TORONTO, Oct. 2 /CNW/ - As severe supply constraints and rising prices
continue to plague the mining and metals industry, Ernst & Young says it's
more important than ever for companies in this sector to manage risk
effectively. Ernst & Young compiled the following top 10 mining company risks
to help businesses navigate challenges and meet their goals.
1. A skills shortage is the greatest strategic threat facing the mining
industry today. This issue could cause delays in project development
and production, as well as impacts costs.
2. Industry consolidation is a major factor. The opportunity to attain
economies of scale, greater marketing muscle, diversified risk and
more strategic options has driven an unprecedented level of merger
and acquisition activity across the sector. The credit crisis is
impacting the exploration-stage mining companies. Because they are
unable to get further financing, we are seeing even more
3. Limited infrastructure access means the level of infrastructure
expansion does not meet mine expansion, and bottlenecks can develop
as a result.
4. If a company can't maintain social licence to operate, it will no
longer be able to access resources. To keep that licence, companies
must provide excellent social dividends for employee health and
safety, the environment and the host communities they work in.
5. As in other industries, climate change concerns are infiltrating the
mining sector. As a major user of energy and a primary user of land,
mining and metals companies can't afford to ignore climate change.
6. Rising capital and operating costs are squeezing margins. This
problem is driven mainly by a lack of capacity in the supply chain.
Operationally speaking, the sector faces an inability to control
7. The general decline in exploration has made it cheaper for companies
to acquire resources than to discover and develop new ones. Pipeline
shrinkage is an unsustainable trend for this industry.
8. Resource nationalism comes in many forms and is a major risk in
developing and developed countries alike. The problem often arises
when host nations try to renegotiate their share of the profits - and
it usually happens when prices are already running high.
9. Underinvestment in critical infrastructure by host governments is
restricting companies' access to secure energy.
10. The call for increased regulation of the mining industry is
increasingly complex and must be understood by all those at the helm
of mining and metals companies.
Ernst & Young's mining and metals leaders can explain more about what
these risks mean, how companies can manage them, and what other issues are on
the horizon for this complex industry.
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and
advisory services. Worldwide, our 130,000 people are united by our shared
values and an unwavering commitment to quality. We make a difference by
helping our people, our clients and our wider communities achieve potential.
For more information, please visit ey.com/ca.
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