COVID-19: Navigating impact in mining and metals

April 3, 2020

The unfolding coronavirus crisis in mining & metals

The rapid spread of COVID-19 is disrupting lives and operations across industries, and mining and metals are no exception. The pandemic is affecting the entire value chain, as organizations limit access to offices, mine sites and manufacturing facilities, and restrictions on transportation and shipping increase. The industries face potential shortages of materials, such as chemicals and machine components, from upstream suppliers who are experiencing their own disruptions from the pandemic. And the crisis has shaken the confidence of investors around the globe.

In short, the mining and metals industries have been thrust into a period of change and uncertainty that requires action. To move forward, companies must maintain a dual focus, tackling an array of short-term critical issues while keeping an eye on the longer term, and reshaping their operations to recover, adapt and thrive in the coming years.

What to do now: Manage the response

The actions that companies take in this crisis will not only determine how well they fare in the short term—they will also define their culture and brand for some time to come. To mitigate near-term operational risks and protect people, the following actions should be taken now:

Maintain/Establish the response governance team

Continue to maintain the response room of senior leaders and establish cross-functional teams to deal with emerging challenges, giving consideration to the needs of workers, vendors and communities.

Ensure that people are safe

Manage and continue to innovate the recently deployed strategies to protect your people such as the use of remote operating centers and mobile technology to reduce the need for on-site personnel.

Conduct financial due diligence

Assess the company’s current financial position, update strategic assumptions, and be ready to aggressively mitigate risk and identify opportunities to benefit from market volatility.

Reduce operational exposure

Address potential supply chain disruptions; validate business continuity plans; engage suppliers, unions, communities and others; and engage the workforce in finding ways to reduce the impact of the crisis on operations.

Monitor and report

Keep track of the health of the workforce and the sentiment of stakeholders across the value chain. Develop a risk assessment process and update it regularly.

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What's next: Building for the long term

The crisis has brought significant challenges to the mining and metals industries, but it has also created an opportunity to reset for the future. Beyond their immediate responses to the crisis, companies can build the capabilities that over time will help them recover from today’s crisis and successfully navigate through tomorrow’s disruptions. To do so, consider these six actions:

1. Empower people, operate with purpose

Re-think the way you operate and how you build trust with employees, partners and communities. Honor company values as your actions today will define how all key stakeholders think of you tomorrow.

2. Assess liquidity

Conduct scenario modeling (for cash flow, P&L and balance sheet), looking at controllable uncertainties for demand and supply and the triggers affecting revenue and cost. Formulate action plans to respond—while considering the capital expenditures that would be required from a supply/labor/resource perspective to execute those plans.

3. Assure supply and delivery

Companies can re-forecast their demand plans for the remainder of the production year by working collaboratively with their largest end customers, and those with long-term supply contracts. Understanding their needs through the crisis and beyond can help you identify the correct production profile for your situation and avoid the excess use of working capital.

4. Secure operational continuity

For the short term, companies may need to operate their assets at a suboptimal point. But beyond that, they should consider rebalancing production. On a tactical level, that means operating at a predictable production output capacity to match re-forecasted demand, and to avoid WIP inventory stockpiling and re-handling costs.

5. Uncover opportunities

Be alert to opportunities where necessity opens the door for strategic improvements that can support future growth. For example, a plant shutdown could provide a window for asset upgrades and modernization. Remote training or applied technologies could be used to upskill an idled workforce that is staying home.

6. Replatform for a digital world

Assessing how digital technologies and analytics can be used to increase resilience and efficiency is paramount. Some typical examples in operational and industrial settings include: remote work enablement; remote operation monitoring; real-time, analytics-driven planning tools; and automation and robotics to remove workers from the field where possible.

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Overall, mining and metals companies need to react now, respond decisively and plan for what is coming next. It’s an approach that will help meet today’s challenges brought on by COVID-19 and those that come tomorrow.