EY on the Copper Cliff: Managing New Supply Chain Risks

The mining and metals sector is experiencing a fundamental operational shift that has direct implications for global supply chains.

As geological depletion intensifies and extraction becomes more complex, mining companies are being forced to rethink their operational strategies, with potential ripple effects throughout the supply chain.

According to an EY report, operational complexity has surged to the top of the sector's risk radar, displacing external strategic pressures as companies grapple with declining ore grades and increasingly challenging extraction environments.

The shift could be a pivotal moment as the industry confronts what might be described as the physical limits of accessible mineral deposits.

Operating in a NAVI environment

The sector is operating within what EY characterises as a "NAVI" environment: nonlinear, accelerated, volatile and interconnected.

Paul Mitchell, EY Global Mining & Metals Leader, explains: "Slow, isolated change is not suited for an operating environment that is increasingly NAVI."

This new reality means that operational challenges no longer exist in isolation, with geopolitical tensions, resource nationalism and tariff shifts directly influencing capital allocation decisions and project timelines.

For supply chain managers, these interconnected pressures translate into increased uncertainty around material availability and pricing volatility.

Notably, mining companies are shifting away from prioritising short-term shareholder returns, instead channelling resources into reinvestment and growth, evidenced by rising capital expenditure and growing interest in vertical integration, which has reached 26% as firms seek to secure their supply chains.

This trend toward vertical integration could reshape supplier relationships and procurement strategies across the mining value chain.

Declining ore grades impact supply

The operational complexity transforming the sector is perhaps most starkly illustrated by what could be termed the 40% Copper Cliff. Since 1991, the average grade of copper mined globally has declined by approximately 40%.

Today, numerous major operations are processing ore containing less than 0.5% copper content. This means that to extract equivalent metal volumes, miners must move, crush and process nearly double the quantity of rock compared to 1990. For supply chain professionals, this translates into higher processing costs, increased energy consumption and potentially longer lead times.

Additionally, extraction is occurring at unprecedented depths, frequently exceeding two kilometres underground, creating geotechnical stress, escalating energy costs for ventilation and exponentially increasing logistical transit times. These operational constraints directly impact the reliability and predictability of mineral supply.

According to the EY report: "Predictability underpins investor confidence, capital access and strategic agility. But achieving reliable output is more difficult because of operational complexity."

This fundamental challenge is reshaping the relationship between mining operators and their downstream customers, as supply chain partners increasingly scrutinise operational reliability alongside traditional delivery metrics.

Digital tools address productivity challenges

Digital innovation and AI have emerged as critical tools for addressing this productivity crisis. While early digital initiatives delivered only incremental improvements, 58% of miners are now substantially increasing their AI investments to transition from siloed data systems to an integrated operational framework.

EY says: "Gains have been realised within core operations." But more value will come from an end-to-end approach that leverages a unified data and AI backbone.

Currently, 21% of respondents plan to increase their AI budget by more than 20% over the next 12 months. These technologies are being deployed through precision mining strategies to reduce waste and predictive maintenance programmes designed to eliminate the operational unpredictability that concerns supply chain partners.

However, a critical workforce challenge threatens to undermine these technological advances. A staggering 75% of executives express doubt about their ability to address labour shortages for onsite operations. This human capital gap could jeopardise delivery of the US$5.4tn in new projects required by 2035 to meet anticipated mineral demand, creating potential supply constraints across multiple industries.

The challenge is compounded by a contracting exploration pipeline, with global exploration budgets falling to US$12.5bn in 2024, down from US$12.9bn in 2023. This could limit future supply availability and increase competition for scarce materials.

Mark Bristow, President and CEO of Barrick, says: "Mining done right is a powerful force for development. When our host communities succeed, we succeed too."

For supply chain professionals, understanding these upstream operational pressures is becoming essential for effective risk management and strategic planning.