|By Marketwired .||
|January 7, 2013 12:01 AM EST||
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.
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.
IoT is at the core or many Digital Transformation initiatives with the goal of re-inventing a company's business model. We all agree that collecting relevant IoT data will result in massive amounts of data needing to be stored. However, with the rapid development of IoT devices and ongoing business model transformation, we are not able to predict the volume and growth of IoT data. And with the lack of IoT history, traditional methods of IT and infrastructure planning based on the past do not app...
Jan. 16, 2017 03:15 PM EST Reads: 318
"LinearHub provides smart video conferencing, which is the Roundee service, and we archive all the video conferences and we also provide the transcript," stated Sunghyuk Kim, CEO of LinearHub, in this SYS-CON.tv interview at @ThingsExpo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
Jan. 16, 2017 02:30 PM EST Reads: 1,543
With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo 2016 in New York. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be! Internet of @ThingsExpo, taking place June 6-8, 2017, at the Javits Center in New York City, New York, is co-located with 20th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry p...
Jan. 16, 2017 01:45 PM EST Reads: 3,586
"There's a growing demand from users for things to be faster. When you think about all the transactions or interactions users will have with your product and everything that is between those transactions and interactions - what drives us at Catchpoint Systems is the idea to measure that and to analyze it," explained Leo Vasiliou, Director of Web Performance Engineering at Catchpoint Systems, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York Ci...
Jan. 16, 2017 12:30 PM EST Reads: 5,468
The 20th International Cloud Expo has announced that its Call for Papers is open. Cloud Expo, to be held June 6-8, 2017, at the Javits Center in New York City, brings together Cloud Computing, Big Data, Internet of Things, DevOps, Containers, Microservices and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding business opportunity. Submit your speaking proposal ...
Jan. 16, 2017 12:30 PM EST Reads: 5,003
Discover top technologies and tools all under one roof at April 24–28, 2017, at the Westin San Diego in San Diego, CA. Explore the Mobile Dev + Test and IoT Dev + Test Expo and enjoy all of these unique opportunities: The latest solutions, technologies, and tools in mobile or IoT software development and testing. Meet one-on-one with representatives from some of today's most innovative organizations
Jan. 16, 2017 12:00 PM EST Reads: 1,375
20th Cloud Expo, taking place June 6-8, 2017, at the Javits Center in New York City, NY, will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud strategy.
Jan. 16, 2017 11:30 AM EST Reads: 4,126
SYS-CON Events announced today that Super Micro Computer, Inc., a global leader in Embedded and IoT solutions, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 7-9, 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/Big Data, HPC and E...
Jan. 16, 2017 11:30 AM EST Reads: 5,670
SYS-CON Events announced today that Linux Academy, the foremost online Linux and cloud training platform and community, 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. Linux Academy was founded on the belief that providing high-quality, in-depth training should be available at an affordable price. Industry leaders in quality training, provided services, and student certification passes, its goal is to c...
Jan. 16, 2017 11:30 AM EST Reads: 1,868
WebRTC is the future of browser-to-browser communications, and continues to make inroads into the traditional, difficult, plug-in web communications world. The 6th WebRTC Summit continues our tradition of delivering the latest and greatest presentations within the world of WebRTC. Topics include voice calling, video chat, P2P file sharing, and use cases that have already leveraged the power and convenience of WebRTC.
Jan. 16, 2017 08:30 AM EST Reads: 3,024
"A lot of times people will come to us and have a very diverse set of requirements or very customized need and we'll help them to implement it in a fashion that you can't just buy off of the shelf," explained Nick Rose, CTO of Enzu, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Jan. 16, 2017 06:30 AM EST Reads: 4,502
WebRTC sits at the intersection between VoIP and the Web. As such, it poses some interesting challenges for those developing services on top of it, but also for those who need to test and monitor these services. In his session at WebRTC Summit, Tsahi Levent-Levi, co-founder of testRTC, reviewed the various challenges posed by WebRTC when it comes to testing and monitoring and on ways to overcome them.
Jan. 16, 2017 06:30 AM EST Reads: 5,847
Every successful software product evolves from an idea to an enterprise system. Notably, the same way is passed by the product owner's company. In his session at 20th Cloud Expo, Oleg Lola, CEO of MobiDev, will provide a generalized overview of the evolution of a software product, the product owner, the needs that arise at various stages of this process, and the value brought by a software development partner to the product owner as a response to these needs.
Jan. 16, 2017 05:30 AM EST Reads: 1,095
WebRTC services have already permeated corporate communications in the form of videoconferencing solutions. However, WebRTC has the potential of going beyond and catalyzing a new class of services providing more than calls with capabilities such as mass-scale real-time media broadcasting, enriched and augmented video, person-to-machine and machine-to-machine communications. In his session at @ThingsExpo, Luis Lopez, CEO of Kurento, introduced the technologies required for implementing these idea...
Jan. 16, 2017 04:30 AM EST Reads: 4,514
The WebRTC Summit New York, to be held June 6-8, 2017, at the Javits Center in New York City, NY, announces that its Call for Papers is now open. Topics include all aspects of improving IT delivery by eliminating waste through automated business models leveraging cloud technologies. WebRTC Summit is co-located with 20th International Cloud Expo and @ThingsExpo. WebRTC is the future of browser-to-browser communications, and continues to make inroads into the traditional, difficult, plug-in web co...
Jan. 16, 2017 03:30 AM EST Reads: 2,844
The Internet of Things will challenge the status quo of how IT and development organizations operate. Or will it? Certainly the fog layer of IoT requires special insights about data ontology, security and transactional integrity. But the developmental challenges are the same: People, Process and Platform. In his session at @ThingsExpo, Craig Sproule, CEO of Metavine, demonstrated how to move beyond today's coding paradigm and shared the must-have mindsets for removing complexity from the develop...
Jan. 16, 2017 03:30 AM EST Reads: 5,235
While not quite mainstream yet, WebRTC is starting to gain ground with Carriers, Enterprises and Independent Software Vendors (ISV’s) alike. WebRTC makes it easy for developers to add audio and video communications into their applications by using Web browsers as their platform. But like any market, every customer engagement has unique requirements, as well as constraints. And of course, one size does not fit all. In her session at WebRTC Summit, Dr. Natasha Tamaskar, Vice President, Head of C...
Jan. 16, 2017 03:15 AM EST Reads: 5,747
Who are you? How do you introduce yourself? Do you use a name, or do you greet a friend by the last four digits of his social security number? Assuming you don’t, why are we content to associate our identity with 10 random digits assigned by our phone company? Identity is an issue that affects everyone, but as individuals we don’t spend a lot of time thinking about it. In his session at @ThingsExpo, Ben Klang, Founder & President of Mojo Lingo, discussed the impact of technology on identity. Sho...
Jan. 16, 2017 02:30 AM EST Reads: 3,933
DevOps is being widely accepted (if not fully adopted) as essential in enterprise IT. But as Enterprise DevOps gains maturity, expands scope, and increases velocity, the need for data-driven decisions across teams becomes more acute. DevOps teams in any modern business must wrangle the ‘digital exhaust’ from the delivery toolchain, "pervasive" and "cognitive" computing, APIs and services, mobile devices and applications, the Internet of Things, and now even blockchain. In this power panel at @...
Jan. 16, 2017 01:45 AM EST Reads: 2,679
With all the incredible momentum behind the Internet of Things (IoT) industry, it is easy to forget that not a single CEO wakes up and wonders if “my IoT is broken.” What they wonder is if they are making the right decisions to do all they can to increase revenue, decrease costs, and improve customer experience – effectively the same challenges they have always had in growing their business. The exciting thing about the IoT industry is now these decisions can be better, faster, and smarter. Now ...
Jan. 16, 2017 01:15 AM EST Reads: 4,163