During the mining industry\u2019s heydays \u2013 the mid-2000s \u2013 capital projects were global mining investment hotspots, and the pace of projects in exploration and construction in the pipeline was staggering.<\/p>\n
But the commodity price meltdown changed that, as many investors got burned on over-funded projects that yielded sub-par returns.<\/p>\n
As a result, capital expenditures in new developments by 2017 fell by almost two-thirds compared to the $80.8 billion peak of 2012, Deloitte\u2019s Tracking the Trends 2019<\/em> report found.<\/p>\n \u201cBurdened by years of cost overruns and impairment charges, many mining companies opted to concentrate on\u00a0maximizing\u00a0output from their existing operations rather than investing in new mine supply and exploration,\u201d Deloitte said.<\/p>\n Capital projects were also overshadowed when investors turned their attention to the emerging and controversial cryptocurrency and cannabis markets.<\/p>\n But the crypto and cannabis hype has died down, and the capital project concept is seeing resurgence as the world realizes the need to mine the minerals of the future to meet the inevitable demands of the electric era, and feed the EV supply chain.<\/p>\n While major mining projects fell to the wayside, the world began to see a surging need for metals like lithium, cobalt, and copper.<\/p>\n \u201cWith the cycle turning mining companies will need to engage in a new wave of capital projects to offset production declines and meet demand,\u201d Deloitte reports.<\/p>\n Supply shortages for commodities such as copper<\/a>, zinc, cobalt, lithium<\/a>\u00a0and gold now\u00a0loom\u00a0and the amount of current deposits will not cover the shortfall, Deloitte reports.<\/p>\n Despite their concerns about realizing sustainable returns miners cannot avoid putting off capital project investments indefinitely, Deloitte asserts.<\/p>\n But Deloitte says the foundations that the capital projects of the future are built on must be strengthened by mining companies.<\/p>\n \u201cThey must learn from the mistakes of the past by approaching capital projects with a new frame; one that sees them honing stronger\u00a0organizational\u00a0capabilities across their entire portfolio of projects rather than reinventing the wheel and assembling new teams on a project-by-project basis,\u201d the report states.<\/p>\n Deloitte\u2019s analysis, based on company capex guidance and market sentiment, indicates that capex is increasing. Even with a modest growth rate, investment could exceed $40 billion in 2020, according to S & P Market Intelligence.<\/p>\n As capital projects begin to pick up again, mining companies will need to avoid the mistakes of the past by rethinking their delivery models, adopting appropriate governance processes and ensuring they have the skills in place to manage performance across the entire project lifecycle, Deloitte warns.<\/p>\n To overcome these challenges, Deloitte says mining companies must build: Delivery Models<\/strong> that should determine the project team\u2019s set up, where accountability lies, and how risk should be shared among delivery partners; Data and Technology<\/strong>\u00a0that should have the capacity to capture a wealth of project information, as siloed information systems hamper their efforts to effectively share this data across the supply chain; Project Controls<\/strong>\u00a0<\/strong>that must be adopted not only during a project\u2019s execution phase, but also during pre-feasibility and feasibility studies, and during the transition to operational readiness; License to Operate<\/strong> as success also hinges on corporate willingness to deliver shared value to local communities and supply chain partners; and Collaboration<\/strong>\u00a0<\/strong>\u2013 to better share risk and drive innovation, mining companies should aim to expand their partnership ecosystem by pursuing grassroots partnerships with juniors and entering into joint ventures to discover new deposits.<\/p>\n Examples of technologies adopted by miners to optimize efficiencies include image recognition, sensor data, text mining, and machine learning and data visualization to enable predictive maintenance for its rail infrastructure. This allowed miners to remediate emerging issues in a controlled fashion \u2013 increasing rolling stock availability, optimizing asset performance and reducing risk of accidents, Deloitte says.<\/p>\n \u201cAfter the challenges faced during the last down cycle, there is a palpable sense of optimism for mining companies as commodity demand picks up.\u201d<\/p>\n Deloitte says that while it won\u2019t happen overnight,\u00a0companies\u00a0that focus on putting the right capital project capabilities into place can strengthen their capacity to adjust supply in response to shifting demand patterns.<\/p>\n And the shift back to the capital mindset is already beginning to show in the mining markets.<\/p>\n Darren\u00a0Stralow, chief development officer for Australian gold miner Northern Star Resources,\u00a0sees bigger business projects ramping back up, and signs of a big capital project comeback into the industry.<\/p>\n