Cost Control is Challenging in the Mining Industry.

Date posted: October 31, 2017

To be financially successful in any business, cost control is just as important as revenue, as maintaining margins is essential for making a profit. We have all heard about companies enjoying spectacular success for some years that were brought down to earth by indiscriminate spending on things that did not advance the business.

Cost Control Essential to Maintain Margins

The situation is no different in the mining services industry. Despite a general perception that the resources sector is awash with money, margins are always tight. To bring a major mine, for example, from planning to operational status, involves years of work and millions of dollars in investment before there is any return. Controlling costs over the time it takes to see any revenue is critical, as is maintaining these margins during operations.

Companies, such as ours, with contracts to provide services to large mining operations also operate on tight margins. We offer a range of pipeline and trenching services to our industry clients. Reay Services Group has a reputation for reliability and quality, and we have survived where others have not, because we look after our clients and our costs.

Cost Control is Not Cost Cutting – Safety and Quality Must Be Maintained

This does not mean that we cut corners. Where money needs to be spent on equipment and personnel, we do, especially when safety and product quality is concerned. The key is having robust systems to measure productivity and monitor costs quickly and consistently. The old accounting model of waiting for month-end figures before seeing a problem and acting on it is too slow for modern business.

Keep Monitoring Critical Indicators

We have lead indicators that point to a problem or identify a trend as it is emerging. Month-end figures are lag indicators that provide historical data, but this is often too late, as money has already been lost. Lead indicators also allow us to move people and equipment quickly from one site to another to correct a situation before it becomes a problem.

Having this information at our fingertips allows us to keep costs under control and bring in projects on or at times, under, budget. This keeps faith with our clients and allows us to make the profits we need to keep the business viable, provide employment and contribute to economic growth.

Cost Control Critical to Success of Long-term Projects

Many of our projects are long term, so the costs we estimate in the tendering process change before we start work. We manage this closely throughout the life of the project, which can be years, not months. Cost increases that seem insignificant at the start can escalate as the work progresses.

Maintaining healthy margins in our industry is challenging but necessary to keeping our business viable.