Worldwide mining operations are as much as 28 percent less productive today than a decade ago, according to new McKinsey research. The results from McKinsey’s new MineLens Productivity Index (MPI), which adjusts for declining ore grades and mine cost inflation, show that the pronounced decline in productivity is evident across different commodities and is seen in most mining players and geographies.
Compared with industries such as automotive, which obsessively focus on productivity gains, the numbers seem astonishing. Nevertheless, the decline may be less surprising when we take into account the fact that the industry has just ridden a demand supercycle and has succeeded in expanding production of certain major commodities by 50 percent or more over the past decade.
What is clear is that with the collapse in mining profitability over the past three years, the industry is seeking once more to raise productivity. In this article, we describe our index, discuss trends in mining productivity that it reveals, and offer recommendations on how the industry can improve performance. Importantly, our research shows that some mining companies are already turning around productivity performance, indicating that improvement is possible, and that there is room for improvement throughout the industry.