In the near future, the global mining sector has to face some big risks mainly because of resource nationalism, poor infrastructure that obstruct development along with supply chain disruptions, according to the latest report given by Willis Group Holdings plc, a leading global insurance broker.
Apart from these, rapidly rising costs, challenges given by emerging markets, shortage of skilled workers and the threat of losing a social licence to operate are some of the other risks to the global mining sector. Inspite of these challenges, in the mining sector the insurers are narrowing their pricing, capacity and coverage along with poor underwriting results.
Because of the global economic uncertainty along with political turmoil, it has generated a volatile environment, due to which the demand for metals, natural resources and commodities has decreased considerably, according to the report. For example, in Africa and China’s emerging markets, there are challenges which include political instability, poor liquidity, inadequate regulation along with substandard financial reporting and large currency fluctuations are affecting their mining sector.
Globally there are many mining companies which are facing challenges in gaining a social licence to operate. In most of the countries, mining projects are made more complicated and expensive to secure and is also difficult to retain a licence to operate, since the local people of the country can oppose mining projects and also force to cancel their rights that were already gained. This trend is likely to continue in 2013 and beyond.
In South Africa, the country’s mining companies are affected because of growing energy costs, labour unrest, above-inflation wage increase, older and deeper mines and currency fluctuations.