Managing changing weather patterns

15 December 2016

Mining companies have for decades operated in some of the world’s most challenging locations as fierce competition to discover new, quality reserves continues to drive the industry. As miners have ventured further into emerging and frontier markets, risks around natural catastrophes and local weather conditions have had to be managed. Changing and more extreme weather patterns, largely attributed to climate change, means that these risks are evolving. This means in some cases that the costs of dealing with weather patterns are increasing, and many miners are finding that a scientific approach to managing these risks is becoming an essential part of business planning.

The mining industry has long been renowned for confronting the operational challenges of working in remote, hostile, under-developed, or politically unstable regions head-on. While risk appetite varies immensely between companies, there is no question that some of the environments in which miners operate are extreme. However, that is simply the strategy required for mining companies to remain competitive as the global race for viable, high yield projects remains intense.

Part of this need to explore and exploit wherever in the world the most promising deposits are located means that miners encounter a range of risks relating to natural catastrophes and changing meteorological conditions. Over time, miners have become highly adept at managing natural catastrophe risks, such as earthquake, and project feasibility studies will examine the likelihood and risks of such natural catastrophes.

Yet changing meteorological risks present a new challenge. Despite the fact that techniques for modelling are constantly evolving, which means that miners can make more informed decisions around the impact of local weather patterns on their project and supply chains, ultimately the risks cannot be entirely mitigated and until recently, these risks were largely uninsurable.

This means that while miners have designed projects, supporting infrastructure, and supply chains with certain weather risks in mind, ultimately the costs associated with the impact of meteorological conditions sit on the balance sheet. The need to assign contingency funds to manage increased operational costs on account of these risks, while always a challenge, has become even more onerous in recent years as cost cutting and cost management remains a priority.

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For further information, please contact Harry Floyd, Partner, Mining on +44 (0)20 7466 1305 or email harry_floyd@jltgroup.com


contact Harry Floyd
Partner, JLT Mining harry_floyd@jltgroup.com