Crescendus™ | Key Issues: Mining & Metals

© Crescendus™ 2012-2014. All Rights Reserved.1

Crescendus™Key Issues: MINING & METALS

Mining (Metallic | Non-Metallic | Precious Minerals & Metals)Steel Manufacturing


1. GLOBAL SLOWDOWN/RECESSION• Strong impact on commodity and metal prices, especially if some of the emerging market countries such as China and Indiaslow down• Economic gyrations will also impact currency prices, whose effects could be substantial for globally operating companies• Projects will be delayed, leading to near term losses and layoffs• Affects the viability of most small and mid level mining and metals companies• Slow economy will also lower demand for metals, leading to idling factories and poor operating efficiencies2. CONSOLIDATION/INTEGRATION RISKS• High costs coupled with intense regulations and project risks will increase the pace of global consolidation• Overpayment, synergy extraction and post merger integration risks need to be managed carefully to prevent value erosion3. RISING OPERATING COSTS• Rising costs (e.g. labor, EPCM, regulations, supply chain etc.) are expected to place severe pressures on profit margins• Cost controls and project efficiencies need to be managed carefully to extract low and mid lying fruits• Capex utilization rates will be sub-optimal in light of economic slowdown and poor market demand in the near term4. ENVIRONMENTAL, HEALTH & SAFETY (EHS)/ REGULATIONS• EHS demands will place severe pressures on companies to comply with changing regulations• Compliance costs are expected to increase due to increased regulations and shortage of skilled labor force• New GHG emission proposals will put most mining and metals companies in caution mode, leading to delayed operations andgrappling with regulatory uncertainty• GHG emission controls at end users will also lower the demand for raw materials, placing additional pressures on miningcompanies• A combination of public and regulatory pressures will increase the demand for sustainable practices such as end-to-endresource management (e.g. water) and remediation efforts

Crescendus™ Mining & Metals Key Issues


5. MINE CLOSURE/REMEDIATION• Substantial investments need to be made to remedy mining sites (land, water, air) to satisfy regulations and prevent publicbacklash (e.g. in the event of large scale ground water contamination)• Scientific and engineering challenges remain regarding the effective remediation of hazardous wastes such as mine tailingsand heap leach wastes6. COUNTRY EXPLORATION/PROPERTY RISKS• Increased nationalization efforts in troubled hot spots will nullify or unfavorably amend existing contracts, leading tosubstantial uncertainty and potential losses for mining rights holders• Long term planning and forecasting production outputs will be extremely difficult to predict in light of above nationalizationtrends7. LABOR/SKILLS SHORTAGE• Matching skills with remote geographic locations and hostile environments will be challenging, in both developed anddeveloping countries• Shortage of labor and skills will significantly increase labor costs• In the absence of right skill sets, companies need to invest significantly in workforce training efforts• Retention challenges remain amidst intense competition for skilled labor• Union costs, in certain countries, will make it difficult to hire new labor under different market operating rates8. EPCM• In light of the above labor/skill shortage issue, matching EPC planning, design and execution will be challenging, and in mostcases, projects will be delayed leading to rising costs• Managing EPC vendors will be critical to control supply chain procurement costs and maintaining budget discipline



9. SOLVENCY• The severity of the economic crisis will lead to the demise of customers and partners (e.g. in joint ventures)• Dumping of cheap products from certain countries (that are backed by state incentives) will lead to severe pricing pressures,and in the process, accelerate the exit of weak players from the market• Non-adherence to supply-demand balance (e.g. excess capacity) will also lead to pricing, cash flow and profitability pressures10. ENERGY• Access to reliable energy sources (e.g. natural gas or coal) for running production operations will be a major rate limiting stepin certain energy poor countries11. INNOVATION & TECHNOLOGY DEVELOPMENT• ERP and other software performance improvement, analytics implementation and ROI generation risks remain in spite ofdetailed planning and large scale investments• New process technologies need to be developed and protected (e.g. IP filings) to keep up with changing customer demandsand performance specifications (e.g. superior temperature and pressure resistance, materials that are both lightweight andtough, etc.). The outcome of such R&D and engineering efforts is difficult to predict• Innovations in business processes, technologies and CRM are needed to face the next generation challenges of globalcompetition and pricing pressures12. ACCESS TO CAPITAL• The vicious cycle of economic downturn coupled with intense global competition and pricing pressures will make most of thefinancial statements of companies look unattractive to lenders, leading to difficulty in securing capital• Lack of access to capital will force companies to make difficult decisions, including delaying resource rich projects• CFO’s will be forced to do financing under unfavorable terms, placing long term pressure on cash flow and profitability



Telephone:1-(865)-332-0942

Email:[email protected]

Website:

www.crescendus.com

Crescendus™ Contact

Contact us if you need help with any of the topics listed in this presentation.

Crescendus™ | Key Issues: Mining & Metals

Business

Transcript of Crescendus™ | Key Issues: Mining & Metals