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Productivity, capital decisions and civil opposition to mining projects are the top three risks to the mining industry this year, finds EY’s annual “Business risks facing mining and metalsreport.

Boards and CEOs are realizing that regaining lost productivity will be critical for long-term profitability, says Bruce Sprague, EY’s Canadian Mining and Metals Leader.

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The top strategic business risks:

  1. Productivity (2 in 2013)
  2. Capital dilemmas – allocation and access (1)
  3. Social license to operate (4)
  4. Resource nationalism (3)
  5. Capital projects (7)
  6. Price and currency volatility (6)
  7. Infrastructure access (9)
  8. Sharing the benefits (8)
  9. Balancing talent needs (5)
  10. Access to water and energy (new)

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Major industry players have made steady progress on capital management and optimization following a spate of asset write downs in 2013. However, little has changed in the past 12 months for many small companies and explorers when it comes to capital challenges.

While capital risks improved over last year, the number and size of projects being delayed or stopped by community and environmental activists continues to rise.

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Access to water and energy is the only new entrant to this year’s risks list. Burgeoning energy costs and competing water demands in many regions, particularly Chile, Peru, South Africa and Mongolia are starting to have a bigger impact on costs and companies’ ability to operate.

Mining companies spent US$11.9 billion on water infrastructure globally last year alone — a 250% increase over 2009. And global energy prices have leapt 260% since 2000.

Originally published on Advisor.ca

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