• FINANCE FORUM
MANAGING MINING RISK IN A RAPIDLY TRANSFORMING WORLD
Supplied by Aon
Aon’ s Global Mining Practice leader, Paul Pryor, unpacks Aon’ s latest report – Connected Perspectives: Better Decisions on Risk Capital and Human Capital for Mining Organisations – highlighting the key challenges facing the mining sector, as well as the opportunities and measures to manage the increased volatility and risk.
The mining industry holds a pivotal role in shaping a sustainable future by supplying the essential minerals needed for renewable energy technologies and the energy transition. By embracing innovation and sustainable practices, mining can become a catalyst for progress, balancing environmental stewardship with economic growth. However, it also means that the operators in the mining sector face a tough balancing act with the ever-increasing demand for raw materials against the limitations of finite resources while navigating interlinked challenges such as geopolitical risk, commodity price fluctuations, inflation, human capital risks, cyber risks, climate change and societal and regulatory pressure for greener solutions.
Major challenges
1. Volatility in commodity pricing: While the sector is wellversed in navigating fluctuations in commodity pricing, intensifying global headwinds have increased volatility. The dramatic decline in certain energy transition materials in 2023 highlights just how drastically the commodity price pendulum can swing in the face of weak demand and ample supply. While companies that mine multiple commodities have been better positioned to spread this risk, price uncertainty has been challenging for single-commodity companies.
2. The impact of inflation: Inflationary pressures have seen equipment, labour and energy costs soar, while supply chain challenges within the industry have also contributed to escalating costs. Social inflation has also become a disruptor that is increasing risks for the mining industry, largely attributed to more aggressive legal tactics and a shift in societal attitudes.
3. Evolving human capital risks: With increased requirements for digital skills and evolving employee demands, the mining industry is navigating a significant human capital challenge. Acute shortages across the sector threaten both day-to-day operational stability and long-term profitability and growth. Rapid technical advancements in mining drive the need for digital skills which are in huge demand across every industry sector, making talent attraction and retention challenging and highly competitive.
4. Geopolitical tremors and a tightening regulatory environment: Flashpoints like the Russia-Ukraine conflict have disrupted supply chains, exposed vulnerabilities and complicated the risk management challenge. The industry must think more strategically about how future geopolitical disruptions might impact operations and consider credible risk transfer mechanisms to mitigate these risks. Critical mineral supply is becoming an increasingly geopolitical issue on the path toward clean energy.
5. The dual challenge of climate change: Mining businesses are particularly vulnerable to the physical impact of climate change. However, as a contributor to greenhouse gas emissions, energy consumption and natural resource usage, the industry has close ties to the global climate challenge. As a result, stakeholders are demanding robust environmental, social and governance( ESG) strategies.
6. Cyber risk oversight: Despite the widespread and evolving risks that cyber threats present to all industries, the mining sector is lagging in defence against these threats, with complacency
Supplied by Aon
Aon’ s Global Mining Practice leader, Paul Pryor.
that could heighten vulnerabilities to this risk. As the industry becomes increasingly digitalised and more dependent on automation, businesses increase their exposure to cyber threats.
Opportunities to transform
1. Leverage mining as a catalyst for progress: Mining organisations can lead the charge toward sustainability by adopting eco-friendly practices, investing in renewable energy and supporting conservation efforts. By prioritising sustainability, these companies reduce their environmental impact, enhance their reputation, strengthen investor confidence and attract value-driven employees.
2. Harness the power of digitalisation: Technological advancements, such as artificial intelligence( AI) and automation are revolutionising mining processes. Digital tools can also streamline supply chain logistics, predict equipment failures and support workforce development, creating a competitive edge for forward-thinking organisations.
3. Unlocking the value of recycling: The circular economy presents significant opportunities for the mining sector. By investing in recycling technologies, businesses can extract value from waste, reduce reliance on new extractions and support environmental goals.
4. Embracing growth through strategic investments: As the world shifts toward decarbonisation, demand for critical metals like copper is soaring. This creates an ideal environment for mergers, acquisitions and investments in clean energy and renewable technologies. Forward-looking mining companies can diversify their portfolios, align with sustainability goals and unlock new growth opportunities while capitalising on investor appetite for environmentally responsible practices.
5. Strengthening communities and workforce engagement: Investments in community projects, fair labour practices and workforce training enable mining companies to create lasting
32 • African Mining • May 2025 www. africanmining. co. za