Roland Berger: Mining industry holds 91 billion in cash

23 July 2015

The mining industry 'sits' on a pile of cash the size of $90 billion, research by Roland Berger shows. In the past 15 years, the mining industry has enjoyed big ups and downs, and while 30% of the mining industry’s capacity is unprofitable, the firm shows that wider fundamentals remain strong. In addition to the cash, both the industry's operating and human capital costs are down.

Mining has in the past decades enjoyed considerable growth, and with the coming online of the BRICs region, demand for a period in the 2000s outstripped supply. As a result, commodity prices increased, allowing for mining companies to expand into what would otherwise have been uneconomical claims, with the general aim of getting the oar as quickly to market.

In a recently released report from Roland Berger, titled ‘Mining Rebound: Why 2015 is the perfect year to prepare your mining operations for the next cycle’, the consulting firm considers the changing fortunes of the mining industry in general.

Roland Berger - Mining

Mining slow-down
During the period between 2004 and 2012, iron ore seaborne demand increased from 606 million tons to 1,157 million tons. The massive demand, particularly from BRICs, resulted in a 15% per year commodity price increases in the 2000s, and the corresponding fixation on winning oar rather than other considerations. Recent years however, have seen a slump in demand as China and other BRICs fall foul to the dangers of overheating economies. One consequence, according to the firm, is a resultant net oversupply of minerals which has resulted in the commodity metal price index to fall by 40% between 2011 and 2015. This drop has had the further consequence of laying waste to around 30% of capacity that is unprofitable at current market conditions.

Although the down-turn is considerable, it has also come at a time in which the environment on which mining is dependent is relatively stable and abundant. Oil prices continue to be low, which reduce operating costs, while a strong US dollar will generally help all miners with US dollar revenues that have not yet fully optimised their operations to cope with lower commodity prices in the short term. Other positive factors affecting the industry include the relatively cheap cost of key mining equipment, reducing operating costs as well as less competition for skilled labour, reducing capital costs. Furthermore according to the report, with the sometimes inefficient practice of getting the product to market without considering operational costs, many mines still have considerable scope to streamline operations and thereby improve their operating cost profiles.

Evolution of cash available to mining companies

Cash pile
The consultancy notes that the industry as a whole is – in cash terms – in a relatively strong position. Since the start of 2000 the industry has increased the cash available to mining companies from $7 billion to a record of $152 billion in 2010, before the downturn seeing the industry burn through around $60 billion to plateau at around $90 billion over the past two years.

The authors conclude: “Since the decrease of mineral prices in 2011, savvy operators have been very cautious in not depleting their cash reserves when they first needed time to adjust their cost structure to this new pricing environment. Since then, cost, working capital and CAPEX optimisation programs have started to deliver results and 2015 will be the first year of renewed positive cash generation.”


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Accenture to work alongside WPP-owned agency on Shell CRM contract

27 November 2018

As the firm vies for a share of the design and marketing industry, Accenture Interactive has won a preferred supplier status on Shell's customer relationship management (CRM) roster. The firm will work closely alongside the brand's lead digital agency Wunderman to deploy campaigns for the international energy giant.

Accenture Interactive has grown substantially in the past year, and is presently ranked as the world’s largest digital agency by the Ad Age Agency Report. While this is something hotly disputed by design market incumbents such as WPP, further acquisitions in 2018, coupled with a growing client portfolio, have led the digital design wing of the international consultancy to increasingly eat into the market share of long-standing advertising companies.

Now, a new deal has made for some interesting bed-fellows, as Accenture Interactive works alongside WPP-owned agency Wunderman with a remit to provide "overall global strategic planning and creative direction for Shell’s CRM programmes globally." According to reports first circulated by news site The Drum, Accenture was tapped by oil and energy firm Shell to boost its marketing efforts around eight months ago, but the appointment was kept under lock and key until now.

Accenture to work alongside WPP-owned agency on Shell CRM contract

While Wunderman remains Shell's lead digital agency, having led the CRM account since 2013 when its loyalty budget was estimated to be worth £30 million. Accenture's customer experience arm will meanwhile work to support the deployment of CRM campaigns across Shell’s digital channels. The work is understood to be focused on boosting "one-to-one customer relationships" using Adobe software, as a managed service.

The news comes at the end of 12 months of change for Shell's agency roster for its retail and lubricants arms. The company has been working to reposition itself in a market moving away from heavy dependence on fossil fuels. This has seen the British-Dutch hybrid energy giant move toward renewables and backing electric travel schemes. As it enters into these new markets, CRM – a strategy for managing an organisation's relationships and interactions with customers and potential customers – has become increasingly important.

Regarding the change in its CRM set-up, Shell told The Drum it is looking to "drive deeper and more meaningful connections with customers across every touch point." The Accenture Interactive role comes with a brief including building a robust digital network for global and local campaigns.

Remarking on this remit, Joy Bhattacharya, Accenture Interactive lead for UK and Ireland, said that through "the consolidation of systems and services, we aim to drive efficiencies and scale personalised marketing campaigns, creating greater experiences for Shell customers.”