Welcome to our first CFO Labs newsletter for the year!

Mining companies missed 61% of their own production targets over the last five years, wiping out $64 billion in forecast revenue (Accenture). Meanwhile, the best undeveloped assets on the planet were quietly secured by those who moved early while everyone else was busy practicing capital discipline.

This is The Performance Issue. Don't worry, it happens to every mining company.

We have two guest articles that tackle this from different angles:

We've also rebuilt our quarterly mining finance dashboards as mobile-enabled web apps with a little help from AI*:

A quick personal note: over the Christmas break, the family and I headed to China for our first visit in almost ten years. I was struck by how much had changed: the scale of the infrastructure, the quality of Chinese brands and EVs, and the sheer pace at which technology is embedded into everyday life. I've been sharing observations and photos from the trip as a LinkedIn series, with reflections from a couple of books I was reading along the way (Dan Wang's Breakneck and Patrick McGee's Apple in China). The first post is here.

* We've been on a journey to improve finance function performance with AI and we’re interested in hearing from others taking the same journey. If you’re keen on setting up a regular AI in Resources Finance meetup, drop me a line.

The gap between the boardroom's ambition and the operational reality on site is more expensive than you think.

According to Accenture, 61% of mining production targets were missed globally in the five years between 2020 and 2024, wiping out USD $64 billion in forecast revenue. Miners are setting their own targets and missing them.

Variance is expensive in more than just financial terms. Yes, it erodes shareholder trust and turns quarterly reporting into a damage control exercise, but it often sets sites into what Jim Collins, author of Good to Great, described the Doom Loop. This is a cycle of chronic reactivity. Organisations, unable to deliver consistent results, react to disappointment by lurching from one “solution” to another, never allowing any initiative enough time to build cumulative momentum. You may know these as silver bullets.

Chasing silver bullets, the heavy flywheel of operational performance gets pushed in one direction. After seeing no immediate result, it’s stopped, and another solution is implemented, throwing the site's energy in a new direction, so the flywheel never has an opportunity to start spinning. It’s no wonder so many sites have such change fatigue and resistance to ‘improvement projects’.

Instead of diagnosing the root cause (usually a lack of capability keeping sites in operational chaos), a silver bullet is selected. These fall into one of four categories (TAMI):

Unfortunately, these are band-aids, as the point of failure actually lies in the misalignment between Strategic Ambition and the site’s Operational Capability.

We call this The Execution Gap.

Profit sits at the intersection of potential and performance.

To understand why guidance and targets are so consistently missed and CAPEX over runs are only increasing, you have to look at the disconnect between the two ends of the business.

When you overlay these two worlds, you get The Performance Quadrants.

This creates four worlds:

The data shows us that most mining companies sit in the bottom-right quadrant: Missed Guidance

The most dangerous instinct in the Missed Guidance quadrant is to go searching for silver bullets, throwing capital at the problem.

When production lags, the site requests more trucks, a plant expansion, or new software. Because these are tangible assets that sit nicely on a balance sheet, they are easier to justify and approve. But, if you add more assets to a site with low capability, production may increase, but so too does complexity. You are scaling the chaos and inefficiency.

This is the Productivity Paradox: Investment is up, technology is better, yet according to McKinsey, industry productivity is 25% lower than it was in 2005.

Mining is now spending more to get less because we have focused on investing primarily in the tangible (machines) while mostly ignoring the intangible (systems, behaviours, and culture).

It’s no wonder the daily chaos crowds out strategic projects.

The answer instead lies in Operational Capability, the invisible engine on a mine site that converts strategy into results. It includes:

How well these tangible and intangible factors work together determines performance. Potential + Performance = Profit.

To close the Execution Gap, decision makers need to change the conversation.

Stop only asking: “What do we want to achieve?”
Start also asking: “Do we have the capability to execute this strategy?”

If the answer is no, you need to commit to building it. NASA didn’t land on the moon because JFK set the goal of landing on the moon before the end of the decade. They committed to inventing the maths and the materials to turn ambition into reality.

In mining, reliability is highly valued, that’s why we pay a premium for management teams that have done it before: if they’ve done it once, they are likely to do it again. So, don’t just invest in the potential of the orebody, make sure you also invest in the reliability of the site, its invisible engine.

The companies that are able to bridge the gap between the boardroom and the blast site find themselves in the outperformance quadrant. They don’t just hit their numbers; they do it with less capital, less waste, less friction, and less risk.

For CFO Labs readers: you can take this assessment to identify which Performance Quadrant you’re in and assess the health of your Invisible Engine.

Alex Franklin is a Chartered Engineer, Managing Director at First Principles Consulting and author of Mining For Value. He helps bridge the gap between the boardroom and the blast site, believing operational risk can be minimised, not just managed.

The challenge has shifted from raising capital to securing viable tonnes before someone else does.

From roughly 2012 to 2022, the dominant response across the sector was restraint. Capital projects had overrun. Operating costs had escalated. Debt had built up through the previous expansion cycle. The response was to cut costs, divest non-core assets, optimise existing portfolios and keep balance sheets clean enough to move quickly if the right opportunity emerged. COVID accelerated this focus, turning cash generation and debt reduction from aspirational goals into urgent imperatives.

The logic was that a company with low debt, strong cash flow, and no legacy overhang would be best positioned when valuations corrected. Sentiment analysis from tier 1 mining executives (Exhibit 1) reflects a sector that was notably quiet for large-scale M&A from 2020 through 2022, with CEO signals clustered around capital discipline and cautious organic growth. CFO language was marginally more acquisitive but still restrained. Neither was pointing clearly toward inorganic moves.

The most vocal voices reinforced it. Mark Bristow at Barrick, presenting FY2022 results:

Richard Adkerson at Freeport McMoRan, on the same theme in early 2022:

EBITDA/Revenue ratios (Exhibit 2) for a selected group of tier 1 and mid-tier producers (BHP, Rio Tinto, Glencore, Fortescue and Vale among others), tracked from 2015 to 2025, peaked above 50% in 2021 then compressed back to around 36% by 2025, broadly returning to pre-pandemic levels despite some commodity prices remaining elevated.

While production mix effects likely played a role, as higher prices pull higher-cost operations back online, the pattern suggests structural cost pressure is also at work. The cost base has not unwound as prices stabilised. Setting aside how much of that reflects mix versus structure, the direction is the same either way. Three factors appear to be making it progressively more expensive to produce the same tonne of metal.

Ore grades are declining: Ore grades are declining across the industry as mines age and higher-grade ore is progressively mined out. At Escondida, for example, feed grade fell from 2.5% in 1990 to around 1.0% by 2024, meaning twice as much material is now moved to produce the same metal.

Projects are more expensive: Analysis of over 150 global mining projects shows that cost overruns of 30 to 50% are typical, with a meaningful share running well past 80%. BHP's Jansen potash project illustrates the pattern: approved at $5.7 billion in 2021, it had risen to $8.4 billion by January 2026, a 47% increase driven by design changes, inflation and lower productivity. Capital intensity per unit of production has risen roughly 3% per year since 2007.

CAPEX and OPEX are growing faster than output: A company with rising sustaining capital per year has less free capital to deploy on acquisition, even if its revenue holds. Glencore 2020 to 2026 CAPEX illustrates what this looks like in practice. Total CAPEX rises from approximately $3.7 billion in 2020 to a forecasted $6.1 billion in 2026. Deferred stripping and waste removal (the cost of accessing ore in future years) represents the single largest line item at over $2 billion in 2025. Mobile equipment, infrastructure, water and tailings CAPEX are all growing. None of this is growth capital, it is the cost of keeping existing operations running in progressively more difficult mining conditions, rising at 8.8% per year.

Unit costs tell the same story with more granularity. Unit cost analysis across the same tier 1 and mid-tier producers shows that unit costs drifted higher at roughly 3 to 4% per year (based on trend line estimates; the rate varies by commodity) from FY15 to FY25 across copper, gold, coal, iron ore and nickel. Some of that reflects production mix, but grade decline and rising input costs compound on top regardless of price. That pressure does not unwind when prices normalise.

In the background, Chinese state capital was quietly building stakes in the assets that would later define the pipeline. The cumulative effect only became visible in retrospect. Chen Jinghe, who built Zijin into the world's third-largest miner by market capitalisation, was not secretive about the approach:

Chinese state companies were making moves a decade ago. In December 2015, Zijin paid $412 million for a position in Kamoa-Kakula. In 2016, CMOC acquired Freeport McMoRan's stake in Tenke Fungurume for $2.65 billion. CITIC Metal built an approximately 24% position in Ivanhoe Mines, with a co-signed offtake arrangement alongside Zijin on Kamoa-Kakula's copper output. The pattern has not stopped. In January 2026, Zijin paid C$5.5 billion for Allied Gold's producing mines in Mali, Ivory Coast, and Ethiopia.

Of ten significant transactions attempted since 2022, including BHP's bids for Anglo American, Glencore's acquisition of EVR coal, Rio Tinto's purchase of Arcadium Lithium, and the BHP/Lundin Vicuña JV, among others, three failed and six completed. The one JV formed, BHP and Lundin's Vicuña Corp, secured the largest undeveloped copper district in thirty years through a governed 50/50 partnership.

The CFOs knew before the CEOs said it publicly. Sentiment analysis reveals that CFO language shifted toward acquisition intent from 2022 onward while CEO language stayed cautious. The widest gap was in 2024, the year of BHP's bids for Anglo American, the Glencore acquisition of EVR coal, and Rio Tinto's approach for Arcadium Lithium. The CFOs were already repositioning while their CEOs were still talking about capital discipline.

Gary Nagle put it plainly:

What remains is a set of constrained choices, each with a different cost, a different risk profile, and a different window before it closes.

The deal landscape matrix below (Exhibit 3) maps the current state across 22 major mining companies. Positioning is based on management commentary from earnings calls, investor presentations, and observed M&A activity over 2022 to early 2026. The x-axis reflects a categorical scale of deal posture from organic-only on the buyer side through to open to acquisition on the target side. The y-axis reflects position strength: how settled and clear each company's strategic direction is.

A few things stand out. Glencore sits in the active zone with about as clear an acquisition mandate as any western major has stated publicly. Gary Nagle told investors in December 2025 that the company's ambition is to become the world's biggest copper producer. The failed Rio Tinto merger in early 2026 sharpened that position rather than softening it. Zijin and CMOC sit alongside with similarly high conviction, consistent with what Chinese state capital has been doing for the better part of a decade.

Companies open to acquisition are few. Capstone is the clearest near-term candidate, as acquiring before FID on Santo Domingo, due H2 2026, is likely more favourable than doing so after the construction decision is locked in. Most of what remains sits in JV or partnership territory, available in some form but carrying structural complications that a clean acquisition would not.

What is harder to argue is that the choice available now looks the same as it did five years ago. The cleanest assets have been taken. What remains tends to carry higher prices, contested ownership, or structural complexity most western boards have spent a decade trying to avoid.

The pattern suggests timing mattered more than most boards anticipated. Early positioning in uncertain jurisdictions (2015 to 2016) created options that strong balance sheets alone cannot replicate. Companies with asset access and partnership rights built before demand became obvious now have choices. Those without are discovering that capital readiness is not enough when targets are taken, partnered, or priced to reflect seller leverage.

Waiting for cleaner trades assumes the market will present better options later. The evidence from the past decade suggests otherwise. Asset quality, jurisdictional risk, and seller leverage tend to move together. By the time an asset looks obviously strategic to everyone, its availability and pricing reflect that consensus.

This article is a summary of a detailed paper that can be found here: read more from Kenfucius on Substack.

KW is a management consultant focussed on mining, oil and gas, ports, rail, and energy. He advises clients across capital project advisory, financial and technical modelling, and operational diagnostics, bringing engineering depth to sharpen investment decisions across asset performance, capital allocation, and operations improvement.

We’ve completely revamped our Mining Finance Dashboard: this is now a web app that you can view on your mobile phone with a heap of new features. We’ve also updated data for the last quarter (to the end of March).

You can use our dashboard to look at:

Check it out here!

We’ve also revamped our Mining Debt Dashboard for the quarter as part of our web app upgrade! You can now filter by facility type, company size and commodity. Let us know what you think!

As my esteemed chartist colleague previously suggested, the BCI has decisively broken higher, propelled by rising oil prices that are providing a strong tailwind. It looks like momentum currently shows no signs of fading…

Signing off for the quarter,

Gav

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W: www.modelanswer.com.au
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