03 July 2008
Improved procurement is one of the top three challenges for the mining industry, according to a report by PricewaterhouseCoopers.
If mining firms want to continue to grow and increase margins, says the report, they would have to address the three 'P's - power, people and procurement.
"With the mining industry well into the midst of a commodities super-cycle, the strain on resources to support the industry is one of the most critical issues facing mining companies today," it said.
Although revenues at the top 40 global mining firms grew by 32 per cent in 2007, costs increased by 38 per cent, leaving smaller profit margins.
The report highlighted the global tyre shortage as an example of the procurement challenges facing the sector. Since 2004 the price of tyres for vehicles has doubled, and now sourcing involves long lead times and high competition.
Mining firms are tackling this by buying tyres at auctions, forming relationships with brokers and making sure they extend the life of their current tyres
They are also establishing long-term deals, such as one struck by Barrick with manufacturer Yokohama to provide it with 1,300 off-road tyres every year until 2018.