Welcome!

Agile Computing Authors: ManageEngine IT Matters, Liz McMillan, Pat Romanski, Elizabeth White, Xenia von Wedel

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
Internet-of-Things discussions can end up either going down the consumer gadget rabbit hole or focused on the sort of data logging that industrial manufacturers have been doing forever. However, in fact, companies today are already using IoT data both to optimize their operational technology and to improve the experience of customer interactions in novel ways. In his session at @ThingsExpo, Gordon Haff, Red Hat Technology Evangelist, will share examples from a wide range of industries – includin...
"We build IoT infrastructure products - when you have to integrate different devices, different systems and cloud you have to build an application to do that but we eliminate the need to build an application. Our products can integrate any device, any system, any cloud regardless of protocol," explained Peter Jung, Chief Product Officer at Pulzze Systems, in this SYS-CON.tv interview at @ThingsExpo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
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...
"We're a cybersecurity firm that specializes in engineering security solutions both at the software and hardware level. Security cannot be an after-the-fact afterthought, which is what it's become," stated Richard Blech, Chief Executive Officer at Secure Channels, in this SYS-CON.tv interview at @ThingsExpo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
According to Forrester Research, every business will become either a digital predator or digital prey by 2020. To avoid demise, organizations must rapidly create new sources of value in their end-to-end customer experiences. True digital predators also must break down information and process silos and extend digital transformation initiatives to empower employees with the digital resources needed to win, serve, and retain customers.
The IoT is changing the way enterprises conduct business. In his session at @ThingsExpo, Eric Hoffman, Vice President at EastBanc Technologies, discussed how businesses can gain an edge over competitors by empowering consumers to take control through IoT. He cited examples such as a Washington, D.C.-based sports club that leveraged IoT and the cloud to develop a comprehensive booking system. He also highlighted how IoT can revitalize and restore outdated business models, making them profitable ...
In his general session at 19th Cloud Expo, Manish Dixit, VP of Product and Engineering at Dice, discussed how Dice leverages data insights and tools to help both tech professionals and recruiters better understand how skills relate to each other and which skills are in high demand using interactive visualizations and salary indicator tools to maximize earning potential. Manish Dixit is VP of Product and Engineering at Dice. As the leader of the Product, Engineering and Data Sciences team at D...
"Once customers get a year into their IoT deployments, they start to realize that they may have been shortsighted in the ways they built out their deployment and the key thing I see a lot of people looking at is - how can I take equipment data, pull it back in an IoT solution and show it in a dashboard," stated Dave McCarthy, Director of Products at Bsquare Corporation, in this SYS-CON.tv interview at @ThingsExpo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
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 and how we integrate our thinking to solve complicated problems. In his session at 19th Cloud Expo, Craig Sproule, CEO of Metavine, demonstrated how to move beyond today's coding paradigm and sh...
Today we can collect lots and lots of performance data. We build beautiful dashboards and even have fancy query languages to access and transform the data. Still performance data is a secret language only a couple of people understand. The more business becomes digital the more stakeholders are interested in this data including how it relates to business. Some of these people have never used a monitoring tool before. They have a question on their mind like “How is my application doing” but no id...
@GonzalezCarmen has been ranked the Number One Influencer and @ThingsExpo has been named the Number One Brand in the “M2M 2016: Top 100 Influencers and Brands” by Onalytica. Onalytica analyzed tweets over the last 6 months mentioning the keywords M2M OR “Machine to Machine.” They then identified the top 100 most influential brands and individuals leading the discussion on Twitter.
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 @...
IoT is rapidly changing the way enterprises are using data to improve business decision-making. In order to derive business value, organizations must unlock insights from the data gathered and then act on these. In their session at @ThingsExpo, Eric Hoffman, Vice President at EastBanc Technologies, and Peter Shashkin, Head of Development Department at EastBanc Technologies, discussed how one organization leveraged IoT, cloud technology and data analysis to improve customer experiences and effici...
As data explodes in quantity, importance and from new sources, the need for managing and protecting data residing across physical, virtual, and cloud environments grow with it. Managing data includes protecting it, indexing and classifying it for true, long-term management, compliance and E-Discovery. Commvault can ensure this with a single pane of glass solution – whether in a private cloud, a Service Provider delivered public cloud or a hybrid cloud environment – across the heterogeneous enter...
Data is the fuel that drives the machine learning algorithmic engines and ultimately provides the business value. In his session at Cloud Expo, Ed Featherston, a director and senior enterprise architect at Collaborative Consulting, discussed the key considerations around quality, volume, timeliness, and pedigree that must be dealt with in order to properly fuel that engine.
Successful digital transformation requires new organizational competencies and capabilities. Research tells us that the biggest impediment to successful transformation is human; consequently, the biggest enabler is a properly skilled and empowered workforce. In the digital age, new individual and collective competencies are required. In his session at 19th Cloud Expo, Bob Newhouse, CEO and founder of Agilitiv, drew together recent research and lessons learned from emerging and established compa...
Whether your IoT service is connecting cars, homes, appliances, wearable, cameras or other devices, one question hangs in the balance – how do you actually make money from this service? The ability to turn your IoT service into profit requires the ability to create a monetization strategy that is flexible, scalable and working for you in real-time. It must be a transparent, smoothly implemented strategy that all stakeholders – from customers to the board – will be able to understand and comprehe...
"IoT is going to be a huge industry with a lot of value for end users, for industries, for consumers, for manufacturers. How can we use cloud to effectively manage IoT applications," stated Ian Khan, Innovation & Marketing Manager at Solgeniakhela, in this SYS-CON.tv interview at @ThingsExpo, held November 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA.
Extracting business value from Internet of Things (IoT) data doesn’t happen overnight. There are several requirements that must be satisfied, including IoT device enablement, data analysis, real-time detection of complex events and automated orchestration of actions. Unfortunately, too many companies fall short in achieving their business goals by implementing incomplete solutions or not focusing on tangible use cases. In his general session at @ThingsExpo, Dave McCarthy, Director of Products...
Information technology is an industry that has always experienced change, and the dramatic change sweeping across the industry today could not be truthfully described as the first time we've seen such widespread change impacting customer investments. However, the rate of the change, and the potential outcomes from today's digital transformation has the distinct potential to separate the industry into two camps: Organizations that see the change coming, embrace it, and successful leverage it; and...