August 2015

Innovation and opportunity in the minerals sector

mining bulldozer
  • By Elizabeth Lewis-Gray, Chair, Austmine

Australian METS companies should take advantage of new technologies and collaborative partnerships

The Mining Equipment, Technology and Services (METS) industry is critical to the Australian economy. METS companies generate three per cent of gross value added as a percentage of the Australian economy (this is compared to the mining industry which contributes approximately ten per cent gross value added). Whilst mining employs around 250 000 people, the METS industry is responsible for over 386 000 employees. According to Austmine’s 2012-13 survey of the industry, it generates $90 billion total revenue a year (although these numbers have likely declined slightly since that survey due to the downturn).

The METS industry is distinctive because it is a knowledge-based industry. This makes it a source for a large volume of high value adding products and services. The industry plays a critical role in supporting productivity improvement and capability in the broader mining community. This capability really makes a difference, especially in the current climate where mining companies are facing low commodity prices and must dramatically reverse the recent downwards trend in productivity.

Australian METS companies are significant exporters of services and technology products, worth an estimated $15 billion per annum. The ongoing commitment of METS companies to innovation is evident in the $1.6 billion they are investing every year in research and development. It is also one of the few industries in the Australian economy that has a high proportion of ‘new to the market international innovators’ as termed by the Australian Bureau of Statistics.

Australian METS companies are significant exporters of services and technology products, worth an estimated $15 billion per annum.

These positive features explain why the federal government has selected METS as one of the five industry growth centres.

Tackling the productivity challenge

To effectively address the productivity challenge, there needs to be a focus on collaboration and closer working relationships between mining companies, the METS industry, and the research industry. Over the past 18 months, Austmine has signed memorandums of understanding (MOUs) with several research, mining and innovation institutions including CRC ORE, RIIT/Unearthed, Industry Capability Network (ICN) and the Minerals Council of Australia to help foster increased collaboration.

There is also a need to accelerate the innovation cycle and speed up the adoption of new technologies and services into mining or METS operations. Naturally this will come about faster through closer collaboration between all stakeholders in the industry. It also requires identification and education of alternative processes and funding options. Importantly, alternative innovation processes may require a different treatment of intellectual protocol to accelerate development, and mining companies may benefit from considering more strategic relationships with and investments in METS and research capability.

Additionally, there should be an emphasis on leadership and skills training. There are definitely skill gaps in certain technical roles across the industry that need to be addressed to ensure we have a workforce skilled for the next generation of mining technology. Leadership that encourages collaboration is the cornerstone of the entrepreneurial spirit that has motivated many small-to-medium-sized METS companies to go on and become leading suppliers globally.

The success of collaboration

A great illustration of successful industry collaboration is that of Rio Tinto’s procurement partnerships. Their partnerships with suppliers, including Atlas Copco, Komatsu, Schneider Electric, Metso, CISA and research institutions such as JKTech, the University of Sydney and Imperial College London, have led to outcomes including the Remote Operations Centre in Perth, their Processing Excellence Centre in Brisbane, and the world-first computer-generated drill pattern.

Similarly, Caterpillar has partnered with both BHP Billiton and Fortescue Metals Group in the Pilbara, Western Australia, to design and deliver increasingly intelligent trucks.

Overseas, AngloGold Ashanti in South Africa has used an open innovation approach, working with a number of suppliers to address several operating challenges in their underground mines. In a generous move to address the declining production of South African mines over the past decade, they have shared their reef boring technology designed to address the challenges of narrow reef mining with other South African miners.

Challenges facing Australian METS

The biggest challenge currently facing the entire mining industry is low commodity prices. The constraints in the public capital markets to provide finance for projects and the distress of operations from the low prices have meant the industry is shrinking in size relatively quickly. Many miners are bringing back services they had contracted out when they were busy. These factors conspire to make it a tough environment to do business, particularly for the METS industry.

Australia has also become a more regulated and expensive country in which to operate. At the same time the capacity of mining companies to embrace innovation has declined. A lot of the innovation required to address the challenges of the industry requires long-term thinking. The distraction of cost-cutting has taken the focus away from an innovation mindset and this has set the industry back.

drill rigs

The shift towards exporting

A significant shift has occurred for many Australian METS since the start of the downturn three years ago. Companies who previously relied upon Australian mining operations for more than 50 per cent of their revenue are now seeing a dramatic growth in income from overseas regions.

The lower Australian dollar means we are now more competitive in export markets. METS companies need to consider restructuring and repositioning themselves to take advantage of the strategic opportunities that will generate their future growth. As part of its mandate, the METS Industry Growth Centre will focus on how to support the many SMEs and large METS companies to develop their export markets and skills. For the past 26 years Austmine has helped to promote Australian METS capability offshore.

Future trends and technologies

There is need for attracting the brightest minds into mining, METS, and resources research organisations. There is a particularly important role for METS companies relating to the growing importance of big data. We are currently seeing an incredibly high volume of data and a relatively small amount of truly meaningful analysis that is applied to the available data. Data analysis represents a massive opportunity for the industry to drive step-changes in operational performance and productivity. This is a crucial area of further research and application of new technologies.

We see that Australian productivity is being impacted by a lack of experienced technical capability. We know enough is not being done to enhance younger workers’ knowledge and experience. This we believe is where cross-industry collaboration will play an important role in the future.

Project and contract opportunities

I see opportunities both in Australia and overseas.

The Australian government and the METS industry can see that we need a collaborative approach to strengthening the sustainable competitive advantage of the Australian METS industry nationally and globally. This is our vision for the METS Industry Growth Centre. The METS Industry Growth Centre’s mission will focus on four broad themes to stimulate productivity and competitiveness:

  • regulatory reform
  • market access and global supply chains
  • management, skills and workforce development
  • industry and research collaboration and commercialisation.

Australian mining companies have become open to embracing a strategic role for innovation and to drive their desire for higher productivity. In a tougher economic environment, people in the industry become more interested in investigating alternatives. Interest in our company, Gekko Systems, has gone up threefold during the downturn because we offer an innovative solution to some perennial CAPEX and OPEX challenges.

Whilst the bulk commodities could struggle for the next couple of years, Australia isn’t a country of only two resources. Nickel, gold, platinum, copper and tin all have decent to good short-term forecasts, with projects like the Sirius Resources’ Nova project going ahead full steam.

In terms of overseas opportunities, many Australian METS have seen their exports increase to a significant percentage of their entire revenue. We see METS companies attracting favourable reviews and business in regions such as South and North America, Africa, South East Asia and New Caledonia, to name a few.

Companies can use this downturn to consolidate, reposition and set themselves up for the inevitable upturn that will come. Mining and supplying mining is a cyclical business and we need to be at the forefront ready to go with Australian METS for when the cycle returns, as it inevitably will.

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  • Andrew Clements
    14 Aug 2015 at 11.46am

    How many of these companies will use the downturn to move manufacturing to more competitive labour markets overseas where their competitive advantage is increased? Lower production costs and wage costs are giving our advantage to other countries. Once the manufacturing moves overseas, the reverse engineering starts as well from competitors.
    Is it in Australia’s best interest to challenge the wage growth that is “expected”?
    METS could become quite like the franchising model, the idea or concept is home grown but then shops are set up around the world to sell/manufacture the product.
    Further benefits for research and development in Australia need to be fostered. And exploitation of current R&D rules tightened to support real growth in R&D.