Mine 2021: Great expectations, seizing tomorrow

Mining companies are concerned about tax policy uncertainty, but few are doing much about it. With increasing pressure to disclose, and significant upside to be gained from doing so, miners should embrace tax transparency as an integral part of their ESG strategy.

The mining industry, which has been slow to embrace tax transparency, can no longer afford to remain silent. In order to impact tax policy, strengthen relationships with stakeholders and open the door to ESG investment, mining companies must do a better job of reporting on their tax policies, tax risk management and governance strategies related to taxes.

The Top 40 remained resilient during the pandemic. Strong balance sheets and prudent capital management helped deliver outstanding results well ahead of forecasts. Now, as the world emerges into an indeterminate ‘COVID normal’ phase—manifested by much lower levels of the virus but uncertainty about rates of infection in different parts of the world—miners will be faced with a renewed stakeholder focus with a decidedly different flavour: it’s not just how you mine but what you mine, how it is processed and how it is used further down the supply chain. With their recent financial performance, the Top 40 are ideally placed to deliver the materials needed to satisfy the heightening emphasis on decarbonising the global economy.

Last year, the Top 40’s balance sheets were considered rock solid. This year, they are looking even better. The critical question is: what should companies do with their war chests?

The Top 40 continue to divest themselves from thermal coal in a bid to protect shareholder value. But few are looking at the upside of ESG-led deals. ESG offers miners a chance to grow by targeting and acquiring advantaged assets that will continue to expand in value as a low-carbon future unwinds.

Rather than viewing ESG through a defensive lens, miners should see it as a driver of long-term value. Taking an ESG-led approach to M&A can help the Top 40 identify a new class of advantaged assets. These assets meet traditional benchmarks, such as standards for minimum grade and size of deposit, and score high on ESG criteria, such as a low carbon footprint, stable government and supportive local communities. 

The hurdles presented by the pandemic have acted as a catalyst for much-needed change in the mining industry. The challenge for the Top 40 is to take their new ways of working and create a strategy for success in a ‘COVID normal’ world. It's time to shift gears from short-term adaptation to long-term transformation.

This time last year, no one knew how long the pandemic would last. Now, it’s clear that COVID-19 will be with us for some time, with varying rates of infection and different degrees of pre-pandemic life from one country or even community to the next. While the short-term response to the crisis worked, it’s time for a shift in thinking: how do miners succeed in a ‘COVID normal’ world? The decisions the Top 40 make will determine the shape of the industry—and their place in it—for years to come. Three factors should be uppermost to consider: rethinking supply chains, focusing on employee retention and community safety, and embracing automation.