Case Study - Mining & Resources Corporate Strategy

Client Situation

Our client, a publicly listed company that operates in the mining and resources industries, had a number of operations in Australia as well as in North America and Europe.

As a newly listed company, they wanted assistance developing and reviewing their company strategy.  They divided this strategy into a number of “building blocks”.  Specifically we were asked to develop a number of reports detailing:

• Industry Overview / Peer Dynamics
• Environmental Strategy
• Exploration Strategy
• Environmental Liabilities

Industry Overview / Peer Dynamics

Approach

• The overall approach was to provide the board with an external basis for analysis of performance relative to:
  • Peers on an entity and asset basis
  • A range of resources players using cashflow / return / equity measures
  • Other role model companies
• Development of measures which allow the Company to monitor and measure performance on an ongoing basis

Impact

• Developed a report for the Board highlighting the Company’s relative position both in comparison to peers, but also in comparison to broader resource firms and suitable role model firms.
• This report also put in place the basis for an ongoing performance comparison for the Company to its peers and role model companies.

Environmental Strategy

Approach

• The analysis required information from a number of external and internal sources to address the following questions:
  • What are the drivers of success in achieving zero waste production, and elimination of historical waste / environmental issues?
  • What are the existing environmental liabilities and what residues are still being generated today by the Company’s operations?
  • What techniques might be applied to both eliminate the current liabilities and stop production of further waste products?

Impact

• The Environmental Strategy provided a sustainable approach to first stopping further increases in the Company’s environmental liabilities and then systematically reducing the impact and size of liabilities on their balance sheet.

Exploration Strategy

Approach

• A fundamental review and synthesis of the drivers of successful outcomes in exploration both within minerals and other resources
• Develop an understanding of:
  • What constitutes success in resource renewal?
  • What are the fundamental drivers of improved performance and the causes of failure in Exploration?
  • What lessons can the company take from other industries when it comes to Exploration?
  • Where, and when, should the Company seek to explore / acquire in the Exploration value chain to ensure that short and long term renewal needs are met?

Impact

• The Exploration Strategy provided a clear view on the drivers of success, both within resources and other sectors, which will underpin the Company’s ability to successfully renew and extend its resource base in the future.  The report also highlighted the potential options for the Company to adopt in resource renewal to ensure that short and medium term renewal objectives were met.

Environmental Liabilities

Situation

• The Company wanted to gain a greater understanding of their current environmental liabilities; including when they are likely to occur, to allow for ongoing management and to provide information to the Board.
• Previously, environmental liabilities had been captured by an external company, as a result, the Company was not able to update or report on these dynamically

Approach

• The Company engaged Pacific Strategy Partners to assist them develop a dynamic model to capture, manage and report their environmental liabilities.
• The Company needed to be able to understand:
  • How much their environmental liabilities were changing from year to year
  • When liabilities were likely to occur
  • The possibility of environmental liabilities being brought forward
  • The liability for each site
  • The proportion of the environmental liabilities that were required in the balance sheet provisions

Impact

• The results of the project were:
  • A probabilistic model that replicated their existing data
  • A user friendly Access front end and database that allowed for HSE reporting
  • A model that filtered provisions based on Group Finance requirements
  • Documentation to support ongoing internal use of the models
• The HSE and Group Finance teams are now able to independently capture, manage and report their environmental liabilities

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