EY’s latest report, Navigating volatility: do you change your business or the way your business works?, has identified six areas mining companies should focus on to strengthen their business and manage ongoing volatility – cost reduction, working capital, productivity, capital effectiveness, portfolio strategy, and financing.

EY global mining & metals advisory leader Paul Mitchell said companies needed to move fast to strengthen their balance sheets, in light of the UK’s Brexit referendum and a potential hung parliament in Australia.

“Our analysis is clear that mining companies need a different mindset in this environment if they want to maintain a strong balance sheet and develop plans for long-term profitability,” he said.

“Too many companies have viewed cost reduction measures and productivity initiatives as a once-off, when what they need to be doing is embedding continuous improvement in their DNA.”

While miners have worked overtime to cut costs over the past few years, Mitchell said it would be a challenge to find the next 10-20% of productivity savings.

He urged mining companies to learn from other sectors like manufacturing, airlines and industrial producers.

“Mining companies have generally been too slow to consider how they can apply best practice processes from other sectors,” Mitchell said.

“Consumer products companies have historically had lower margins so capital and cost efficiency has always been a focus – there are examples of some companies who have embedded process improvements that have enabled year-on-year savings of $US1.2 billion over the past three years.

“Miners can no longer rely on conventional wisdom and expertise from within the sector, they must cast the net wider and seek outsiders’ experience to get that next productivity and efficiency boost.”

 Flowing on from an earlier EY report released in December, the firm said working capital was an area that remained ripe for improvement.