The global metals and mining industry, its antenna closely attuned to the emerging BRICS economies and volatile global commodity markets, faces a period of uncertainty as operating costs spiral, key commodities such as iron ore and coal threaten to tip into over-supply and exploitable new mineral deposits become increasingly elusive.
Add to that competition from US coal exporters, resource nationalism, uncertainty around taxation and legislation, and a global investment community that is increasingly risk-averse, and it's no surprise that industry analyst Deloitte is predicting a 'seismic shift' in mining methodologies in 2014.
"The global mining industry is faced with volume issues and increased underlying costs," says Phil Hopwood, Deloitte's global mining leader. "China is moving towards a more consumption-based and construction-led economy and so mining operators are no longer just focused on volume and cost, but on how they can improve productivity in the marketplace."
Why is productivity down? "Look at the figures from Australia in terms of labour costs per unit for iron ore production," Hopwood says. "In 2003, the annual wage rate was $75,000; in 2012 that figure was $124,000. However, in 2003, the iron ore production rate per employee was 17,000t - less than a decade later that figure was just 12,000. So, wages have gone up while production has gone down and this is indicative of the overall story throughout the mining sector."
Supply and demand: cost-efficiency, reduced ore grades and business fundamentals
Published in December 2013, Deloitte's report 'Tracking the Trends 2014: top ten issues in mining' will not be a comfortable read for operators, many of whom have grown accustomed to the easy profits that characterised the bullish early noughties, and who now must now take a long hard look at business fundamentals if they are to survive - let alone flourish - in the bearish near future.
What does the labour market in the global mining industry look like in 2014?
"The mining industry is always looking at macro-economic issues," Hopwood explains. "China really entered the world stage in 2004-05 and since then, apart from a hiccup in 2008, GDP growth rates have been very strong. The whole story has been around volume - just churn the stuff out.
The issue with mining, of course, is that different commodities have different drivers. "It has been a good story across the board for most commodities in the last few years, but some base metals such as aluminium have fared less well," Hopwood says "It's all about supply and demand, and there's more supply in that sector in China than there is, say, in iron ore, which is limited to a smaller number of producers in Western Australia, Brazil and parts of Southern Africa.
"Take copper or gold," he continues. "Mining operators are chasing fewer and fewer decent mine sites with reduced ore body grades, and are having to go much deeper in order to access those commodities. So that's what is driving the decreases in production, not just inefficiency."
There is an element of boom and bust here, Hopwood points out, adding: "Mining is a relatively simple industry and in a slump it tends to just cut costs, but the problem there is that when the market recovers the costs just go up as before. So in reality it's about attacking the fundamentals around productivity and what really drives costs around business fundamentals such as energy and water consumption. That's why we identified 'innovation' as one of our trends in the report and that's why mining companies have got to innovate their way out of some of these issues."
Remote possibilities: hybrid air vehicles, energy wave drilling and remote mining
And innovated they have, drawing inspiration from their counterparts in the global oil and gas sector. Offshore operators, desperate to demonstrate to investors and wider society that theirs is not a sunset industry, have pioneered solutions such as digital radiography and hyperspectral imaging, allowing them to access precious resources in hitherto inaccessible environments such as the Arctic.
"Sometimes mining can be a little insular as an industry, but we've been doing a lot of work in the energy management space and there's undoubtedly a mood in the sector that says 'it's not just about innovation in mining, it's about learning from other industries as well'," confirms Hopwood. "There has been some fantastic strides made in process manufacturing - in 3D robotics and process automation, for example - and mining companies can learn from that."
Rio Tinto is one mining giant that places a premium on intellectual capital, partnering with the likes of NASA, Microsoft and leading US universities to develop its 'Mine of the Future' concept.
"The main driver, of course, is that if you have to develop mines in ever more remote locations, how do you get people out there to do that?" says Hopwood. "Rio Tinto has been talking about operating mines on a remote basis and there is significant discussion taking place around the use of airships and hybrid air vehicles for transportation. Several mining companies are also looking to use drones to carry out equipment inspection in the field."
Something as prosaic as the use of trucks to transport iron ore to port has also proven to be a fertile subject for leading-edge technological research. In Australia's iron-rich Pilbara region, subsidiary Rio Tinoto Iron Ore uses the autonomous hauling system, which comprises a fleet of 15 gigantic robotic vehicles operated by computers housed 930 miles away in Rio Tinto headquarters in Perth.
Hopwood also points to advancements in drilling technology. Horizontal drilling allows engineers to the penetrate further underground by following naturally occurring rock layers and is typically used for gas or oil drainage and ore body delineation in brown-field mining operations. Energy wave or sonic drilling uses high-frequency, resonant energy and has great potential for mining operations.
"Energy wave drilling is a fascinating area as are new conveyer technologies," says Hopwood. "I was recently in a remote mining site in the South Africa's Northern Cape and it was full of conveyers. With 40% of mining costs taken up with materials movement and energy management, the thinking is now around replacing these with electric light rail services.
"People question this, but the mining sector is a big driver of electrification and renewable energy - in the era of sustainability, it makes good economic sense for many mining companies operating in remote locations such as Chile to look into new techniques around water reclamation."
The number of controversial mining projects around the world is on the rise and 2013 was no exception .
Cultural revolution: why mining companies must embrace change
Deloitte's 'Tracking the Trends' report urges mining companies to adopt a new approach to doing business, one that does away with short-termism in favour or collaboration and innovation.
Against this backdrop, I conclude by asking Hopwood for his take on commodity prices, how the industry will evolve in 2014 and whether there is a danger that operators are relying too much on technology at the expense of a more forensic evaluation of more entrenched business practices.
"In my view, the biggest issue is around trying to build a proper dialogue between the mining sector and governments," he states. "The issue of resource nationalism has been around for generations. What is different now is that governments spent a lot of money to get themselves out of the 2007 slump and there is less of that money available now if that was to ever happen again - hence, they now need a larger share of profits and taxes.
"At the same time, mining is about building communities and there is more of a need for companies to get the story out about what they can offer countries in terms of employment. Governments need more money and miners want to invest, but operators need stability in terms of tax levels because they are making long-term investment decisions of ten to 15 years."
"As for 2014, there are definitely green shoots of recovery appearing in the developed nations. If you look at the GDP and share market growth in advanced economies such as the US and Japan, the talk is often more positive than it is in China and India. Having said that, there is a lot more optimism coming out of China now following the third [plenum reform] plan.
"However, there is also nervousness, especially around the price of gold, which is still down, and the copper market. There's only around 23 million tons of copper consumed in the world, so in terms of supply and demand, a 5-10% variation has a significant effect on production and prices - it's a finely balanced market. Economists are also nervous about quantitative easing coupled with low inflation.
"The mining industry didn't really start to drive shareholder value until 2004. Times were hard before then and so, in the medium to long term, miners are always optimistic - you have to be in this industry - while in the short term they are always nervous."