This website uses cookies, including third party ones, to allow for analysis of how people use our website in order to improve your experience and our services. By continuing to use our website, you agree to the use of such cookies. Click here for more information on our and .
Australia’s productivity problem is causing the country’s miners to lose ground to international competitors, Deloitte has argued.
In the organisation’s Tracking the Trends 2014 report, several areas of improvement for Australian companies were highlighted.
According to Deloitte, the cost of building new iron ore capacity jumped from $100 per tonne in 2007 to $195 per tonne just five years later. Thermal coal miners were hit particularly hard, with per tonne costs jumping from $61 to $176 over the same period.
This was despite the fact metallurgical coal prices plummeted by more than 50 per cent between 2011 and 2013, slipping from $330 per tonne to $150 per tonne.
Deloitte said Australia has struggled with its productivity over the last decade. Since 2003 – the last time the country posted a productivity increase – efficiency has dropped by 30 per cent.
Mining engineering challenges
A report commissioned by the Minerals Council of Australia claimed that high resource sector wages, combined with the costs of doing business in the nation, have compounded problems for the resources sector.
“Chinese and Indian producers have an estimated 60 to 80 per cent cost advantage in minerals processing compared to their Australian counterparts,” Deloitte said, citing figures from the council’s study.
Project analysis shows that 65 per cent of mega projects in excess of AU$500 million do not deliver on their target value, the company added.
“To improve project outcomes, mining organisations need a clear line of sight on actual expenditures, one that provides insight on costs per unit of production.”
Another problem companies face in Australia is anti-mining sentiment, with the country subject to some of the highest taxes in the world.
Nicki Ivory, mining leader for Australia at Deloitte, said: “To avoid chasing companies out of their regions, governments must become more sophisticated in the application of their fiscal rules.”
The skills gap
A dearth of skills in the mining sector is another issue. Deloitte said businesses must refine their talent attraction and retention strategies.
This is becoming increasingly important as the average resources workforce age increases. Figures from Canada’s Mining Industry Human Resources Council show that around 40 per cent of extraction employees are at least 50 years old.
In fact, one-third of the industry is expected to retire within the next six years, which could create gaps even if many of these workers move into executive roles.
“The pace of worker attrition threatens both operational productivity and the leadership pipeline,” Deloitte stated, adding that while these are Canadian figures, it is a worldwide trend.
“This has left many companies without the skillsets crucial to shepherd them through the current commodity price downswing or ensure success in remote and unstable regions.”
Mining training and courses
Deloitte’s report emphasises the conflicting goals many mining companies face in wanting to reduce costs and still retain critical talent.
The company identified mining training as an important piece in the puzzle. Businesses were encouraged to embrace new training environments and innovative thinking to improve employee skills while staying on top of wage inflation.
Many mining firms are also standardising their systems, Deloitte said, which allows common operating procedures across all their mines. This boosts staff mobility and reduces the amount of on-site retraining required.
“Conversely, however, an overly-rigid operating environment can stifle innovation and creativity, resulting in the flight of key talent,” the organisation argued. “Companies must take care to get this balance right.”
