The sudden implosion of the commodity boom in recent months has had a profound impact on the global mining and metals industry.
After a period of sustained growth and significant merger activity (which reached its peak in 2006 at USD 140 billion), players in the industry are now looking inward. They are focusing on cutting costs, driving operational improvements and fixing their balance sheets to allow some flexibility to maintain or initiate capital spending if required.
Volume reductions can be observed across the board, either because mines and smelters have become loss-making in an environment of falling commodity prices, or because profitable operations need to reduce production as a result of the rapid slowdown in global demand. The mining industry has reacted to the new realities remarkably quickly and cut capacity substantially. While this may help stabilize commodity prices in the longer term, particularly if some governments step in with major stimulus packages, the downturn already seems to have created some winners and losers, with balance-sheet strength a critical differentiating factor.
Some of the smaller exploration companies listed on AIM and TSX have been particularly affected because financing has dried up, especially for resources companies that do not yet produce anything that can be sold. However, these small players play a critical role in the overall development pipeline, as they serve as the eyes and ears of the big corporations that buy them when a big discovery is made and which makes investment worthwhile.
Yet not all is doom and gloom: some precious metals are expected to perform rather well, and countries such as Brazil, Russia, India and especially China are bound to continue their urbanization and industrialization. Also, some companies are taking advantage of low share prices and limited finance options, particularly among smaller mining companies, by making strategic investments or outright purchases at bargain prices.
What skills are needed?
The winners emerging from the current upheaval will not only be those leaders who can steer their companies through these turbulent times, but also those executives who thrive in this highly complex environment: There are few industries that are more global in nature than mining and metals, and investment horizons span decades rather than years, with often high stakes in the prospecting of new deposits.
How can Egon Zehnder International support the mining industry?
Egon Zehnder International has worked with the majority of the world’s leading mining companies, and our unique internal structure, which knows no national barriers, allows us to serve our clients effectively around the globe. With our close internal collaboration and knowledge sharing, our
Executive Search consultants have been successful in helping our clients identify, evaluate, hire and integrate the best possible leaders.
Our
Leadership Strategy Services Practice has supported a number of players in the sector in systematically evaluating and benchmarking their existing management portfolio at both individual and team level. Having the right team dynamics in place and the best inviduals on board may be the most critical success factor in times of turmoil.
Today, Egon Zehnder International’s global Mining Practice consists of a number of dedicated consultants and researchers spanning the globe. All of our consultants and researchers have acquired extensive professional experience in the sector, and with our single profit centre partnership, we can mobilise our resources quickly to serve our clients to the highest possible standards of professional excellence.
