Mining Industry: Five Leadership Issues Worthy of Board and Executive Attention

Introduction

Mining companies operate in a complex business environment where they face many challenges in terms of price volatility, access to financing, geopolitics and regulation. At the same time, the effects of technological innovation, changing market conditions and a host of other major risk drivers are contributing to dialogues in boardrooms and executive offices. Most significantly, executives are asking if they have the right leadership talent in light of the challenges they face.

From our conversations with board members and CEOs in the mining industry, the following five issues and their implications on leadership talent have emerged as top of mind for the executives:

• Optimizing assets and operations

• Continuing to earn the “license to operate”

• Leveraging technology and innovation

• Injecting diversity in leadership

• Building a board for a complex business environment

Optimizing Assets and Operations

• In the current down cycle, the focus of mining companies is on restructuring asset portfolios and driving productivity improvement programs. The companies with a strong balance sheet are seizing the opportunity to grow through mergers and acquisitions (M&A).

• There is demand for leaders adept at cost discipline, operations improvement, and project development and management, and at the same time for those who can drive strategic and successful M&A and new business model innovations.

Continuing to Earn the “License to Operate”

• Mining companies need to address a number of issues in their operations. These include navigating regulation and government policies, confronting sustainability concerns from investors and local communities, and managing on-site health, safety and environmental issues.

• An increasing focus on sustainability is fueling the need for more proactive stakeholder management to mitigate the reputational risk and to future proof the business.

Leveraging Technology and Innovation

• Following more than a decade of sparse adoption of innovative infrastructure, mining companies should evaluate how they best embrace technologies such as automation, mechanization and data analytics. Doing so can significantly improve productivity and will transform the industry’s operating model and redefine what will be required of future leaders.

• Harnessing talent who will successfully drive value-adding technological change across the organization requires considering pools of talent in adjacent sectors. The specific targets depend on the scope and scale of the company’s technological vision.

Injecting Diversity in Leadership

• Given the cyclical nature of the mining business, there is demand for leadership talent with a long-term perspective and, for certain roles, a track record in the industry.

• However, the mining industry has become very insular and would benefit of more leadership diversity in terms of gender, ethnicity, generation and industry experiences to tackle the future challenges.

Building a Board for a Complex Business Environment

• Mining boards should include a diverse and multi-disciplinary roster of professionals to help solve issues in an increasingly complex business environment.

• Apart from key tasks such as CEO succession planning and remuneration, boards need to respond to challenges like regulation, price volatility and productivity, shareholder activism, technological advancements, M&A and cyber security.

Endnotes

OPTIMIZING ASSETS AND OPERATIONS

1. Commodity Metals Price Index 1995-2015, Index Mundi, 2015; Indices of Primary Commodity Prices, 2005-2015, International   Monetary Fund, 2015

2. “E&MJ’s Annual Survey of Global Metal-Mining Investment,” Engineering & Mining Journal, 2014; “E&MJ’s Annual Survey of Global Mining Investment,” Engineering & Mining Journal, 2013; “Pulling Back Across the Board: Project Survey 2015,” Engineering & Mining Journal, 2015

3. Proprietary analysis of executives from leading mining companies, Russell Reynolds Associates, 2015

4. Proprietary research, Russell Reynolds Associates, 2015

CONTINUING TO EARN THE “LICENS E TO OPERATE”

1. “Indonesia Holding Firm on Iron Ore Ban amid More Investments,” Bloomberg, 2014

2. “Top five unusual mining protests,” Mining Australia, 2014

3. “Mexico’s senate approves reforms, including 7.5% mining tax,” BNAmericas, 2013

4. “Chile enacts tax reform,” Ernst & Young, 2014

5. “Bolivia’s Morales nationalizes zinc and tin mines licensed to Swiss group,” MercoPress, 2012 

6. “African Governments Tussle With Mining Firms,” The Wall Street Journal, 2014

7. Proprietary analysis of executives from leading mining companies, Russell Reynolds Associates, 2015

8. Proprietary research, Russell Reynolds Associates, 2015

LEVERAGING TECHNOLOGY AND INNOVATION

1. “Tracking the trends 2015,” Deloitte, 2015; “Business risks facing mining and metals 2014-2015”; Ernst & Young, 2014; Engineering & Mining Journal, 2014-2015; Mining.com, 2014-2015

2. Digital Pulse Survey, Russell Reynolds Associates, 2015

3. Proprietary research, Russell Reynolds Associates, 2015

INJECTING DIVERSITY IN LEADERSHIP

1. Proprietary analysis of executives from leading mining companies, Russell Reynolds Associates, 2015

2. Proprietary analysis of integrated exploration and production oil and gas CEOs, Russell Reynolds Associates, 2015

BUILDING A BOARD FOR A COMPLEX BUS INESS ENVIRONMENT

1. Proprietary analysis of boards of leading mining companies, Russell Reynolds Associates, 2015

2. “Tracking the trends 2015,” Deloitte, 2015; “Business risks facing mining and metals 2014-2015,” Ernst & Young, 2014; Proprietary research, Russell Reynolds Associates, 2015