The issue of capital productivity has long been a common problem in mining and metals, with a large percentage of megaprojects often running either over schedule or over budget. With recent volatility and uncertainty, including the disruption of COVID-19, the problem has been compounded. A June 2021 study of 192 global mining and metals projects worth more than US$1b found that 64% ran over budget or schedule, with the average cost overrun reaching as high as 39%.
To help companies realise greater synergies and efficiencies to enhance productivity, a holistic lens is required. Mining specialists that take measures to improve capital productivity now, will be better positioned to navigate ongoing uncertainty and drive better project outcomes for clients, creating value for money on a multibillion-dollar scale.
Through the two critical levers of controlled project delivery and operational efficiency, greater success for capital projects in mining will mitigate the challenges of at-risk capital projects commonly facing challenges of both input inflation and compromised output performance.
In our experience of supporting mining and metals companies on large, complex capital programs, six major risks sit at the heart of the productivity challenge:
While there is little direct influence over some of these risks, project management is clearly within the grasp of control.
Research shows that miners that invest in the right project management capabilities and toolsets can positively impact project values by up to 30%. And the following five key elements can build a holistic approach to capital project delivery to realise synergies and efficiencies that boost productivity.
Scenario planning can enhance the robustness of risk-based cost and schedule estimates and the performance of core project management processes. Effective scenario planning also allows miners to identify and understand the impact of potential events, equipping them to respond with confidence when challenges arise. This agility to act decisively can make the difference between projects stagnation or momentum.
The best contingency approaches take a “monitor and evaluate” approach, reassessing at key project intervals. This ensures capital investment decisions are based on the best possible information and help miners reduce the potential for unforeseen costs and schedule impacts.
The organisations with the most successful approaches encourage their teams to commit to the process through innovating budgeting and scheduling, driving true productivity across project life cycles.
In a resource-constrained and sustainability-conscious environment, more critical infrastructure asset owners and operators are using digitally enabled workflows to automate processes and help build end-to-end supply chain resilience. Ensuring business and project continuity requires a greater focus on upfront planning, including identifying critical risk scenarios and potential points of failure to pre-empt and define potential responses.
Well-structured governance frameworks with clear roles and responsibilities is a key driver of capital productivity success, but often a lack of relevant and useful information can hamper decision-making. By building out leading indicators into reporting dashboards can flag these risks as they arise, empowering project managers with the insights they need to make fast, effective decisions.
Organisations need to adapt their capital portfolio management strategy so it is fit for purpose now, while being able to rapidly transform to respond to changing business needs. Mining project managers will build confidence in their current capital portfolio management strategies when companies start to address potential long-term changes to their market. This requires them to refocus their portfolios on their core business, carefully planning and prioritising funding allocation to initiatives in line with their defined strategic objectives and goals.
While uncertainty is likely to continue creating challenges for mining and metals companies around capital investment, it will also provide an opportunity for change. Companies that take the lead now to improve capital productivity will be better placed to meet ongoing volatility while building stronger foundations for more successful project outcomes in the future.
13 Mar 2025