Future growth now the top business risk for mining and metals companies

Canadian companies also dealing with new regulations, talent crunch

VANCOUVER, July 7, 2015 /CNW/ - Cyclical behavior and short-term focused shareholders have pushed "switch to growth" to the top of EY's annual ranking of business risks in mining and metals companies globally.

Bruce Sprague, EY's Canadian Mining & Metals Leader says: "A switch to growth mode, productivity improvement and access to capital are all critical risks for mining companies around the world – and Canadian companies are no different. But we have some additional risks that companies here can't afford to let fly under their radar. Increased transparency requirements – such as the Extractive Sector Transparency Measures Act which came into effect on June 1 – and a looming skills shortage are issues that should be top-of-mind for mining companies in Canada."

EY's report, Business risks in mining and metals 2015-2016, notes that in Canada an estimated 40% of the workforce in resource extraction sector is at least 50 years old, and around 33% of those are expected to retire by 2022.

"These retirements will impact operational continuity and lead to a great loss of organizational know-how and operational experience for mining companies," says Sprague. "It's a big issue that companies must address. Strong talent management programs that focus on retaining the right people for today's challenges will be as critical to the future success of mining companies as investment in exploration."

According to the report, the top 10 business risks for mining and metals companies today, compared to the top 10 in EY's 2008 report at the peak of the super-cycle, provides a stark contrast to the issues faced now and then, and underlines the cyclical nature of the sector. Just three of the top 10 risks from 2008 rank in the top 10 this year.

"A focus on regaining lost productivity has led to a serious lack of innovation in the sector, which pushed it into our top 10 risks this year," says Sprague. "There's a lot of room for improvement when it comes to innovation. It's no secret that compared to most other industries, there has been minimal transformational innovation in the mining sector. That's something companies across the board really need to prioritize if they're to thrive into the future."

Top 10 risks

2015

2008 (peak of the super-cycle)

01

Switch to growth

01

Skills shortage

02

Productivity improvement

02

Industry consolidation

03

Access to capital

03

Infrastructure access

04

Resource nationalism

04

Social license to operate

05

Social license to operate

05

Climate change

06

Price and currency volatility

06

Rising costs

07

Capital projects

07

Pipeline shrinkage

08

Access to energy

08

Resource nationalism

09

Cybersecurity

09

Access to energy

10

Innovation

10

Increased regulation

 

About EY
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY is proudly celebrating 150 years in Canada. For more information, please visit ey.com/ca. Follow us on Twitter @EYCanada.

EY refers to the global organization and may refer to one or more of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

SOURCE EY (Ernst & Young)

For further information: Erika Bennett, erika.bennett@ca.ey.com, 403 206 5157; Julie Fournier,julie.fournier@ca.ey.com, 514 874 4308; Sasha Anopina, sasha.anopina@ca.ey.com, 416 943 2637

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