Some Mining Companies are buckling rising costs
PWC Report 2018
According to a PWC assessment released earlier this year, "… improved performance will continue in 2018, as companies continue to reap the benefits of the upswing in the mining cycle". However, they also flag the inevitability of rising costs!
Half way through 2018 and we are already seeing rising cost pressures from oil & labour related activities. It is easy to get lulled into a sense of comfort when commodity prices and demand are high.
If we wish to maximise current opportunities then it is imperative to keep a tight controlling hand on costs.
Whilst many Australian mining companies are struggling to manage rising cost pressures from oil & labour related activities, a few major companies have indeed managed to find a way to improve margins.
As challenging as it may be to manage per unit costs in an environment where revenues are increasing, it is certainly possible.
Three companies in particular are mentioned for achieving productivity cost gains in PWC’s 2018 report on the ‘tempting times that lie ahead’ for mining companies (see below).
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Productivity Cost Gains
BHP Billiton has reported that, through its Maintenance Centre of Excellence initiative, it expects to save $1.2 billion across the business by FY2022, with a corresponding reduction in downtime of 20 per cent.
Rio Tinto identified $2.2 billion in operating cash cost improvements across 2016 and 2017 with the optimisation of its maintenance strategies, partnerships with suppliers and improvements in mine processes.
Anglo American increased its production by 9 per cent, at a 26 per cent lower cost per unit, and its volume target for 2017 by $1.1 billion. It attributed these successes to its improved mine planning and the simplification of its operating structure. Anglo American also identified the potential to achieve an additional $3-4 billion improvement as a result of improved production and cost reduction.
Read the full PWC report: “Mine 2018: Tempting Times”
RAMESYS GLOBAL – Cost Excellence in Mining
For many years now, Ramesys Global has been helping our clients to implement robust cost management solutions which has given them the control over their business they desire, with the added ability to improve business processes and drive profitability.