Mining capital projects

Are you ready for the next

CapEx investment cycle?
Capital Project Insights
Contents
Preface: Back to CapEx growth01
Capital project delivery: What’s changed? 02
Getting match-fit for delivering capital projects04
Five levers for capital project delivery confidence06
1. Apply the right owner delivery model and  06
capabilities at the right time

2. Utilize data and digital technologies to optimize  08

project execution and operational readiness

3. Implement highly effective project controls to  10

deliver confident decisions

4. Have a customer mindset and invest in your  12

license to operate

5. Balance the portfolio of investments and partner  14

to win

Finding sustainable growth 16

How Deloitte can help 17
Endnotes 18

Capital Projects Insights is a series of papers bringing together the latest thinking from
members of our global team on optimizing performance and value across the lifecycle of
capital projects.

Note: In this report, capital expenditure (CapEx) comprises the cash outflow on purchases of property, plant
and equipment, and intangible assets. Expenditure on exploration activity undertaken by mining companies
is not capitalized.
 Mining capital projects | Are you ready for the next CapEx investment cycle?

Back to CapEx growth

Can mining companies successfully deliver
the next wave of CapEx growth?
The mining sector has seen challenging ups and downs Figure 1: Mining industry greenfield CapEx
over the past ten years, set against a backdrop of 90
declining ore body grades, decreasing availability of
80
tier one assets, and a continued focus on shareholder
returns. 70

Following the collapse in commodity prices, margins 60

were squeezed on capital investments. This was further 50
exacerbated by the industry’s weak capital project
40
performance.
30
For mining companies, the focus has been on OpEx
efficiencies and returning cash to investors, rather than 20

investing in major greenfield developments. 2017 saw 10

industry CapEx in new developments drop by close to
0
two-thirds versus the US$80B peak of 2012. Grassroots

2018e

2019e

2020e

2021e
2012

2013

2014

2015

2016

2017
exploration spend is at historic lows1, and headcount
and internal project capacity have seen cutbacks as Note: Mining CapEx has declined heavily since the US$80B+ peaks
cost-reduction strategies have taken effect. of 2012. Our analysis, based on company CapEx guidance and
market sentiment, indicates that CapEx is increasing. Even with a
Now the cycle has turned, CapEx must increase modest growth rate, investment could exceed US$40B in 2020.
significantly in order to offset production declines
Source: S&P Market Intelligence, Deloitte Analysis
and meet emerging demand. With improved prices,
mining companies will be under pressure to find and
exploit resources along with delivering on their growth “At some point, a new CapEx boom
promises to the market.
is going to come along to plug
This paper asks whether mining companies have learnt
the lessons from the last cycle, and identifies the five a supply shortfall.“
biggest levers to deliver projects safely, on budget, and Simon Redmond, Sector Lead at S&P Global Ratings2
on time.

Projects to focus on commodities of the future:

Throughout 2017, there has been a revival in the price of most metals and minerals, spurred by better-than-
expected economic growth and a focus on disruptive technologies such as electric vehicles (EV) and battery
technology. In 2018, economic growth is expected to continue; China’s One Belt, One Road project promises
incremental demand for raw materials, and the International Monetary Fund (IMF) revised its global growth
outlook upwards to 3.6 percent in 2017 and 3.7 percent in 2018.3

Traditional materials such as iron and copper will continue to make up the majority of production,
supported by the strong macro-economic environment. The future presents an opportunity to explore
more non-traditional, ‘green’ metals and minerals – mining companies must seize this opportunity by
delivering capital projects effectively and growing sustainability in the long term.

01
Mining capital projects | Are you ready for the next CapEx investment cycle?

Capital project delivery:

What’s changed?
Mining companies have improved delivery performance...
How have mining companies adapted? The industry has invested heavily in digital innovation
Mining companies have taken several steps to to drive operating efficiencies. As investment in
improve on their project performance in the last cycle. projects recovers, embedding a data-centric delivery
Stricter capital-allocation frameworks mean that model and exploiting appropriate technology
investment decisions are much more rigorous with throughout the capital project lifecycle could yield
heightened scrutiny on risks to the business case. further savings.
Business models have also shifted to centric corporate
governance mechanisms that facilitate greater “Following the downturn, significant
command and control on CapEx, improving capital overruns and increased focus on
efficiency.
costs, large mining companies often
To expand their exploration pipeline, several mining are requesting flexible contracting
companies have entered into strategic partnerships
or joint ventures with junior explorers. The quid models where there is a more balanced
pro quo is typically to share intellectual property allocation of risk with engineering,
(IP), engineering resources, technical expertise, and procurement, and construction (EPC)/
exploration costs in exchange for first rights to new
mineral discoveries.4 engineering, procurement, construction
Further, as the demand for project investment has
management (EPCM) providers … There
waned, mining companies have negotiated savings are also immense resource demands as
from tier one suppliers and the supply chain as a large mining companies have downsized
whole, bringing down project delivery costs. However,
without the right controls, these costs will be hard to
their technical and execution resources.”
contain as project activity increases. Dave Lawson, President,
Mining & Minerals at Wood5

Figure 2: Global mining exploration spend Exploration spend

Annualized exploration spend has started to rebound following
3535
a rapid decline since the peaks of 2012.6 With commodity prices
Global Exploration Spend (US$B)

continuing to improve over the past year, better conditions for

2828 exploration investments are expected in 2018.

2121 Source: Bloomberg6

1414

77

00
2018e
2019e
2020e
2021e
2022e
2023e
2024e
2025e
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

Year

02
 Mining capital projects | Are you ready for the next CapEx investment cycle?

... but the goal posts have moved too

What’s different about the project delivery Elsewhere, project models have evolved. ‘Turn-Key’
landscape? projects, where more of the risks from design through
Although mining companies have made adjustments to operation are carried by EPCM contractors, have
in the way they operate, external factors and the wider become more common. Also, large processing original
project ecosystem have also evolved. equipment manufacturers (OEM) have expanded their
offerings significantly, moving into the engineering
Government expectations and resource nationalism
delivery space for smaller developments. Whereas
mean the share of take from reserves has increased, not
the role of the traditional EPCM finishes at project
just in developing economies, but also in the developed
completion, the OEM may be involved throughout the life
world. Such changes put pressure on project margins
of the asset. These new models change the risk balance
and, ultimately, project viability, pushing out payback
and incentives for project delivery, and forge longer,
periods on the capital invested.
mutually beneficial relationships.7
Stakeholder groups (partners, employees, community
The head count reduction in owner project teams
bodies) now expect more from mining companies.
means a leaner, smarter approach is required for
Continuous engagement, faithful delivery of
delivery partner engagement. Mining companies must
commitments, and a focus on sustainability and the
strengthen their in-house project capabilities to ensure
environment are now fundamental requirements. A long-
that they maintain the right control and risk balance with
term strategic approach must be developed accordingly.
their supply chain. With investors low on trust, and a
Meanwhile, the major EPC and EPCM contractors opted more challenging backdrop in which to develop capital
for consolidation when demand for their services projects, a step change in performance is essential.
declined. Fewer suppliers, with less capacity, means
that flexibility and competition in the market have
reduced, and the ability of the supply chain to respond
to increased demand is far from certain. This, combined
with an increased focus on local content, signifies that
effective supply chain management will be a key pillar of
project success.

Figure 3: Diversified miners’ CapEx CapEx spend

Capital guidance from five of the largest diversified mining
companies suggests that capital spend is on the rise again.
CapEx Spend (US$B)

7070 The focus now shifts to delivery confidence. How can mining
5656 companies ready themselves for the next wave of capital
investment? The project delivery landscape has changed and the
4242
challenges during the next investment cycle are different to those
2828 faced before.8
1414
00 Source: The Economist, S&P Global Market Intelligence,
Deloitte Analysis
2020e
2019e
2018e
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

Year
Rio Tinto BHP Glencore Anglo American Vale

03
Mining capital projects | Are you ready for the next CapEx investment cycle?

Getting match-fit for delivering

capital projects
Building capital project delivery confidence requires maturity across
multiple areas
As mining companies prepare for the next uptick in the CapEx cycle, their focus should be on how to rebuild
investor trust. They will achieve this through investment in innovation and digitization, strengthened
government and community relations, and guiding their efforts to repair their public image. A more
disciplined investment approach with strategic partners is expected, with much more effective project
controls and transparency on progress and delivery – simply increasing the delivery contingency will not
resolve the root cause of failures seen in the last cycle. Below, we outline the five most important levers to
improve both project success and scalability throughout the next upcycle, and beyond.

2. Utilize data and digital

technologies to optimize project
execution and operational readiness
Move to data-centric capital projects by
employing digital innovation to drive efficiencies,
leveraging your data assets.

1. Apply the right owner delivery model

and capabilities at the right time
Strike the right balance between owners,
partners, and suppliers though a leveraged
owner model, whilst transitioning capabilities
effectively throughout the project lifecycle.

04
 Mining capital projects | Are you ready for the next CapEx investment cycle?

3. Implement highly Establish appropriate governance, processes

and systems, supported by transparent, timely,
effective project controls to
and visible project information to guide
deliver confident decisions decision making.

4. Have a customer mindset and

invest in your license to operate
Create a new social contract with communities
and governments, transparently aligning
operational decisions with stated commitments,
and working directly with stakeholders
for long-term mutual benefits.

5. Balance the portfolio of

investments and partner to win
Take a holistic approach to your project portfolio,
continuously evaluating against a variety of
dimensions, including; cost, complexity and risk
exposure, and reacting to internal and external
changes. Find the right partners to share project risk
and expertise, gain access to new resources, forge
new relationships and target growth.

05
Mining capital projects | Are you ready for the next CapEx investment cycle?

Five levers for capital project

delivery confidence
1. Apply the right owner delivery model and capabilities
at the right time

The current state of play Our view

Mining projects and the associated supply chain Set up for success: The project development
are multifaceted and often global in nature. Mining strategy and owner organization is critical to success.
companies have heavily relied on EPCM and EPC In the next cycle, miners must move away from being
companies to deliver major projects, but incentives dominated by their delivery partners, and maintain a
have been misaligned with project goals. With control balance. This means equipping leaner project
smaller project teams and continued pressure teams with the right insight and capabilities to make
to control costs, the delivery models adopted by better decisions – a leveraged owner delivery model.
mining companies in the last cycle need a rethink.
Transition through the project lifecycle:
An intelligent client capability with appropriate scale
For projects to progress effectively, the required
to provide expertise and the correct contractor
capabilities need to evolve in line with the project so
oversight is now more critical than ever.
that value delivery doesn’t diminish. Operating model
Other industries have led the way with regards to scalability is critical throughout the project lifecycle,
project delivery innovation, and there are many where all moving parts of the delivery environment
insights the mining sector should draw upon. For must come together to work as a single delivery unit.
example, in the UK construction industry there is an
Think long-term: By taking a long-term view as to
increased use of alliancing and other collaborative
how to select, control, and share risk with delivery
contracting strategies. In such cases innovation is
partners, value can be maximized, people allocated
encouraged, risks are transparent and jointly managed.
efficiently, and confidence in delivery increased. It is
It also remains a challenging environment to achieve key to align incentives with project and operational
project delivery success; as the industry emerges outcomes, driving performance with collaborative,
from the downturn, limitations in capacity and yet targeted, contractual mechanisms. Working
supplier capability must also be navigated effectively. together with the supply chain to drive continuous
Project leadership will be put in the spotlight, and improvement and innovation by sharing in the
management specialization, rather than pure resultant gains will forge long-term, mutually
engineering capabilities, must be nurtured accordingly. beneficial partnerships.

Figure 4: Capital projects delivery models

Dominant Dominated Leveraged

Given the reduction in head count from the last cycle, owner teams need a rethink. Leaner teams, leveraged with the right capabilities and
project information, will ensure a better risk balance between owner and contractor.

Client/Owner Delivery supply chain (e.g. EPCM or EPC contractor)

Source: Deloitte

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 Mining capital projects | Are you ready for the next CapEx investment cycle?

Setting the delivery model up for success:

Whichever project delivery model an organization chooses, and for all types of contractors and third parties
engaged, it is vital that the following is established:

•• Clarity on the client/owner’s role(s) •• Appropriate levels of collaboration between parties

•• Definition of who is accountable for what •• Correct incentivization for each layer of the delivery
•• A proactive approach to interface management organization

Exploring best practice from other industries:

The Tideway project is a near US$6B investment in the delivery of a 25km tunnel, 65m below the River
Thames in central London. Deloitte supported the formation of a new, stand-alone entity: the Infrastructure
Provider. This entity needed to not only have the capabilities to deliver the capital project, but also manage
the needs of multiple external stakeholders, attract potential investors and preserve the client’s existing
operations.

The target operating model design considered the organization’s capability requirements at key phases
of the project’s lifecycle, focusing on the optimal owner’s team structure and core in-house capabilities
needed. The operating model was subsequently implemented through a transition management plan, which
supported the stand-up of the required capabilities across a number of areas such as technology selection,
detailed supporting manuals, process maps, training materials and governance terms of reference. This
innovative way to set up a project owner delivery model enabled the right capabilities to be in place, at the
right time.

07
Mining capital projects | Are you ready for the next CapEx investment cycle?

Five levers for capital project

delivery confidence
2. Utilize data and digital technologies to optimize project
execution and operational readiness

The current state of play analytics, forming the foundation for data-driven
The good news is, mining companies have made decision making in a consistent, timely and visible
significant advances in using technology, such as manner. Based on our experience with technology
self-driving vehicles, drones, three-dimensional (3D) delivery on multi-billion-dollar infrastructure
printing, and wearables, so as to optimize operational programs, we expect to see CapEx savings of up to
assets. Mining companies are now starting to rethink five percent from these technologies when
the way they generate, capture and process a wealth complimented by an effective owner’s team.
of project information throughout the project
Data is an asset: View information as an asset to be
lifecycle, but must do more to make the most of the
managed throughout the project lifecycle, ultimately
opportunity this data provides.
setting up a ‘digital twin’ to support success during
Such innovation still faces systematic barriers. Mining the transition to operations. Building information
companies must attract and develop new skillsets and management (BIM) can not only help with safety
expertise not typically associated with the sector’s performance, design, modular construction and
workforce. There is a need to increase transparency accurate budgeting, but can also facilitate smooth
and improve collaboration throughout the supply handover of data to enable a continuous maintenance
chain, with data and engineering information shared regime pre and post first ore.
more freely, processes more closely aligned, and
systems better integrated. Figure 5: The unified data system
Schedule
Our view
Become digital: Mining companies need to shift
HSE Cost
from ‘doing digital’ to ‘being digital’. Achieving the
right blend of digital technology, data, and advanced
analytics in order to deliver data-centric capital
projects.

Invest in data standards: Codifying data Risk Productivity

requirements and specifications drives consistency
between projects and operations, as well as ensuring
Unified data model + Analytics
data management costs are focused on information
that adds the most value.

Embed a unified data model: Data needs to be

fully optimized, standardized and collected
consistently from a vast number of sources into Materials Engineering
tracking data
a unified data model. This unified system enables
consistent reporting and the leveraging of predictive Quality

Cloud-based, System-integrated, Secure

Source: Deloitte

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 Mining capital projects | Are you ready for the next CapEx investment cycle?

Finding efficiencies through analytics:

Deloitte was engaged to apply advanced analytics to a global miner’s rail infrastructure, optimizing
maintenance costs and production processes for 900km of railway between a major mining complex and its
port and logistics terminal.

Our team applied the latest technologies, such as image recognition, sensor data, text mining, machine
learning and data visualization, to provide predictive maintenance capabilities for these critical assets.
Identification of various failures ahead of full manifestation, allowed for controlled and planned maintenance
activity, increased rolling stock availability, a reduced risk of accidents and increased confidence in asset
condition.

Increasing information consistency and transparency through analytics:

Deloitte has developed an integrated tool for analytical monitoring of a portfolio of capital projects at
the operational, tactical and strategic levels. It integrates information from planning systems, such as
Oracle Primavera, and on a single platform provides insights into subcontractor productivity, analysis of
interdependencies, health and safety performance, as well as the monitoring of physical and financial
progress at a project and program level. Such insight allows for informed management decisions based on
up-to-date, common data and information.

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Mining capital projects | Are you ready for the next CapEx investment cycle?

Five levers for capital project

delivery confidence
3. Implement highly effective project controls to deliver
confident decisions

The current state of play Our view

Today’s capital projects are more complex, with more Define your project controls landscape: Establish
partners, and increased internal and external scrutiny. an owner-led project controls strategy early in the
Delivering projects whilst maintaining control of such project lifecycle, applied across all operating model
complexity has been an ongoing challenge for all layers: organization, process, technology, data,
capital intensive industries – particularly when project and governance. Success depends on integrated
controls capabilities are established too late. relationships and ways of working within the
Other sectors, such as aerospace and defense, have organization and supply chain being strictly adhered to.
led the way when it comes to controlling cost, scope, Visualize your data: Invest in information technology
schedule, and risk by investing in the right capabilities that facilitates accurate, on-demand reporting and
and technology, and putting project controls at the rigoros performance review. Visualizing centralized
center of their approach to project delivery. Mining project information appropriately for each
companies must follow suit in order to turn the tide of stakeholder informs insight-driven decision making.
cost and schedule overruns seen in the past decade. Predictive project management: Optimizing cost
and schedule requires continuous monitoring of
project performance, tracking cost and schedule
trends, and anticipating issues before they occur.

Figure 6: Decision pressures throughout the project lifecycle

Ability to
influence baseline

Impact of change

Start-up and
Pre-Feasibility Feasibility Execution
Operational Readiness
•• Ability to support business •• Ability to provide oversight/ •• Project controls capacity •• Inventory and preservation
Project controls/
requirements

case development control of design and scaled to fit activity levels. management.
through cost estimating, procurement activities. •• Standard and process •• Engineering data
risk assessment and high •• WBS and scope packages compliance. management.
level scheduling to enable defined with baseline •• Data-centric management •• Workstream prioritization and
investment decisions. estimates and schedules of information. agility in activity planning.
developed. •• Timely, consistent quality
outputs.

•• Land access, environmental •• Detailed study, processing •• HSSE, time, cost, quality critical. •• HSSE, quality and completion
and infrastructure needs. options/technology selection. •• Risk and project execution focus.
Project focus/

•• Stakeholder and interface •• Commercial focus. focused. •• Clear handover.

activity

management. •• EPCM oversight, procurement, •• Up-to-date, accurate data- •• Collaboration between

•• Iterative processes with time operational requirements and based decision making. project and operations
for detailed analysis. logistics planning. •• Limited time to interpret teams.
•• Risk based decisions on •• Cross-stream integration. information.
early-phase data. •• Control of change and •• Need a ‘chain of command’
impacts. with clear decision owners/
Source: Deloitte authority.

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 Mining capital projects | Are you ready for the next CapEx investment cycle?

Exploring best practice from other industries:

As Europe’s largest infrastructure project, Crossrail is complex; delivering 42km of rail tunnels and seven
new central underground stations via 140 main works contracts. At a critical point in its lifecycle, the project
secured investor confidence by establishing effective project controls, systems and capabilities. This enabled
the project team to lead and control this US$20B mega-project, driving better performance from delivery
partners lowering costs and navigating a multifaceted range of interfaces, stakeholders and contracts.

Deloitte was engaged as Crossrail’s strategic partner, working as part of an integrated team to establish
governance, processes and systems that enabled control of cost, schedule, risk and scope with a leaner
organization. The integrated project controls solution incorporated enhanced analytics capabilities utilizing
a single, integrated source of information. The executive suite of dashboards and reporting prioritized
focus on material performance indicators, provided a clear line of sight on progress, as well as ensuring
transparency internally and to the project sponsors.

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Mining capital projects | Are you ready for the next CapEx investment cycle?

Five levers for capital project

delivery confidence
4. Have a customer mindset and invest in your license
to operate

The current state of play Mining companies must also manage a range of
In recent years, the mining sector has moved to international treaties, complex local permitting
improve its reputation, but it nonetheless battles legislation and diverse approval processes. Without
with a history of poor environmental performance, a detailed understanding of such requirements
troubled community relations, as well as questions throughout the full project lifecycle and a balance
surrounding transparency and corruption. Recurrent being struck between a wide range of stakeholders,
events, such as local unrest, labor disputes and project redesign and resultant stoppages can occur.
production stoppages, stem from a disconnect
In order to manage such a complex web of
between stakeholder expectations and delivery.
requirements and interactions, mining companies
These negative perceptions can spill over into other
must not only optimize their corporate relations
jurisdictions and limit or restrict future relationships.
capabilities, but also evolve their approach to
The environment within which mining companies engagement. Today’s diverse stakeholders require
operate has expanded to include far more a proactive, customer mindset to fully realize common
complex challenges and proactive stakeholders. benefits.
One such example is the increasing focus on
Our view
energy management – continued legislative and
Embed a license to operate and customer
community pressure to use energy responsibly and
culture: Adopt an approach that balances the need
reduce greenhouse gas emissions is forcing mining
for strategic long-term planning and shorter-term
companies to act.9 These challenges require more
budgeting with delivering shared value to local
than a sustainability agenda, communications and
communities and the supply chain. This requires an
external relations efforts to manage and resolve.
organizational model that allows the coordination
Our research indicates that over two thirds of license of capabilities across all of a mine’s business areas,
to operate incidents occurred in Latin America and enabling effective relationship-building across the
Africa. As future growth opportunities move to entire project lifecycle.
more challenging environments in terms of access,
Deliver on your commitments: Build license to
geopolitical uncertainty, and business practices, the
operate aspects into investment and stage-gate
onus will be on mining companies to put strict control
decision making, and build a long-term institutional
and governance regimes in place.
capacity and strategy to nurture stakeholder
relationships.

Setting Corporate Relations targets and measuring performance:

Deloitte supported a global mining company in developing its local content and community incident target
program by co-baselining targets and preparing for pilot roll-out across projects and operations. The work
enabled better performance management at a local level and allowed for development of standardized,
integrated reporting of targets at a group level. The monitoring and transparent tracking of targets, fosters
a regime of continuous improvement and allows focused action to ensure an economic dividend for local
communities and suppliers.

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 Mining capital projects | Are you ready for the next CapEx investment cycle?

Developing a detailed plan of commitment activities, Stakeholder influence environment

integrated into the wider project scheme, is Strengthening the business’s capability to manage and
key. Technology can also play a part – customer respond to its stakeholder environment will ensure a
relationship management (CRM) tools allow license to operate is maintained.
optimization of relationship management and can
Improving processes, systems and governance
enable functions to actively manage commitments
will allow the business to proactively influence key
and communications.
stakeholders, and mitigate critical issues.
Rethink local partnering: Move beyond the unilateral
Understanding the influence of local, regional and
actions companies typically adopt (such as donations
national stakeholders is critical to the long-term
and philanthropy, preferential hiring, and legal
relationships with these parties. Gone are the days
compliance) to embrace more collaborative modes of
where promises were made to be broken. For the
engagement designed to get local communities more
relationships with these stakeholders to be beneficial
invested in mining operations. Investing in innovative
to all parties, the license to operate must become part
local content programs is critical to ensuring
of the core organizational model.
sustainable engagement.

Understand your customer: Demonstrate a capacity Figure 7: Complexity of stakeholder influence

to deliver greater value as understanding customer
needs and delivering against them is now critical. Look
Intra-
beyond one cycle and one project, and try to build organizational
truly long-term relationships that benefit all parties.

“As the mining industry’s value

proposition is increasingly called International Local

into question, mining companies Project/

asset
are beginning to see that they
cannot succeed into the future
unless they change the way they
operate. This is about more National Regional

than enhancing efficiencies. It’s

about re-establishing trust with Complex, ever-changing interactions between different stakeholders,

stakeholders, and collaborating as well as the project, mean that a clear strategy and plan for
engagement is required.

to devise better responses.” Source: Deloitte

Glenn Ives, Americas Mining Leader,

Deloitte Canada

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Mining capital projects | Are you ready for the next CapEx investment cycle?

Five levers for capital project

delivery confidence
5. Balance the portfolio of investments and partner to win

The current state of play Optimize your portfolio: Early-stage projects should
Although it’s true that mining companies have be continuously evaluated. Flexible, driver-based
taken significant steps to optimize their portfolios, modeling gives visibility of multiple ‘what if’ scenarios
commodity prices are notoriously hard to predict, and to support decision making in line with the overarching
disruptive technologies are continuously changing the strategic vision. Rolling this information into a single,
market landscape. consolidated view helps mining companies make
decisions that properly assess macro and project risks
The uptake of stringent capital allocation frameworks
at a portfolio level.
is a step forward in ensuring investments are made on
only the best projects, but when sanctioning long-term Partner strategically: Be selective, and optimize your
investments and strategic deals, mining companies partnering landscape. Define what drives partnering
have not been able to react as the macro environment decisions and develop your partnering ecosystem.
shifted. Further, investments must be assessed with a Mining companies should pursue grassroots
whole-lifecycle view. Often the true implications of deal partnerships with Juniors, enter into joint ventures
exit or mine rehabilitation are not considered, and the to uncover new deposits, better share risk and drive
additional costs prove prohibitive. innovation.

Due to a distrust of collaboration, concerns about Develop the right internal capabilities: Manage
intellectual property rights and competitive advantage, partnerships and joint ventures (JV) effectively.
mining companies have in many cases preferred to This includes establishing partnering frameworks
take a lead role, bearing the burden of risk. This has and operational controls, and embedding the right
meant that more capital is tied up over the long term, behaviors throughout the deal and project lifecycles.
more shouldering of risk, and missed opportunities.
Other industries, most notably oil and gas, have
leveraged partnering to their advantage by diversifying Use analytics to optimize portfolios
their portfolios, sharing the risks of large investment, One of the greatest difficulties organizations face
gaining access to new technologies and geographies, when trying to structure optimal portfolios is making
and fostering new relationships. informed choices about which assets to buy or sell, and
Our view when. Too often, these decisions hinge on subjective
Learn from other sectors: To reduce the risk of factors that cannot be effectively measured or
long-cycle megaprojects, oil and gas companies often improved. To remove some of that subjectivity, leading
engage in shorter-cycle projects designed to rapidly organizations are increasingly relying on data analytics
generate a positive cash flow. In addition to reducing to rank and score potential investment opportunities.
capital expenditures, these short-cycle investments Properly implemented, these analytical tools can help
help to preserve production capacity and help ensure mining companies improve their financial models,
portfolio agility. For mining companies, a phased uncover new business opportunities, and make better
approach to the largest investments could spread the investment and divestment decisions.
risk in a similar fashion.

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 Mining capital projects | Are you ready for the next CapEx investment cycle?

New approaches in action:

To position itself for future growth and gain a competitive advantage, Rio Tinto has committed to managing
its asset portfolio more actively. To this end, it set up Rio Tinto Ventures to gain access to commodities that
are set to benefit from megatrends, such as industrialization and urbanization, technological disruption,
and the interconnection of global markets. Rio Tinto Ventures aims to enter joint ventures and partnerships
with asset owners where its engineering excellence, sales and marketing channels, and technical expertise
allow it to add value. The company hopes these investments will position it to uncover new greenfield
opportunities in partnership with junior mining companies.

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Mining capital projects | Are you ready for the next CapEx investment cycle?

Finding sustainable growth

The winners in the next cycle will be those that create repeatable
value through effective project development

After the challenges faced during the last downcycle, There are multiple barriers to overcome, not least
there is a palpable sense of optimism for mining operating in challenging geographies, constrained
companies. Global economic activity is improving, budgets, complex supply chains and a shortage of
and new industries and technologies are providing skills. Those who navigate these challenges first will
opportunities for commodities growth. reap the richest rewards.

But before launching into the next wave of By ensuring the right capabilities are in place, and
investment, the lessons of the last cycle must be through transforming traditional operating models,
learnt, and the industry needs to rebuild trust with mining companies can select the right investments,
stakeholders in its ability to deliver value in the find the best partners and deliver capital projects with
longer term. confidence, to the benefit of investors, employees,
local communities, and suppliers alike.
Finding the right balance between in-house
exploration, joint ventures and acquisitions, and
developing your own projects will be key.

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 Mining capital projects | Are you ready for the next CapEx investment cycle?

How Deloitte can help

Deloitte has advised on many of the world’s largest and most complex
capital projects, both within the mining sector and other capital
intensive industries. Our global team brings together leading best
practice, in-depth knowledge and market-leading expertise to provide
end-to-end service across the entire lifecycle of mining assets.
For more information, or to discuss any of the topics raised in this paper, please contact a Deloitte projects or
mining professional.

Global contacts
Global Leader, Lead Mining Capital Global Leader, Global Leader,
Mining Projects Partner Infrastructure Energy
& Capital Projects & Resources
Phil Hopwood Marc O’Connor Nick Prior Rajeev Chopra
pjhopwood@deloitte.ca maoconnor@deloitte.co.uk nprior@deloitte.co.uk rchopra@deloitte.co.uk
+1 416 601 6063 +44 20 7303 5324 +44 20 7007 9858 +44 20 7007 2933

Regional/Country contacts

Africa Brazil China South Africa

Andrew Lane Eduardo Raffaini Kevin Xu Louis Kruger
+27 115 174 221 +55 213 981 0538 +86 10 85207147 +27 118 066 165
alane@deloitte.co.za eraffaini@deloitte.com kxu@deloitte.com.cn lokruger@deloitte.co.za

Australia Canada Colombia UK

Heidi Isreb Guy Lembach Astrid Fernandez Tim Biggs
+61 3 9671 6696 +1 403 503 1341 +57 1426 2397 +44 20 7303 2366
hisreb@deloitte.com.au plembach@deloitte.ca asfernandez@deloitte.com tibiggs@deloitte.co.uk
Lewis Stewart Sima Gupta Kazakhstan Bora Pasuljevic
+61 8 9365 7338 +1 416 643 8932 Marina Kostanian +44 20 7007 5975
LeStewart@deloitte.com.au sigupta@deloitte.ca +7 727 258 1340 bpasuljevic@deloitte.co.uk
Steve Walsh Glenn Ives mkostanian@deloitte.kz US
+61 8 9365 7097 +1 416 874 3506 Michael Whalen
Peru
swalsh@deloitte.com.au gives@deloitte.ca +1 214 840 1461
Christopher Lyon
James Kornweibel Chile +56 227 297 204 miwhalen@deloitte.com
+6 189 365 7190 Fernando Rodriguez-Rey clyon@deloitte.com Mark Cohen
jkornweibel@deloitte.com.au +51 1211 8585 +1 212 436 7206
Russia
frodriguezrey@deloitte.com markwcohen@deloitte.com
Igor Tokarev
+7 495 787 0600 Paul Campbell
itokarev@deloitte.ru +1 713 982 3644
pcampbell@deloitte.com

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Mining capital projects | Are you ready for the next CapEx investment cycle?

Endnotes
1. S&P Global Market Intelligence.

2. Telegraph.co.uk, October 29, 2017. “Metals start to shine as miners find new optimism” by Jon Yeomans. Accessed at http://www.
telegraph.co.uk/business/2017/10/29/metals-start-shine-miners-find-new-optimism/on January 05, 2018.

3. International Monetary Fund, October 2017. “Seeking Sustainable Growth: Short-Term Recovery, Long-Term Challenges”

4. Deloitte.com, January 31, 2018. “Tracking the trends 2018” by Deloitte. Accessed at https://www2.deloitte.com/global/en/pages/
energy-and-resources/articles/tracking-the-trends.html on January 31, 2018.

5. IM-Mining.com, November 24, 2017. “The view from the top at Bechtel, Wood and Fluor on mining EPC/EPCM” by Paul Moore.
Accessed at https://im-mining.com/2017/11/24/view-top-bechtel-wood-fluor-mining-epcepcm/on January 15, 2018.

6. Bloomberg.com, March 24, 2017. “Miners Regain Mojo to Spark $18 Billion in Exploration Hunt” by David Stringer. Accessed at
https://www.bloomberg.com/news/articles/2017-03-23/miners-regain-mojo-to-spark-18-billion-in-global-exploration on January
03, 2018.

7. Miningmagazine.co.uk, September 12, 2017. “Reeling in cost overruns” by Carly Leonida. Accessed at http://www.miningmagazine.
com/future-of-mining/future-of-mining-sustainability/reeling-in-cost-overrruns on January 22, 2018.

8. The Economist, March 11, 2017. “Mining companies have dug themselves out of a hole” by The Economist. Accessed at https://
www.economist.com/news/business/21718532-electric-vehicles-and-batteries-are-expected-create-huge-demand-copper-and-
cobalt-mining on January 22, 2018.

9. Industry.gov.au, September, 2016. “Energy Management in Mining” by Department of Industry, Innovation and Science (AU).
Accessed at https://industry.gov.au/resource/Documents/LPSDP/LPSDP-Energy-Management-in-Mining-Handbook.pdf on
January 25, 2018.

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 Mining capital projects | Are you ready for the next CapEx investment cycle?

Notes

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Mining capital projects | Are you ready for the next CapEx investment cycle?

Notes

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