Welcome!

Symbian Authors: Jack Newton, Kevin Benedict, Matthew Lobas, Shelly Palmer, RealWire News Distribution

News Feed Item

Creating Value in Mining: Four Levers for Long-Term Success

Over the Past Decade, the World's Ten Best-Performing Mining Companies Achieved Stunning Annual Total Shareholder Returns -- Double the Industry Average According to New Report From The Boston Consulting Group

BOSTON, MA -- (Marketwire) -- 01/07/13 -- Between 2001 and 2011, while the S&P 500 eked out an average 3 percent annual total shareholder return (TSR), the mining industry averaged 18 percent. Even more remarkable was the decade-long annual average TSR of the industry's top ten: a stunning 39 percent. Furthermore, unlike their industry peers, the top ten mining companies continued to earn high TSRs during the second half of the decade, the period encompassing the global financial crisis.

How did they do it? Chalk it up to excellent capital stewardship, robust organic growth, and a strong, credible outlook for value creation. So says "Value Creation in Mining 2012: Taking the Long-Term View in Turbulent Times," a new report from The Boston Consulting Group (BCG).

The report, BCG's second annual Value Creation in Mining report and an offshoot of the company's flagship Value Creators report series, disaggregates the sources of total shareholder return for 34 major industry companies using BCG's proprietary model. It also compares the drivers of performance in both the first and second halves of the decade, periods characterized by significantly different macroeconomic conditions. The report then identifies four critical management levers for long-term success. "There are lessons here for all mining companies," says Gustavo Nieponice, a BCG partner and coauthor of the report. "And they will only become more important as companies face persistent market uncertainties, increasingly challenging industry economics, and growing social and policy risks."

Smart Financial Moves

Revenue increases attributable to rising commodity prices accounted for nearly 14 of the total 18 percentage points of TSR that the industry averaged. The remaining 4 percentage points came from a combination of production increases (5 percentage points), margin expansion (6 points), and contributions from cash flow (1 point), all of which were offset by declining investor expectations (-8 points).

The top ten's significant TSR differential (39 percent per year, more than double the industry average) came in part from the deft management of capital expenditures that resulted in better cash flows and from lower debt and equity issuance. Another key contributing factor was their robust organic growth, which triggered rapid increases in profits, given strong commodity prices. Finally, the top ten's successful track record and strong value-creation outlook kept their valuation multiples healthy throughout the decade. "What's even more noteworthy is the fact that success wasn't commodity dependent," says Thomas Vogt, a BCG principal and coauthor of the report. "The top ten include the full spectrum of mineral producers, from gold and copper to coal and industrial minerals."

The report examines the reasons underlying the shift in value creation, looking at the difficulties many companies had in the second half of the decade -- and what those difficulties suggest for the coming years. In particular, it describes three major risks that loom large for mining companies.

First -- like most industries -- the mining industry faces continued uncertainty in the financial and capital markets as well as in customer markets. Second, the economics of mining have grown more and more challenging, owing to a combination of declining ore quality and the need to mine deeper and farther afield to access ores. Finally, social and policy risks -- from social and labor unrest to tax and royalty hikes -- make it incumbent on companies to plan more rigorously. "It's all the more important that companies consider a range of scenarios -- and that they boost their agility and their ability to adapt," observes Tom King, a BCG partner and coauthor.

Four Value Creation Levers for the Long Term

The top ten's success factors point to a set of skills and strategies that have always been important for value creation but that will be increasingly so amid the challenges of a turbulent and uncertain future. The report digs deeper to identify four management levers that, when applied in concert, can help companies achieve solid financial performance and enduring competitive advantage -- regardless of scenario. "These levers deserve renewed attention from mining executives," says King. "Investors and other stakeholders are demanding more of mining companies, and these levers -- when applied appropriately -- have the potential to create tremendous value."

The first lever consists of regularly revisiting and pressure testing the value creation strategy. Companies must get capital allocation and portfolio management right. More important, they should address value creation and risk in a systematic way, across different investment options, so that they can be confident of making the right tradeoffs.

The second lever entails managing country risk and stakeholder relations proactively and continuously -- not only in the development phase but throughout the life cycle of each operation.

Lever three involves boosting the odds of project success. Project execution has grown more complex, and megaprojects have become the norm. "Capex overruns, missed deadlines, and a host of other value destroyers can be successfully mitigated through capex discipline and a number of often-overlooked tools," notes Gustavo Nieponice. "These range from a sound project-governance model and strategic EPC relationship management to rigorous resource planning and having a holistic view of the project pipeline."

The last lever -- developing an advantaged operating system -- encompasses multiple strategies for counteracting the impacts of uncertain demand, rising costs, ever-harsher economics, and declining labor productivity. The report delineates numerous opportunities for leveraging existing assets, from capitalizing on scale for procurement purposes to improving repeatability. Companies can also adopt next-generation mining techniques -- new automated technologies (such as autonomous trucks, remote operations, and new recovery and refining methods), as well as new processes (including the greater use of data and information systems). Finally, companies should create people advantage to combat a dwindling talent supply and declining labor productivity. Drawing on BCG's extensive research on talent and people management, the report offers several people strategies, including focusing on the company's employer brand (specifically, highlighting the employee value proposition); adopting strategic workforce planning; managing talent across the employment life cycle; and centralizing talent and people management efforts in productive ways.

"Value Creation in Mining 2012" provides abundant exhibits, along with a broad array of strategies, methodologies, and approaches that companies can implement to hone their value-creation strategy over the long term. To stimulate discussion and thinking, it also offers a list of key questions for executives.

A copy of the report can be downloaded at www.bcgperspectives.com.

To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or [email protected].

About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 77 offices in 42 countries. For more information, please visit bcg.com.

About bcgperspectives.com
Bcgperspectives.com is a new website -- available on PC, mobile phone, and iPad -- that features the latest thinking from BCG experts as well as from CEOs, academics, and other leaders. It covers issues at the top of senior management's agenda. It also provides unprecedented access to BCG's extensive archive of thought leadership stretching back almost 50 years to the days of Bruce Henderson, the firm's founder and one of the architects of modern management consulting. All of our content -- including videos, podcasts, commentaries, and reports -- can be accessed via PC, mobile, iPad, Facebook, Twitter, and LinkedIn.

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

@ThingsExpo Stories
SYS-CON Events announced today that delaPlex will exhibit at SYS-CON's @ThingsExpo, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. delaPlex pioneered Software Development as a Service (SDaaS), which provides scalable resources to build, test, and deploy software. It’s a fast and more reliable way to develop a new product or expand your in-house team.
In his keynote at @ThingsExpo, Chris Matthieu, Director of IoT Engineering at Citrix and co-founder and CTO of Octoblu, focused on building an IoT platform and company. He provided a behind-the-scenes look at Octoblu’s platform, business, and pivots along the way (including the Citrix acquisition of Octoblu).
SYS-CON Events announced today that Outscale, a global pure play Infrastructure as a Service provider and strategic partner of Dassault Systèmes, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Founded in 2010, Outscale simplifies infrastructure complexities and boosts the business agility of its customers. Outscale delivers a secure, reliable and industrial strength solution for its customers, which in...
SYS-CON Events announced today that Outscale will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Outscale's technology makes an automated and adaptable Cloud available to businesses, supporting them in the most complex IT projects while controlling their operational aspects. You boost your IT infrastructure's reactivity, with request responses that only take a few seconds.
SYS-CON Events announced today that Systena America will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Systena Group has been in business for various software development and verification in Japan, US, ASEAN, and China by utilizing the knowledge we gained from all types of device development for various industries including smartphones (Android/iOS), wireless communication, security technology and IoT serv...
DevOps at Cloud Expo – being held October 31 - November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA – announces that its Call for Papers is open. Born out of proven success in agile development, cloud computing, and process automation, DevOps is a macro trend you cannot afford to miss. From showcase success stories from early adopters and web-scale businesses, DevOps is expanding to organizations of all sizes, including the world's largest enterprises – and delivering real r...
Five years ago development was seen as a dead-end career, now it’s anything but – with an explosion in mobile and IoT initiatives increasing the demand for skilled engineers. But apart from having a ready supply of great coders, what constitutes true ‘DevOps Royalty’? It’ll be the ability to craft resilient architectures, supportability, security everywhere across the software lifecycle. In his keynote at @DevOpsSummit at 20th Cloud Expo, Jeffrey Scheaffer, GM and SVP, Continuous Delivery Busine...
In order to meet the rapidly changing demands of today’s customers, companies are continually forced to redefine their business strategies in order to meet these needs, stay relevant and continue to see profitable growth. IoT deployment and development is integral in this transformation, and today businesses are increasingly seeing the value of investing their resources into IoT deployments. These technologies are able increase ROI through projects such as connecting supply chains or enabling sm...
SYS-CON Events announced today that CollabNet, a global leader in enterprise software development, release automation and DevOps solutions, will be a Bronze Sponsor of SYS-CON's 20th International Cloud Expo®, taking place from June 6-8, 2017, at the Javits Center in New York City, NY. CollabNet offers a broad range of solutions with the mission of helping modern organizations deliver quality software at speed. The company’s latest innovation, the DevOps Lifecycle Manager (DLM), supports Value S...
SYS-CON Events announced today that Peak 10, Inc., a national IT infrastructure and cloud services provider, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Peak 10 provides reliable, tailored data center and network services, cloud and managed services. Its solutions are designed to scale and adapt to customers’ changing business needs, enabling them to lower costs, improve performance and focus intern...
Everywhere we turn in our industry we can find strong opinions about the direction, type and nature of cloud’s impact on computing and business. Another word that is used in every context in our industry is “hybrid.” In his session at 20th Cloud Expo, Alvaro Gonzalez, Director of Technical, Partner and Field Marketing at Peak 10, will use a combination of a few conceptual props and some research recently commissioned by Peak 10 to offer a real-world consideration of how the various categories of...
A strange thing is happening along the way to the Internet of Things, namely far too many devices to work with and manage. It has become clear that we'll need much higher efficiency user experiences that can allow us to more easily and scalably work with the thousands of devices that will soon be in each of our lives. Enter the conversational interface revolution, combining bots we can literally talk with, gesture to, and even direct with our thoughts, with embedded artificial intelligence, whic...
SYS-CON Events announced today that Super Micro Computer, Inc., a global leader in compute, storage and networking technologies, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Supermicro (NASDAQ: SMCI), the leading innovator in high-performance, high-efficiency server technology, is a premier provider of advanced server Building Block Solutions® for Data Center, Cloud Computing, Enterprise IT, Hadoop/...
With major technology companies and startups seriously embracing Cloud strategies, now is the perfect time to attend @CloudExpo | @ThingsExpo, June 6-8, 2017, at the Javits Center in New York City, NY and October 31 - November 2, 2017, Santa Clara Convention Center, CA. Learn what is going on, contribute to the discussions, and ensure that your enterprise is on the right path to Digital Transformation.
Multiple data types are pouring into IoT deployments. Data is coming in small packages as well as enormous files and data streams of many sizes. Widespread use of mobile devices adds to the total. In this power panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, panelists will look at the tools and environments that are being put to use in IoT deployments, as well as the team skills a modern enterprise IT shop needs to keep things running, get a handle on all this data, and deli...
SYS-CON Events announced today that SoftLayer, an IBM Company, has been named “Gold Sponsor” of SYS-CON's 18th Cloud Expo, which will take place on June 7-9, 2016, at the Javits Center in New York, New York. SoftLayer, an IBM Company, provides cloud infrastructure as a service from a growing number of data centers and network points of presence around the world. SoftLayer’s customers range from Web startups to global enterprises.
In his opening keynote at 20th Cloud Expo, Michael Maximilien, Research Scientist, Architect, and Engineer at IBM, will motivate why realizing the full potential of the cloud and social data requires artificial intelligence. By mixing Cloud Foundry and the rich set of Watson services, IBM's Bluemix is the best cloud operating system for enterprises today, providing rapid development and deployment of applications that can take advantage of the rich catalog of Watson services to help drive insigh...
Existing Big Data solutions are mainly focused on the discovery and analysis of data. The solutions are scalable and highly available but tedious when swapping in and swapping out occurs in disarray and thrashing takes place. The resolution for thrashing through machine learning algorithms and support nomenclature is through simple techniques. Organizations that have been collecting large customer data are increasingly seeing the need to use the data for swapping in and out and thrashing occurs ...
SYS-CON Events announced today that delaPlex will exhibit at SYS-CON's @CloudExpo, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. delaPlex pioneered Software Development as a Service (SDaaS), which provides scalable resources to build, test, and deploy software. It’s a fast and more reliable way to develop a new product or expand your in-house team.
With major technology companies and startups seriously embracing Cloud strategies, now is the perfect time to attend @CloudExpo | @ThingsExpo, June 6-8, 2017, at the Javits Center in New York City, NY and October 31 - November 2, 2017, Santa Clara Convention Center, CA. Learn what is going on, contribute to the discussions, and ensure that your enterprise is on the right path to Digital Transformation.