Climate change is the number one risk for ASX-listed mining companies according to the latest KPMG Mining Risk Forecast 2024 — the results were drawn from analysis based on data extracted from reported material risks in the most recent annual reports for ASX 300 mining sector companies.
KPMG Partner Risk Consulting Caron Sugars said: “What stands out is that climate and community/social licence risks have jumped up in the past year to be the new top two concerns for miners.”
Sugars stated that these risks are at the front of mind for the industry right now and are being discussed in the board rooms of Australian miners.
“We would say the challenges from uncertainty regarding climate change and social licence to operate are considerable but so too are the opportunities for the sector. Miners need to ‘bake in’ risk strategy around climate,” said Sugars.
She notes that talent attraction — which was the third top risk in the 2023 forecast — has also dropped down the list, as miners increasingly prioritise net zero targets, health and safety, and related regulatory changes.
Sugars observed that mining companies are focused on regulation and strict financial disclosure requirements.
“They are concerned about people — reflected in the fact that ‘health and safety and security risks’ is new to the top five this year,” said Sugars.
Commodity prices
While commodity price risk dropped from the number one named risk after three years in the top position, KPMG Australia Partner in Charge of Mining and Metals Nick Harridge said that its fundamental importance to the sector was undiminished.
He noted the short-term volatility for spot prices in minerals such as lithium and nickel but said that critical minerals remained a demand and supply story with longer-term demand expected.
“We’re seeing additional pressures around commodity price volatility and downward pressure on margins, at the same time, operational and capital expenditure pressures have increased and staffing shortages of 20 per cent or more mean the need for rigorous planning and cost management
Corporate M&A in mining
Similar to community and social licence risks, managing capital expenditure, costs and staffing were also more pronounced issues for small mining companies where fewer projects and longer start times were reliant.
“As we look ahead into 2024, and a landscape of lower commodity prices and higher costs, we expect to see an increase in corporate M&A as both operators and developers in the sector seek to achieve growth through consolidation,” said Harridge.
Cyber and IT Security Risks
Cybersecurity risks were last named in 2021, however, Sugars stated that it remains a broad corporate risk.
“The World Economic Forum Global Risks Report for 2024 calls out Cyber Insecurity as the fourth most severe risk for the next two years. We’d say that as miners increasingly look to leverage digital technologies — including those needed to mitigate climate change and move to net zero — they need to consider cybersecurity as an ‘all of organisation’ risk,” said Sugars.
Mining Sector Opportunities
The risk challenges identified in the KPMG Mining Risk Forecast for 2024 also present significant opportunities for the mining industry to set climate-related goals and develop strategies to reach decarbonisation targets.
“There is an opportunity ahead for Australian miners to focus on not only extraction by also processing, with Australian Government support being provided for critical minerals. This is a key part of the response to climate change risk and reflects the positive outlook for the sector longer term in both traditional mining and critical minerals,” said Sugars.
Top five reported risks for listing mining companies
- Climate change
- Community relations and social licence to operate
- Commodity price risk
- Health, safety and security risks
- Environmental risks including new regulations
