Random Thoughts for a Hot Summer and a Cold Coffee

Since this is the beginning of summer, I thought it be would fun to relax with some current events that remind us permitting problems are nothing new, and mining has never been more important.

And you thought California was slow . . .

After 137 years a building permit has finally been issued by the City of Barcelona for the spectacular Basilica of the Sagrada Familia.

Although the first stone was laid in 1882, the building has been under illegal construction for 137 years.  Antoni Gaudi personally submitted the signed application and blueprints in 1885.

But the permit doesn’t include the project’s external access staircase.  It will continue to be studied by local residents and organizations. 

Construction is on track to be completed in 2026, and will commemorate the centenary of Mr. Gaudi’s death. 

It would be fun to see a copy of the permit application displayed in the planned museum space!

Musk looks at mining

In case you missed Elon Musk’s annual meeting last week, he unveiled his “cyberpunktruck” (electric pickup), but that it wasn’t much good without the scaling of battery production. He mentioned he “might” have to get into the mining business.  He apparently laughed a little when he said it, but his Boring Company knows how to dig, and Space X is on its way to asteroid mining.  Mmmm . . . I’m waiting for his reaction when he confronts his first “environmental space protectors” protesters!

What’s holding up the China trade agreement?

Well, it could be that China is playing the rare earths card.  Currently they supply 80% of what the US imports, and if they threaten to cut off supplies that affects everything from smart phones to electric vehicles, wind turbines, medical equipment, defense, aircraft, electronics, and much more.  This could get interesting though, if the US decides to pursue more related mining.  In addition, there are at least 4 other countries that are getting ready to gear up in a big way.  Demand for rare earths and other minerals will also continue alongside the growth of developing countries.

Have a sparkling Fourth!

THE CHALLENGES OF ENTERPRISE RISK MANAGEMENT

A revealing risk management report surveying nearly 500 CFOs in the US was recently issued by the American Institute of CPAs and North Carolina State University. 

• 48% - Mostly or extensively concerned about company’s ability to manage leadership and talent needs

• 42% - Impact of the economy

• 40% - Innovations disrupting their business model

• 34% - Shifts in consumer and social demographics

• 30% - Social media harming the organization’s reputation and brand

59% agreed that the volume and complexity of corporate risks have changed extensively over the last five years, and that most did not have a complete enterprise risk management process in place. 

The overall key findings were:

• There is a growing demand for Chief Risk Officers (CROs)

• Management wants a greater focus on risk

• There is a disconnect between risk and strategy

 Barriers cited included beliefs that there were

• Competing priorities

• Insufficient resources, and

• Risk was monitored in other ways besides for ERM

Mining companies continue having a number of social risks that over decades have formed much like sedimentary rock.  And just like metamorphism, they too will undergo change brought about not by extreme physical heat and pressure, but by social stresses that continue to expand.  Educating and updating the public requires a proactive approach.  While standard programs may still be applied, today’s environment demands more creative and contemporary methods and means – from thought leadership to advertorials to influencers and maximizing multiple platforms.  Continuing to respond to the latest barrier before us will eventually result in an industry pushed beyond our borders. 

The Importance of Your Story

Those of us who followed the Theranos saga with incredulity wonder how the company could have convinced investors to outlay $900 million for a “black box” whose technology was not, and may never be, feasible.  In response, federal prosecutors filed charges alleging massive criminal fraud perpetrated against investors, as well as defrauding doctors and patients.  

In my opinion, Theranos was an extreme example of the power of stories.  This particular epic was incredibly powerful because it focused on health benefits for everyone – something laudable, relatable and easy to understand.  Very few people haven’t experienced blood tests, tubes and needles. 

Theranos may have had a stellar story, but it lacked performance.  They convinced everybody of what it could do, and then at great expense and user distress, failed to perform.

On the other hand, mining and building industries have outstanding performance, yet are weaker on stories.

Today, consumer brands increasingly depend on data analytics for buying behavior and to drive product purchase.  That’s certainly helpful, but as the number of brands increase, and true differences decrease, it will be those brands that tell their story – that consistently position their purpose and communicate their positive contributions to society – that have the best chance of enduring.

It is no different – and likely more so – for industrial “brands”, such as those materials from mining.  While our products are wholly necessary for the functioning of society, the ability to operate is often constantly challenged.  Our customers extend to the general public, and we must enable them to experience confidence and trust in what we do and how we do it.  We must meet them where their expectations are, communicate how we “do good”, and bring them along on our journey.

If there’s one lesson from Theranos, it’s that staying power is a combination of performance and stories.

Coping with California's Astigmatism

Those of us who wear corrective lenses do so for a variety of conditions: myopia, hyperopia, presbyopia, and so forth.  Sometimes in describing a viewpoint we use the word “myopia” meaning “narrow-minded” – a reference to an eye condition meaning “short-sighted” or “near-sighted”.

California has a bit of an astigmatism when confronting certain conditions.  The state often tends to distort or blur how it interprets issues, and although often touted as “20-20 vision”, others believe that complex problems need lenses that provide clearer and more complete vision.

Recognizing the astigmatism is important because it affects how all actions are perceived, particularly in building and business.  California’s current focus is to view actions of any kind based on how they’re perceived to affect global climate change.

For example, Assembly Bill 11 is seemingly an attempt to revive redevelopment in California.  While this bill presents a panoply of issues too complicated to go into here, it will require all residential construction to be considered on the basis of whether it meets climate-change goals.  Apparently, every project will need to be approved by the 8-member state Strategic Growth Council.

There is the additional nascent movement occurring of “climate gentrification”.  This is gentrification taking place due to concerns about climate change.  This will impact communities as different cultures and socioeconomic characteristics collide.

Businesses Expected to Address Social and Economic Issues

No longer is it enough that businesses “maximize shareholder value”.  Whether private or public, businesses are now expected to serve a social purpose and demonstrate that they are making a positive contribution to society.  While the public may mistakenly associate mining companies with antiquated skill sets and technologies, those of us in the industry know that many global mining corporations have been on the forefront of adapting, responding, and demonstrating their commitment to communities and countries where they operate.

BlackRock, a global investment firm, manages $1.7 trillion in active funds and CEO Larry Fink is a major proponent that purpose be the animating factor of a company’s business model and strategy, and not simply a marketing campaign.  He believes that “profits and purpose are inextricably linked” and ultimately the key to long term sustainability.  As he states, “environmental, social, and governance issues will be increasingly material to corporate valuation.”

Mr. Fink notes that there are a number of factors driving this direction including:

·         A failure of government to provide solutions for the public’s growing fear and frustration of the future primarily related to the effects of technology on jobs, stagnant wages, and worry about funding retirement.

 ·         A majority of Millennials believing that the primary purpose of business should be “improving society” rather than “generating profit.”

 ·         The pressures of social media that fuel sensitive social issues.

Look for these concerns to only increase, and perhaps instead of assigning mining to the sidelines, it may be that some of the trendier companies could learn something from those of us who continue working to improve an industry that has elevated and augmented human endeavors for eons.

10 COMPANIES DOMINATING THE GLOBAL CONSTRUCTION MARKET

10.  Technip FMC, London, United Kingdom

9.  Strabag, Vienna, Austria

8.  Skanska AB, Stockholm, Sweden

7.  Hocktief Aktiengesellschaft, Essen, Germany

6.  Bechtel, Reston, VA, USA

5.  Bouygues, Paris, France

4.  Grupo ACS, Madrid, Spain

3.  Vinci, Rueil-Malmaison, France

2.  Power Construction, Beijing, China

1.  China Communications Construction, Beijing, China

Source:  Roof Stores

The Irony of Unintended Consequences

California’s 2019 legislature promises to be an Oscar-worthy reality show.   Former Governor Brown may have left the state with a surplus of over $14 billion, but the Democratic supermajority already has legislation lined up exceeding $40 billion in spending.  It will be interesting to watch how Governor Newsom maneuvers, although he has committed to universal health coverage (not yet single payer), and statewide pre-kindergarten.

Unintended consequences often occur when legislation or propositions are passed that feel or sound good but without careful consideration, or based on statements fervently and frequently made in media as accepted fact without allowing for contraindications. 

I was thinking about some unintended consequences recently, and three came to mind:

• Over 200 new mineral species have been identified that have originated principally or exclusively due to human activities – some occurring naturally, but most primarily due to mining. This has occurred over thousands of years, and continues as new suites of compounds form.  It raises the possibility that unknown technological uses will be discovered for these minerals – including environmental benefits. 

• According to a study released by Chalmers University of Technology in Sweden, organic food is worse for the environment than non-organic food.  It turns out that farming organically results in much higher emissions than non-organic farming because of the greater area of land required to farm it.  The study stated that “organic food is so much worse for the climate [because] the yields per hectare are much lower,” mostly due to the fact that fertilizers aren’t being used.

• Researchers at Stanford University have found that many people in the Bay Area may have consistently high fungal exposure from their home – due to “green paint.”  Highly environmentally-friendly painting companies avoid using paints with pyridine.  Pyridine which was a popular house paint additive has an inverse relationship with fungus – so the less pyridine the more fungus.

Copyright © 2018 Sharon Prager All Rights Reserved.

LICENSE TO OPERATE MINING’S BIGGEST BUSINESS RISK

Recently the global firm of Ernst & Young surveyed over 250 mining and metal companies worldwide to pinpoint the top 10 business risks facing this sector.

In descending order, they are:

#10 – New World Commodities

#  9 – Fraud

#  8 – Disruption

#  7 – Future of Workforce

#  6 – Energy Mix

#  5 – Rising Costs

#  4 – Cyber

#  3 – Maximizing Portfolio Returns

#  2 – Digital Effectiveness

#  1 – License to Operate

Mining companies are experiencing tremendous disruption being brought about by societal changes, digital impacts, and pressures from technology and auto companies demanding new world commodities.  However, the license to operate may in fact be the number one critical factor that determines whether a mining company continues to operate successfully in the future.  According to the study “the stakeholder landscape is shifting.  There is more information, bigger platforms and more at stake than ever before.  Underestimating the power of each and every single stakeholder would be a mistake.” 

Truly understanding the risks inherent in maintaining a license to operate requires a detailed assessment of all the factors that will impact your activities including social, environmental, stakeholder expectations, automation of jobs, transmission of rapid digital information, collaboration and branding.  The future may well see new business models being developed to respond and resolve issue-based stakeholder participation.