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Faced with delays and budget overruns – which can add billions to total project costs – mining and metals companies could significantly reduce the cost of large capital projects by improving planning and addressing workforce shortages, according to Accenture (NYSE: ACN) research on capital projects delivery in the mining and metals industries.
The research was based on 31 interviews with mining and metals executives with responsibility for capital projects around the world. Less than a third (30 percent) of the respondents report staying within 25 percent of approved budgets for all projects, and less than a fifth (17 percent) said they completed all projects within a 10 percent budget range.
The tremendous scale and complexity of mining projects – which are often multi-billion dollar investments – mean that budget overruns and delays in completion are not unusual. Among the contributing factors are infrastructure needs such as roads, ports and electrical power in less developed regions; the lack of talent and skilled workforces; and environmental and regulatory requirements in developed regions. When asked what typically causes delays in project schedules, survey respondents cited the availability of talent (57%), new or unconsidered regulatory requirements (45%) and insufficient detail during the planning stage (42%). Metals companies tend to have fewer delays and smaller budget overruns due to the reduced size and complexity of plants as opposed to mining projects.
Accenture research estimates that metals and mining expenditures for capital projects will reach more than U.S. $140 billion in 2012
1, and between U.S. $1 trillion and U.S. $1.5 trillion during the period from 2011 to 2025
2. Even with the current downturn in commodity prices, long-term demand for minerals and metals, driven by economic growth and social development throughout the world, continues to spur investment in mining and metals. With $100 - $200 billion in annual spend, the impact of project delivery overruns on individual companies and the industry as a whole is enormous.
“The potential savings and returns through effective management and delivery of a capital project investment can be huge,” said Jose J. Suarez, managing director for Accenture’s North American Mining industry group and the research lead. “Keeping on budget and within planned timelines across a portfolio of multi-year projects can save millions for a company – in today’s environment strong project management can be an important competitive advantage.”