We are at the end of the second decade into the 21st Century. Yet many mining companies operate with a mindset that made perfect sense in the more stable and predictable times that marked most of the second half of the 20th century. As the 2007-08 global financial crisis taught us, the world is now more volatile, confusing, and filled with uncertainty and ambiguity. To date few companies have managed to overcome this challenge. Even the majors, who can afford to employ Tier One consulting firms, continue to struggle for answers. Should we eliminate complexity? Maybe manage? How about reduce? Or simplify? Here’s a sobering thought: None of these are correct. Because complexity emerges from relationships and interactions.
You can form relationships with people, objects, ideas, and events. When you create a new relationship, the level of complexity you personally experience increases with every interaction you make. But it’s not just the interactions between you and your new relationship, it includes interactions amongst your new relationship and the existing relationships you have. For example, hiring a new employee. This person not only forms a relationships with you but with other employees. Complexity naturally increases exponentially. Complexity is not going away. So, the best advice is to make sense of complexity in order to act.
Impact of Complexity on Mining
Australian mining experienced a resource boom in the Industrial Age. In the early 1960s, discoveries of new metals led to a resurgence of interest in Australia’s mineral resources. Production also increased and Australia became a major raw materials exporter, especially to Japan and Europe.
Today Australia is one of the world’s leading mineral resources nations. According to the History of Australia’s mining industry, It is the world’s largest refiner of bauxite, producer of gem and industrial diamonds, lead and tantalum, and the mineral sands ilmenite, rutile and zircon. Other world rankings in production are: zinc (2nd); gold, iron ore and manganese ore (3rd); nickel, aluminium (4th); copper, silver, black coal (5th).
It seems odd that Australia’s enviable position has been accomplished with productivity levels that have been trending downwards. According to Ernst & Young capital productivity in Australia has fallen 45% since 2000. Perhaps it’s because Australia hasn’t been alone in the worldwide decline. E&Y reported labour productivity in the South African gold sector dropping by 35% since 2007.
These sobering findings are corroborated by McKinsey which found that global mining productivity overall has decreased by 29% over the last decade. From 2014 to 2016 McKinsey’s Mine Lens shows a 2.8% per annum uptick in productivity, but productivity is still far below the level 15 years ago.