These conditions make it challenging for companies to dial capacity up or down and to stop and restart operations (especially in underground mining and refining/smelting operations). Such conditions also raise the risk of contamination during handovers.

Moreover, mining operations may have onsite camps where workers stay for an extended period of time (which can range from many days to weeks to months, depending on site operations). Cases of infection onsite can spark contagion in camps, which could force remote operations to completely shut down.

This counts among the biggest risks facing miners, and companies such as BHP, Rio Tinto, Anglo American and many others are doing everything they can to limit it. Tactics include minimising the presence of non-critical staff at the operation, staggering entry timings for departments, fostering physical distancing through practices such as paper- or call-driven handovers and regularly disinfecting high-touch surfaces and common areas—to name just a few. 

In some jurisdictions, sustaining operational continuity becomes even more challenging when government agencies ask or force mining companies to scale back or shut down their 24/7 operations entirely. Indeed, South Africa experienced a forced three-week shutdown of the entire country.

Some mining companies are also experiencing serious impacts to their supply chain. On the inbound side, inventory levels of tyres, spare parts and even hand sanitizers and personal protective equipment are at record lows. On the outbound side, some miners face difficulty shipping goods to customers.

Finally, with demand falling due to the sudden economic stop in several regions around the globe, prices for some commodities are plummeting (figure 1, below). Falling prices have wiped out fourth quartile operational margins for players in the supply curve and have pushed some into the negative cashflow zone. While price volatility is familiar to miners, managing it in the current context poses a much tougher challenge.

The COVID-19 pandemic constitutes a joint challenge for all players in this industry. To surmount it, they will need a holistic approach for balancing immediate priorities with longer term planning. Leaders can think about how best to manage through the crisis and beyond in terms of three time horizons:

•             ‘Keeping the lights on'—maintaining current operations

•             ‘Stabilising and rebounding'—preparing for recovery from the crisis

•             ‘Executing a strategic pivot'—adopting new ways of managing and working to succeed in the longer term

‘Keeping the lights on'

As in many other industries, metals and mining companies are striving to keep functioning as effectively as possible today. Their immediate focus is to protect the health and safety of their workforce (figure 2), deploy a rapid response to the crisis (including setting up a command center for critical decision-making), use tight financial steering to maintain cash flow, and strive to ensure continuity in their operations and supply chain (for example, by proactively identifying and mitigating disruption risks).

‘Stabilising and rebounding'

Miners can also think ahead to a time when the virus will stop spreading and when infection as well as death rates will level off in the geographies where they have operations. The timing of such recovery will likely vary across countries and regions. But to prepare now for this period leaders can explore questions such as the following:

•             Regarding our operations, how might government-approval processes related to now heavily restricted activities (such as travel of workers and contractors across states, and fly-in-fly-out to remote operations) play out as we enter a period of recovery? What implications will changes in these processes have for our business? How might we ensure that we have enough workers on site, given the possibility of extensive absenteeism?

•             Once government restrictions on our operations ease up, how will we continue to maintain the safety and well-being of our workforce in the face of possible subsequent waves of infection?

•             How can we best manage relationships with our vendors to foster supply chain and vendor transparency into the availability and reliability of critical supplies such as spare parts and consumables?

•             How will we effectively manage our cash flow and raw materials inventory to quickly get our manufacturing engine up and running again once we've entered a period of recovery?

•             What steps should we take to make our sales and operations planning process hyper-responsive to ‘whiplash effects,' such as a surge in commodity demand when (for example) the automotive industry resumes production in some geographies?

Some mining companies are excelling on this front. Take Pucobre, a medium-size copper miner based in Chile. As the crisis unfolded, Pucobre quickly developed a simple tool to track stock levels across critical inputs for their site and a set of standardised actions in case of low stocks that were geared to characteristics of the supply in question (such as country of origin, local alternatives and stock levels of local distributors).

Other global miners are going as far as doing tear-downs of key equipment supplies to understand their suppliers' suppliers' risk of disruption, anticipating second-order effects.

‘Executing a strategic pivot' 

Leaders at forward-thinking mining companies are also now asking themselves how the pandemic may inflict major and in some cases permanent changes on the mining industry. And they are determining how to strategically re-pivot to succeed in a changed future while also protecting themselves against similarly severe disruption in the long run.

A helpful way to execute the right strategic re-pivot is to explore longer-term questions such as the following:

•             How might the needs of end-user customer segments change in the future as a result of the pandemic? What impact could those changes have on commodity demand and pricing?

•             How can we rethink our plant layouts to foster the modularisation of work, space segregation and workflow separation essential for responding swiftly should future crises erupt?

•             In our relationships with suppliers, should we aim for ‘glocalisation'—a blend of globalisation and regionalisation/localisation—so as to improve inbound supply chain resilience while still optimising for cost, quality and innovation? If so, how might we arrive at a fair balance of share between domestic and international suppliers? And how can we forge true partnerships with suppliers rather than relying on the traditional transactional cost-out approach?

•             How do we accelerate adoption of digitalisation and automation, to make operational jobs safer by enabling better health tracking and health measures, such as physical distancing? (Examples include apps that enable COVID-19 contact tracking.) If there's a shift toward remote work in the future, how can digital technologies help us adapt? What data security challenges would this present, and how will we mitigate them?

•             What new opportunities might we find in the area of mergers and acquisitions? For example, would acquiring operationally sound but financially unstable companies enable us to strengthen our product portfolio, enter new markets, reposition ourselves toward shifting supply chains in customer industries or achieve other strategic goals important for our future?

The scale and impact of the COVID-19 outbreak is unprecedented in history, from a humanitarian and economic perspective. Moreover, the situation is dynamic and rapidly evolving, on a daily basis. To navigate in this context, mining companies of course must manage the immediate priorities facing them. But they must also look ahead—by considering the different ways in which their industry may evolve and crafting smart strategies for each scenario to gain a competitive advantage.

For more information visit BCG's COVID-19 microsite https://www.bcg.com/featured-insights/coronavirus.aspx.

*Agustin Costa (costa.agustin@bcg.com) is a managing director and partner at BCG at the firm's Santiago office; Marc Schmidt (schmidt.marc@bcg.com) is a managing director and partner at BCG in the Singapore office. Daniel Feldkamp (feldkamp.daniel@bcg.com) is a managing director and partner at BCG in the Melbourne office.