MINING
Unlocking the cost levers that drive profitability
Cost optimisation in mining is multidimensional and goes far beyond simply slashing expenses. The key is identifying and activating the right cost levers across the entire value chain. These include supply chain integration, corporate costs, operating model restructuring, and capital efficiency.
Supply chain integration In mining, supply chain costs are often hiding in plain sight. Materials management can account for a significant portion of operational expenditure, yet supply and demand are frequently misaligned. The issue can be compared to the‘ leaky bucket’ syndrome: materials are procured but not used, stockpiling becomes the norm, and costly inefficiencies accumulate at the operational level.
A more integrated and digitally enabled supply chain can help reduce waste, align procurement with production plans, and drive bottom-line impact. Leveraging technology to synchronise procurement with demand can minimise stockpile costs, optimise logistics, and ensure that materials are used when needed. By implementing smarter supply chain practices, mining companies can achieve a measurable reduction in operational expenses.
Corporate costs and operating model restructuring Beyond the mine site, corporate overheads represent a significant cost lever. Redesigning the operating model – especially in back-office functions – can unlock substantial savings. For instance, a major mining company in the coal sector recognised that structural misalignment and unclear decision-making rights were contributing to inefficiencies across the organisation.
Deloitte facilitated a series of executive-led workshops to confirm the company’ s five-year strategy, define decision rights, and redesign its service delivery model across both corporate and operational layers. This structured, agile design approach aligned stakeholders, clarified functional accountabilities, and laid a strong foundation for implementation. As a result, the company realised a post-implementation cost reduction of approximately 30 %. This example underscores the importance of leadership-led transformation in driving lasting change.
In this context, modernising the digital core through next-generation enterprise resource planning( ERP) systems, cloud technologies, and automation is vital. These tools not only help reduce costs, but also enable faster, more strategic decision-making across the enterprise. By rethinking the back-office structure and adopting digital technologies, mining companies can increase operational efficiency across all levels.
Capital efficiency With fewer major capital projects underway in mining jurisdictions like South Africa, capital discipline is under heightened scrutiny. Value engineering and project optimisation are critical to preventing over-design and control capital costs without sacrificing safety or quality. By applying disciplined capital management practices, project costs can be optimised and sustainable returns ensured.
Technology and automation While technology offers enormous potential for cost optimisation in mining, it must be strategically deployed to achieve real value. To maximise returns, mining companies must align technology investments with specific cost reduction and productivity goals. Ensuring that automation is adopted across the organisation and integrated with other business systems will help achieve meaningful and measurable outcomes. Moreover, technology should be leveraged to streamline operations, improve safety, and enhance asset management.
Avoid lifestyle creep in boom times In periods of high commodity prices, cost discipline often fades, and complacency sets in. Maintaining a lean mindset during growth cycles is essential to longterm competitiveness. It might be tempting to ramp up production or expand operations during boom times, but doing so without maintaining strong cost controls can lead to inefficiencies and margin erosion. Instead, embedding cost-saving practices into their corporate culture will ensure that companies are prepared to weather market downturns and sustain profitability in any economic climate. sabusinessintegrator. co. za 37