Procurement is one of the largest expenditures on a mine’s balance sheet, often averaging 70 per cent of a company’s spending on goods and services that will keep operations running each year. Despite its scale and strategic importance, procurement, and particularly local procurement, has long received less attention than other aspects of mining performance.
“I don’t think the general public and civil society understand [procurement spending] numbers that well,” said Jeff Geipel, founder and CEO of Mining Shared Value (MSV), in an interview with CIM Magazine. “There is a real fixation on taxes (which is reasonable) and direct jobs, but there are far more jobs directly in supplier business than on the mine site, for example.”
Sourcing goods and services closer to a mine site, in theory, can reduce costs, shorten supply chains, improve reliability, support more sustainable operations and strengthen a mine’s social licence to operate. In practice, however, Geipel said many companies fall into established procurement habits that end up disadvantaging local suppliers.
“Companies get stuck in the inertia of existing procurement relationships and that’s where the limits of local procurement are normally reached,” he said. “You do things the way you always did them and it’s hard to change. Procurement people have their existing relationships with international suppliers or faraway suppliers, and they don’t want to change or risk those by switching to a local supplier.”
To better understand how mining companies are performing globally on local procurement, MSV—a non-profit program of Engineers Without Borders Canada—partnered with the World Gold Council (WGC) to assess the practices of 24 WGC member companies and provide recommendations for improvements on local procurement.
[More]
