Tech Equips Emerging Junior Miners with Agility to Navigate the Challenging Mining Environment

South Africa’s mining industry is under immense pressure due to a confluence of regulatory challenges, decreasing commodity prices, and escalating exploration costs as shallow reserves become depleted. According to PwC, the market capitalisation of the local mining industry dropped 25% to R420-billion in 2017, with gold mining companies suffering the greatest: R114-billion – or 52% – of their market capitalisation was lost last year.

Falling commodity prices and exchange rate volatility has made it extremely difficult for mining companies to maintain profitability. Divestment is also rife: some mining companies have been under such pressure that they’ve analysed their portfolio of assets and took decisions to sell off less profitable assets. With the depletion of shallow reserves, exploration costs have drastically increased, with mines now having to go as deep as 4 km to reach the richer mineral deposits. Subsequently, mining companies are not making large investments into expanding existing mines or entering into new exploration ventures.

The Emerging Junior Miner

In South Africa, cost cutting efforts are extending to the labour force: according to recent data, there were more than 56 000 fewer jobs in the mining sector in 2017 than in 2008, at the peak of the commodities cycle. The continued pressure on larger mining companies has however resulted in the acquisition of less-profitable mines by junior mining companies. The South African government is placing its support behind funding the junior mining industry, and with major companies divesting some of their assets, smaller companies have been able to acquire and operate assets that were previously beyond their reach.

According to the Minerals Council of South Africa, the average market capitalisation of a major mining company listed on the Johannesburg Stock Exchange is R24-billion. In South Africa, the junior – or emerging – mining industry encapsulates micro to medium-size mining companies generating between R30-million to R8-billion in annual turnover. These companies typically operate across some or all aspects of the mining value chain, from exploration to operations, production, refining and service provision. Prohibitively high capital expenditure associated with mining start-up costs has put IT infrastructure out of reach of many junior mining companies. However, the introduction of powerful cloud computing platforms and associated technologies provisioned on Software-as-a-Service and Infrastructure-as-a-Service models have provided junior mining companies with opportunities to significantly improve their operations and gain access to the latest innovations at a lucrative price-point.

Can’t manage what you can’t see

In light of external market conditions over which mining companies have no control, mining companies need to ensure they have clear sight over what the market conditions are and what the potential impact on their business is. To do this, junior mining companies need to integrate IT and operational technology (OT) to equip the C-suite with full visibility over mining operations, for example by providing real-time visibility over the health of certain assets to allow for predictive maintenance, minimising downtime and improving cost-efficiency.

For CFOs, the challenge often rests with gaining real-time visibility over the profitability of the company. Financial planning processes traditionally took 7-8 months, which meant that by the time the plan is implemented, parts of it are already outdated. Advanced technology tools integrated to an in-memory computing platform such as SAP S/4HANA can reduce this planning cycle to 2-3 days.

Solutions such as SAP Cloud for Junior Mining provide instant value and continuous innovation capabilities. Without the need for costly upfront investment in IT infrastructure and a fast implementation with little need for specialised in-house skills, SAP S/4HANA Cloud starts delivering instant value. The powerful digital platform integrates with advanced new technologies such as machine learning and predictive capabilities to accelerate problem-solving and improve the efficiency of business processes. And with full visibility of profitability and cash flow, real-time transparency and support for local country tax and regulations built on global best practices, junior mining companies can safely focus on their core business.

Executives previously relied on direct reports or managers to give them insight into operations. The Digital Boardroom elevates information sharing by integrating the shop floor with the top floor: through embedded IoT devices integrated to SAP S/4HANA Cloud, executives gain real-time visibility to the current status of assets and conditions deep in the mines, enabling them to model scenarios in real-time to maximise productivity and minimise risks.

The mining industry is in the middle of a tough period. A confluence of forces is placing immense pressure on the mining sector to minimise costs while improving productivity. Cloud is a game-changer for these companies: by gaining access to the latest technology through cost-effective Software-as-a-Service and Infrastructure-as-a-Service models, junior mining companies gain the agility they need to navigate current market conditions and gain a strong platform for future innovation.

ENDS

For more information, visit the SAP News Center. Follow SAP on Twitter at @sapnews.

About SAP
As the cloud company powered by SAP HANA®, SAP is the market leader in enterprise application software, helping companies of all sizes and in all industries run at their best: 77% of the world’s transaction revenue touches an SAP system. Our machine learning, IoT, and advanced analytics technologies help turn customers’ businesses into intelligent enterprises. SAP gives people and organizations deep business insight and fosters collaboration that helps them stay ahead of their competition. We simplify technology for companies so they can consume our software the way they want – without disruption. Our end-to-end suite of applications and services enable more than 413,000 business and public customers to operate profitably, adapt continuously, and make a difference. With a global network of customers, partners, employees, and thought leaders, SAP helps the world run better and improve people’s lives. For more information, visit www.sap.com.

# # #
Any statements contained in this document that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “predict,” “should” and “will” and similar expressions as they relate to SAP are intended to identify such forward-looking statements. SAP undertakes no obligation to publicly update or revise any forward-looking statements. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect SAP’s future financial results are discussed more fully in SAP’s filings with the U.S. Securities and Exchange Commission (“SEC”), including SAP’s most recent Annual Report on Form 20-F filed with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates.
© 2018 SAP SE. All rights reserved.
SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP SE in Germany and other countries. Please see https://www.sap.com/copyright for additional trademark information and notices.

Note to editors:
To preview and download broadcast-standard stock footage and press photos digitally, please visit www.sap.com/photos. On this platform, you can find high resolution material for your media channels. To view video stories on diverse topics, visit www.sap-tv.com. From this site, you can embed videos into your own Web pages, share video via email links, and subscribe to RSS feeds from SAP TV.

For customers interested in learning more about SAP products:
South Africa: +27 11 235 6000
Kenya: +254 706 758764

For more information, press only:
Ansophie Strydom, SAP Africa, +27 (11) 235 6000, a.strydom@sap.com
Adam Hunter, SAP Africa, +27 (711) 787 035, adam.hunter@sap.co.za