Monday, December 22, 2008

Mining sector: the top 10 issues for 2009 according to Deloitte


Deloitte’s Energy & Resources Group has released a round-up of global perspectives covering the most pressing and significant issues facing mining companies in 2009.

Deloitte Head of Energy & Resources in Australia, Phil Hopwood said: “Tracking the trends 2009: the top 10 global mining issues, covers the following key issues:

- the commodity price rollercoaster

- the double squeeze of higher costs and lower prices

- the credit tightening and risks to expansion 

- the chronic talent and equipment shortages

- political and tax policy volatility

- the growing difficulty of finding quality assets

- the imperative to consolidate

- the need for sustainable development

- the tightening regulatory environment, its complexity and cost; and

- the increasing shortage of electrical power

Mr Hopwood said: “Whether volatile markets or operating cost pressures, regulatory compliance or carbon permits, the report offers insights and strategic advice intended to help executives chart their companies’ courses over the coming months. 

“There is neither a magic bullet nor a one-size-fits-all solution to the challenges mining companies face. But there is opportunity. Between managing costs, mitigating shortages, reducing risk, streamlining consolidation and improving compliance, the mining sector can continue to lay the foundation for growth despite current economic conditions.

Commenting further Dr Eric Lilford, Deloitte Corporate Finance Partner said: M&A activity will increase in 2009 as companies strive for survival or growth through targeting economies of scale, leveraging off each others’ balance sheets and opportunistic transactions. Inbound investments will also pick up as our neighbours aim to secure attractive mineral assets.”

 Deloitte Head of Mining Bhavesh Morar said: “The pendulum has definitely shifted back. With the rapid falls in commodity prices mining companies must re-evaluate the economics of their mines and mitigate through cost reduction, or face mine closure. Some mines will just not be economic given the price falls and the operating cost structures.

 

But the longer term outlook is strong, according to Deloitte Economics partner and resources expert, Jon Stanford: “The commodities boom had to end sometime but the market reaction to it has been overdone. While commodity prices have fallen from their historic highs, world growth will resume before too long and once again Australian resources will be in increasing demand. The Federal Government deserves credit for taking the long term view and committing to invest in some of the infrastructure projects needed to eliminate bottlenecks that have restricted export growth in the recent past.”

 


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