions (14%) and volatile commodity prices (14%). The opportunities for the next 12 months are in consolidation of operations, cost-cutting, improved productivity and a greater focus on the customer.
The annual report traditionally concludes with advice to the Federal Government from the leaders interviewed. This year the message is simple: ‘We are doing all we can – you need to work with us to make the difference required.’ Miners want to see reformative action taken in the areas of industrial relations and unions.
The report, conducted annually since 2010 by operational management consultancy Newport Consulting, canvasses the views of Australia’s mining leaders. It draws on in-depth interviews held between April and June 2015 with 50 mining leaders from a broad range of private and publicly listed companies. The report serves as an independent pulse-check of Australia’s mining industry.