Labour continues to be a significant component of input costs for the Top 40 mining companies, representing an estimated 32% of operating costs, according to the PriceWaterhouseCoopers survey Mine 2018.
"Overall employee numbers are understood to have been declining, especially through productivity and technology advances," it states.
"However, the collective workforce is also benefitting from the improved price environment, with the pool of aggregated labour costs growing by 5% in US dollar terms, well above the respective inflation rates."
For the 31 companies in the PWC survey that disclosed unit cost data, which represent more than 85% of total revenue, a third of the 146 disclosures reported a decrease in dollar unit costs.
Rio Tinto identified $2.2 billion in operating cash cost improvements across 2016 and 2017 with the optimisation of its maintenance strategies, partnerships with suppliers and improvements in mine processes including cycle times identified as contributing factors.
At a recent investment seminar Rio Tinto investors were told over the past 18 months hourly rates for plant and mobile equipment operators and fitters had risen up to 10%.
Anglo American increased its production by 9%, at a 26% lower cost per unit, and its volume target for 2017 by $1.1 billion.
It attributed these successes to its improved mine planning and the simplification of its operating structure.
Anglo American also identified the potential to achieve a further $800 million benefit by 2022 and an additional $3 billion to $4 billion improvement in underlying earnings per annum, as a result of improved production and cost reduction.
While the Top 40 strives to find efficiencies through the use of technology, labour-related disputes, especially in emerging markets, can be damaging to productivity.
For example, changed labour laws in Chile, effective in April 2017, are expected to make wage negotiations increasingly difficult, according to the report.
In 2017, BHP Billiton's Escondida mine in Chile was impacted by a strike lasting six weeks, which resulted in an about a US$1 billion impact on production and revenue.
"Given the expected strength of the companies' financial performance, Top 40 miners will likely face additional calls from employee groups for wage increases," the report states.
How it balances the need for unit cost management with the rising cost of labour may well determine the ongoing sustainability of mining projects in the future.
