It is not usual for an industry to reflect on the mistakes it may have made during an exceptional period of making hay (while the sun shines). Being self-critical in the face of one’s own weaknesses is not only important but necessary, so as not to repeat an adverse scenario such as the one confronted by the mining sector after the end of the metals supercycle.

That is precisely the purpose of “Mining for Value: Industry Leaders disclose Lessons Learned from the Supercycle”, a book published by CESCO and Spencer Stuart, recently presented in London during the LME Week. In the book, leaders of the world’s leading mining companies analyze the reasons why the industry so severely resented the end of the supercycle.

The project was originated in 2015 together with José Luis Barroilhet, head of the mining area of Spencer Stuart. Our thesis was that the steep drop in prices was not enough to explain the critical situation of the industry and its effects in Chile and other mining countries. There had to be other reasons to explain this situation. As bad as it is, the mining industry is inherently cyclical and its business model should account for this reality and be able to manage it properly.

The value of the book is that the leaders of the mining industry captured in it the lessons learned in this period: to manage companies with a long-term vision through the cycles knowing that the cycles of increase always have an end; to avoid the exuberance that leads to increase production at any cost, rather than to maximize the value, and then have to make painful adjustments to reduce costs; to maintain a solid financial situation and to not over-borrow to carry out expensive projects or acquisitions; to be extremely rigorous in the execution of investment projects taking the necessary time to know well the geology and metallurgy of the deposits and advance in the engineering, before making the investment decision; to have flexible organizations in the face of market cycles and, above all, a corporate culture where sustainability, innovation, and diversity constitute fundamental levers of value creation.

The relevance of Mining for Value is that it confirms that the causes of the problems suffered by the industry are deep and complex, and have been present throughout its history. The supercycle only made the problems more evident, promoting a period of reflection and change of direction that is necessary to maintain, in order to generate a mining industry much more resilient. It is also a contribution to the new generations and will serve as a reminder of what should be avoided, changed and strengthened when a mining company is managed. In short: that leaders focus on the creation of value in the long term and that they are also guided by solid business values. The result will be more strategic, disciplined, diverse and innovative organizations, capable of responding to the increasingly demanding expectations of their shareholders and stakeholders.

By Jorge Bande, Director of Cesco