Business risks facing mining and metals

1. Business risks facing
mining and metals
• The 2010 Ernst & Young
business risk report

2. The top 10 risks for the mining and
metals industry
1. Capital allocation
2. Skills shortages
3. Cost management
4. Resource nationalism
5. Maintaining a social licence to operate
6. Infrastructure access
7. Access to secure energy
8. Access to capital
9. Price and currency volatility
10.Climate change concerns

3. Company Leadership can address
those risks by:
• Identifying, assessing and restructuring distressed assets and
operations
• Sharing costs and risks through farm-out and joint venture
arrangements with new and existing business partners (especially
Asian-based)
• Testing investments at lower metal prices and deferring uncommitted
expenditure in anticipation of better terms for services and equipment
• Securing additional working capital to fund ongoing exploration and
operating costs through measures such as selling assets to unlock
liquidity or negotiating with creditors to restructure debt
• Through shared services, outsourcing to lower cost markets and
process improvements
• Reducing stockpiling / mine output

5. Next Steps suggestions by E&Y
1. Conduct an annual risk assessment impact on business
drivers.
2. Conduct scenario planning for the major risks that you
identify, and develop a number of operational responses.
3. Evaluate your company’s ability to manage risks that you
identify - in particular, ensure that your risk management
processes are linked to the risks that your business actually
faces.
4. Effectively monitor and control processes as they will
provide you with earlier warning and improved ability to
respond.
5. Keep an open mind about where risks can come from.
Ours is an increasingly interdependent global economy
and risks that can damage your business can arise in any
market sector.