Roy Hinkamper

Report
Current Trends in Mining
Finance: Strategic and
Financial Challenges
Roy Hinkamper, KPMG LLP
April 2013
Mining Asset Life Cycle
Asset Life Cycle
Exploration
Evaluation
Development
Production
Closure
1-2 years1
2-10 years1
3-6 years1
1-3 years1
10-50 years1
1-10 years1
Level of activity
Expansion
Commercial
exploitation begins
Removal of overburden
and waste, and plant
commissioning
Permit and licence
applications
Evaluate country
risks and market
opportunities
Prospecting
rights application
Design and
implement
market
strategy
Preliminary
Economic
Assessment (PEA)
Competent
persons report
Search for
commercially
exploitable
resources
Commercial
exploitation ends
Expansion of
mine and plant
Construction of
infrastructure
and plant
Closure of
mine and plant
Ongoing
rehabilitation
Bankable feasibility
study (BFS)
Pre-feasibility study
Note:
(1) Estimated duration of stage in the mining asset life cycle
(2) Reflects key activities only at each stage of the mining asset life cycle
© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of
independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm
has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG
International have any such authority to obligate or bind any member firm. All rights reserved.
Time
2
Mining – what we do
Asset
life cycle
Expansion
Exploration
Evaluation
Development
Production
Closure
1-2 years1
2-10 years1
3-6 years1
1-3 years1
10-50 years1
1-10 years1
Your asset life cycle – How KPMG can help
Strategy
Growth
Performance
Compliance
Sustainability
Strategic &
scenario
planning
Transactions
Projects
Operational
excellence
Risk &
compliance
Business
resilience
Portfolio
management
Market entry
Project
development
Operating model
development
Statutory audit
Community
investment
Scenario planning
Financing and M&A
Feasibilities
Cost and tax
optimisation
Enterprise risk
management
Energy, water and
carbon
Strategy
development
Tax structuring
Financing
Supply chain
transformation
Internal
assurance
Materials
stewardship
People and
change
Due diligence
Tax structuring
Business
intelligence
Forensic
investigations
Mine rehabilitation
Tax strategy and
policy
Integration
Project execution
Business
transformation
Tax compliance
Reporting and tax
transparency
Note: (1) Estimated duration of stage in the mining asset life cycle
© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of
independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm
has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG
International have any such authority to obligate or bind any member firm. All rights reserved.
3
Mining - what are the challenges?
Mining companies face formidable challenges in maintaining profitability in an
environment characterised by declining ore grades and flat commodity prices
Current State Issues
•
Decreasing grade of ore bodies.
•
Higher volume of extraction and
throughput to achieve output
targets.
•
Increased energy costs.
•
Larger capacity infrastructure.
•
Higher capital investment.
•
•
Increased operating costs
associated with higher levels of
mining processing activity.
Regulatory/Social Issues
© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of
independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm
has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG
International have any such authority to obligate or bind any member firm. All rights reserved.
Mitigation
• Exploration for new, higher
grade ore bodies
• Process efficiency
remediation to reduce costs.
• Introduction of new
technology to streamline
extraction and reduce costs.
Consequences
Continual need for
improved productivity to
maintain profit levels
Decreasing net returns
Risks
• Lower output, lower returns.
Pressure to open new
mine sites.
• Continuous escalation of
capital costs.
• Dependence on exploration.
Dependency on capital
funding
4
Mining - Opportunity Areas
Exploration
Drill & Blast
Mine Development
Ore Transport
Crushing/
Grinding
Operation
Closure
Processing
Extraction
Potential Opportunity Areas
Process
Optimisation
Mining processes are often poorly understood and have a great deal of
interdependencies between different stages of the process. De-bottlenecking, lean
techniques, process modeling and controls are significant value levers
Procurement
Procurement in the mining industry can be a source of significant commercial and
strategic value, especially in the current capacity constrained environment where
suppliers are often in powerful bargaining positions. In addition to this a historic focus
on production at the expense of costs can result in inflated procurement costs
Asset Management
Improved maintenance practices and planning activities can improve equipment
availability and utilization through the use of advanced analytics to support predictive
maintenance
Production
Planning
Holistic scheduling of mine production and clear communication and co-ordination
between value chain steps can result in improved overall system performance
Sustainable
Development
The mining industry is facing increasing pressures on the use of land, and water and
constraints on its generation of waste, a thorough understanding of these issues and
appropriate strategies to address them can be a source of significant competitive
advantage
© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of
independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm
has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG
International have any such authority to obligate or bind any member firm. All rights reserved.
5
Thank you
Roy Hinkamper
(314) 244 4061
[email protected]
© 2013 KPMG International Cooperative (“KPMG International”), a
Swiss entity. Member firms of the KPMG network of independent
firms are affiliated with KPMG International. KPMG International
provides no client services. No member firm has any authority to
obligate or bind KPMG International or any other member firm third
parties, nor does KPMG International have any such authority to
obligate or bind any member firm. All rights reserved.
6

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