The failure starts in the boom

ACCENTURE found that missed guidance cost the mining industry $64 billion in forecast revenue over a five-year period. It’s easy to apply labels to explain away this inconvenient number: price volatility, market conditions, supply chain risk.

The one thing all of these excuses have in common is that they blame forces beyond the operator’s control. Whilst this is sometimes true, it’s not always true. And even when it is true, there are often ways to hedge for these events.

In a cyclical industry, you want to maximise the hay you make whilst the sun shines. The problem is that this can lead to tunnel vision.

As commodity prices rise, so does the competition for supplies. Not just plant, parts and consumables, but also talent. This push means that margins expand, but productivity remains constant or even drops as everything is subordinated to production volume.

This is why a site’s inevitable failure starts in the boom.

The invisible accumulation

During a commodity boom, a mining operation can look like it’s performing when it is quietly deteriorating. The margin absorbs everything.

Costs creep in, additional headcount, contractor scope, deferred maintenance rolled to next quarter. None of it is visible on a quarterly review when prices are high.

In reality, Operational Debt is accumulating, and this is, dangerously, not tracked on any risk register, P&L or balance sheet.

Operational Debt is the technical, capability and process shortfall that builds up when an operation prioritises short-term output over long-term reliability. It is the operational equivalent of financial debt. It accrues invisibly, in the gaps between what the site needs to run well and what it actually receives.

What it looks like: maintenance windows shortened to chase production tonnes; superintendents promoted before they’re ready because experience left and the roster had to be filled; process changes implemented without proper training or documented standards.

It also looks like big yellow toys brought in to move more material, without fixing the planning, scheduling and shift hand-over processes that determine whether those assets get utilised effectively. Or new mills built when the old one isn’t running anywhere near its full capacity.

None of these decisions on their own feel like failures in the moment. In isolation, they feel like pragmatic trade-offs in a high-pressure environment when prices are up and the margins are healthy. However, the cumulative effect of all these small decisions results in sometimes catastrophic outcomes.

Like when the price predictably reverses course, as we saw with gold in January 2026, when prices plunged 9%, erasing over $7 trillion from precious metals markets, driven by a perfect storm of over-leveraged positions and mass liquidations.

What the bust reveals

When commodity prices fall, the bust doesn’t create the problem, it reveals it. What Warren Buffett referred to as naked swimmers when the tide went out.

The cost base that embedded itself during the boom needs to be quickly reversed, but without affecting production or productivity. The maintenance backlog deferred quarter after quarter becomes a reliability crisis.

The experienced workforce that left during restructuring took institutional knowledge with it. The processes never standardised now produce inconsistent results, shift to shift, day to day.

BCG found unit operating costs at surface copper mines rose 10-15% annually during the preceding boom. That cost didn’t disappear when the price fell. It was still there, fully embedded, now painfully visible.

McKinsey found mine productivity is 25% lower today than it was 20 years ago, a period that included multiple boom cycles and sustained capital investment. The CAPEX went in. The capability was not built alongside it. Miners spent more to get less.

The response to the bust is almost always the same: rapid headcount reductions, deferred maintenance, aggressive contractor renegotiations, a consultancy engagement focused on finding costs to cut.

The experienced people leave and take their knowledge with them. If the site avoids care and maintenance, it often takes years to get back to where it was before the boom.

Here is the part that rarely gets acknowledged: the site that emerges from a bust in that condition is cheap. It is under-performing, cost-exposed and asset-depleted. It is exactly the kind of acquisition target that a well-capitalised competitor, one that used the boom differently, is looking for.

Your operational condition at the bottom of the cycle is almost entirely determined by what you did at the top.

What the best operators do differently

The counterexample is instructive, even if it comes from manufacturing. When the Global Financial Crisis hit in 2008, General Motors required a government bailout. Sales fell 11%.

Toyota’s sales fell 4%. Toyota took the number-one global sales position for the first time in nearly 80 years.

The difference was not what they did during the crisis. It was what they did before it.

While GM prioritised output during the boom years, Toyota continued refining the Toyota Production System, standardising processes, eliminating waste, investing in the fundamentals of how the operation actually worked. Not because a downturn was coming. Because that was how they operated. The boom did not change the discipline.

BCG found companies with embedded continuous improvement cultures show 15% better cost performance in favourable conditions and 28% faster recovery in downturns. They don’t treat improvement as a crisis tool. It is how they operate every day.

Miners should be doing the same and using the boom to do the unglamorous work, standardising processes, building supervisory capability, closing the gap between best-day and worst-day performance, maintaining assets to schedule rather than deferring to hit this quarter’s tonnes.

Not only will they do well in the good times, they will emerge from the bust in a structurally different position.

No site is bust-proof. But they can be prepared. Lower cost base. Stronger capability. A workforce that knows how the site works. Processes that don’t depend on institutional knowledge sitting inside one superintendent’s head.

When prices recover, they move, and struggling competitors get acquired for cents on the dollar.

The window is now

Commodity cycles are not new. Everyone in the industry knows the pattern. What really determines success is the willingness to act on it.

The boom is not a reward for good performance. It is a window to do the capability-building work that the margin can absorb. To address the Operational Debt before it becomes a financial noose. To build the systems and people that will determine your cost position when the price moves.

When we ask GMs operating in favourable conditions what improvement work is underway, the answers cluster around two categories: technology investments (new software, automation pilots, digital dashboards) and structural projects (fleet expansions, orebody extensions, infrastructure upgrades). Both are legitimate. Neither is the work.

The work is the unglamorous middle, improving operational maturity. The things that determine whether the big yellow toys and the digital tools actually perform as multipliers, not divisors. The things that don’t make a board presentation. That work is best done when the margin is there to absorb it, when the site has the bandwidth to train, to iterate, and build real capability.

Ask yourself: when the price moves, and it will, what condition will this site be in? Not what will your share price be. Not what will your reserves statements say. What will this site’s operational capability be?

If you don’t have a confident answer to that, the failure may already be in progress. The window is open. Whether you use it is the only question that matters.