Mining’s Biggest Risks Will Shift in 2023
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Mining’s Biggest Risks Will Shift in 2023

Photo by:   Karsten Würth
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Paloma Duran By Paloma Duran | Journalist and Industry Analyst - Mon, 10/03/2022 - 09:28

Environmental, social and governance (ESG) risks, the geopolitical environment and climate change have been pointed out as the Top Three hazards miners will face in the coming year, according to EY's Top 10 Business Risks and Opportunities for Mining and Metals in 2023. Companies that diversify their strategies and adapt to the changing landscape will be the most competitive, experts argue.

In 2022, the mining sector has been extensively affected by the war in Ukraine, extreme weather events, rule changes in mining jurisdictions and inflation. Consequently, the opportunities and risks of the sector for 2023 have shifted: The new Top Three is followed by licenses to operate, costs and productivity-related challenges, among others. According to EY, mining companies that implement strong strategies to stave off disruptions and changes in commercial relationships will have the greatest competitive advantage in the short and long term.

While experts concur that ESG issues have been further embedded in mining strategies, decision-making, projects and reporting, it still remains the highest risk for mining companies. If not adopted correctly, subpar ESG strategies could lead to under-investment and the closing of operations. Among the ESG issues expected to be the main priority of investors are water management, decarbonization, green production, emissions and diversity, among others.

In 2022, geopolitical risks ranked as the fourth-highest risk for mining companies. However, in the coming year, it will be placed second as resource nationalism is affecting operations and permitting. In addition, the war in Ukraine has had a strong impact on trade relations and input costs. Faced with this problem, mining companies seek to improve supply chains, increase technological adoption and become more strategic in decision-making.

Regarding climate change, most mining companies have set ambitious goals such as net-zero production processes. However, the strategies to make this happen remain unclear for many companies and have plenty of room for improvement.

So far this year, the mining industry has had to address more climate change-related issues and incidents than in previous years, especially extreme weather like rain, droughts and fires. According to mining executives around the world, these issues will impact the production and earnings guidance of most companies. Consequently, they called on the mining industry to further adapt by implementing collective strategies to lessen the impact of these issues.

“Major disruption and rapidly changing expectations, together, may impact the ability for mining and metals companies to build sustainable value. Risk mitigation and maximizing opportunity require companies to make significant changes to their business through a proactive, diversified approach, integrated into strategy and broader planning,” said Theo Yameogo, Americas Mining and Metals Leader, EY.

Photo by:   Karsten Würth

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