Mining Sector Overview Over the past few years, the mining industry has experienced a boom in growth, with high commodity pricing leading to increased exploration and development. However, this new growth is different from previous eras of high demand, and mining today’s industry has had to adjust to a new, volatile reality over the past several years. With new developments have come new risks, higher input costs, and demographic changes which have led to a decreasing availability of skilled labour. Barrick Gold has responded, for example with an expanded role in workforce development. The table below outlines a number of major trends and their impacts. Implications for Marathon Theme Description of Trend Higher prices mean that previously Increased demand, fueled by unprofitable developments are now being development in emerging undertaken. Marathon needs to support the Strengthened economies, combined with a local prospectors and junior explorers to Demand limited current supply, has ensure that deposits in the region are being boosted prices. developed while the market is so favorable. As demand grows, the supply of key inputs becomes more volatile, increasing the Marathon can assist companies in challenges in meeting steady mitigating risk by ensuring the community production goals. Some can offer local or regional supply at all companies have reacted by Increased Risk levels of the value chain and by helping integrating mining assets, as smaller companies in building supply well as supply and service relationships locally and in the region. functions into their activities, to mitigate supply risks by GLOBAL gaining greater price control and security. While the demand for mining products has risen, so have the costs of transportation, business services, chemicals, Once again, by strengthening the local fuel, electricity and supply chain and local infrastructure, Increased construction materials. MEDC can assist in mitigating risk by Input Costs Despite higher prices, some ensuring the community can offer local or and Costs products which require high regional supply at all levels of the value Volatility levels of inputs during the chain. extraction process may not be profitable should particular costs rise (example, electricity or fuel).
Mining Sector Overview Over the past few years, the mining industry has experienced a boom in growth, with high commodity pricing leading to increased exploration and development. However, this new growth is different from previous eras of high demand, and today’s mining industry has had to adjust to a new, volatile reality over the past several years. With new developments have come new risks, higher input costs, and demographic changes which have led to a decreasing availability of skilled labour. Barrick Gold has responded, for example with an expanded role in workforce development. The table below outlines a number of major trends and their impacts. GLOBAL Theme Description of Trend Implications for Marathon Strengthened Demand Increased demand, fueled by development in emerging economies, combined with a limited current supply, has boosted prices. Higher prices mean that previously unprofitable developments are now being undertaken. Marathon needs to support the local prospectors and junior explorers to ensure that deposits in the region are being developed while the market is so favorable. Increased Risk As demand grows, the supply of key inputs becomes more volatile, increasing the challenges in meeting steady production goals. Some companies have reacted by integrating mining assets, as well as supply and service functions into their activities, to mitigate supply risks by gaining greater price control and security. Marathon can assist companies in mitigating risk by ensuring the community can offer local or regional supply at all levels of the value chain and by helping smaller companies in building supply relationships locally and in the region. Increased Input Costs and Costs Volatility While the demand for mining products has risen, so have the costs of transportation, business services, chemicals, fuel, electricity and construction materials. Despite higher prices, some products which require high levels of inputs during the extraction process may not be profitable should particular costs rise (example, electricity or fuel). Once again, by strengthening the local supply chain and local infrastructure, MEDC can assist in mitigating risk by ensuring the community can offer local or regional supply at all levels of the value chain.