This article is based on material presented by Stephen Hancock in his article ‘Getting value for money from consultants to the mining industry’.
The varied roles of consultants in the minerals industry
The mining industry, as we all know, comprises an extraordinarily diverse community. It ranges from mega-organisations, at both operational and regulatory levels, leveraging ongoing authority over multiple resource exploitation activities, to small concerns involved mostly in niche areas such as exploration, mine development planning, mineral processing and project approval processes and mine closure activities and handback approvals.
Consultants, at their best, present a resource to the mining industry through the diversity and depth of the skills and experience they have attained. Where their reputation is also credibly recognised by their industry (such as CP or AusIMM Fellow status) they can act as direct advisors, objective evaluators and contributors to (and constructive critics of) proposals which may otherwise derive from ‘in-house group think’.
Consulting services have generally been applied in many different roles, including in exploration, resource evaluation and mining approach option studies; in operational support and improvement; in IPO and M&A activity, and the like. The need for these services arises for different reasons. In many cases, the specific reason is to provide mature, diverse experience as oversight. In this role consultants can be of value in determining and recommending the manner of resource development (mine planning and project viability advice) for optimal economic return within the strictures necessarily applying.
Consultants are also commonly engaged as expert reviewers to support senior management decisions on operational alternatives developed in-house. These roles can be particularly valuable during the stages of feasibility studies, especially where they are briefed to be independent experts tasked to provide confidence both to the governing boards and project financing groups.
Similarly, consulting services are obligatory in providing independent evaluation and expert advice on matters such as resource evaluations in public information documents (eg IPO prospectuses and environmental impact statements), and in many cases to assist land planning, mining license and work program approvals. Equally, consultants are commonly engaged to direct work required on project aspects which are one-off or not core skills within the company operational staff. This is especially so where short duration developmental exercises are required. Examples of the latter include:
- intermittent and new resource evaluations
- environmental and social impact assessments
- undertaking geotechnical evaluations
- developing or altering mine water management plans
- designing and implementing mine waste management systems and periodic tailings storage facility expansions
- planning for and overseeing effective mine site rehabilitation, waste system encapsulation and fixation within overall mine closure and site rehabilitation planning.
A less common role for consultants is in providing short-term operational input, albeit this demand generally occurs where critical issues arise unexpectedly that require rapid attention and a focus not available from otherwise fully committed production teams. During the recent mining boom, consulting staff were sometimes contracted to fill short term vacancy positions amongst operational staff. In many cases, the role met was not really a consulting role, but one which the larger consultancies were pleased to meet in order to help their clients and to give their less senior staff further experience and knowledge of their clients.
The range of skills and expertise that consultants are called upon to provide requires consultancy organisations to be diverse in size and skills. In practice, very few consulting organisations include a full range of the skills required to meet the spectrum of demand. Rather they are selective in the areas of expertise they offer. This is based upon their assessment of market size and value and of the inherent risks and costs involved in servicing client needs. Similarly, the larger diverse mining houses have in the past operated their own in-house consulting groups, but these too have been focused around the most common areas of their need. For any of the less frequent needs they often depend upon niche specialist skill consultants, only using large international consultancies where their expertise is demanded by statute or where it serves to dissipate the risk profiles inherent in many mining company decision making processes.
In recent years the emergence of engineering procurement construction management (EPCM) contracts for mine system developments and the use of mining contractors have blurred the role of consulting. While undoubtedly there is a role for both EPCM and for mining contractor involvement in mining projects, the motivations of consultants and contractors are quite different. For contractors, the motivation is to achieve the greatest margin on expenditure while meeting the contracted objectives. For consultants, the motivation is to be appropriately rewarded for providing value for money through cost effective solutions and/or options for material issues capable of affecting the viability and sustainability of proposed mining developments.
Not only are the motivations of contractors and consultants different, but so too are the risk reward scenarios and exposures. For consultants, these relate predominantly to professional indemnity claims arising from dissatisfied clients or third parties, and staff retention issues, amongst others. For EPCM and mining contractors, the risks are project management related and include such issues as liquidated damages and the cost of contract financing, etc. While all these elements are covered within frequently complex contractual arrangements, the requirements for necessary flexibility to encompass changing client priorities make enforcement at law difficult and frequently non-productive in the long term, albeit that the resolution of disputes commonly involves expensive and protracted legal negotiations to achieve settlements with PI insurers. Indeed, many contracts carry provisions for such settlements in their costings over and above insurance costs.
With every downturn and upturn in our cyclical industry there are consequences in employment type and skills availability within mining entities and in pressures on the remaining staff. Some who are retrenched and some within the industry may seek to take up roles as consultants to the industry rather than abandon it altogether. Similarly, established consultancies, forced to retrench staff to survive the downturn, may lose some specialist skills but may still continue to service specialist areas without realising all the ramifications that comprehensively skilled and experienced staff need to be proficient in for the delivery of services in these areas. The latter all contribute to a downturn in the quality and efficiency of performance that the industry seeks to maintain. Regrettably, this impact on quality is seldom fully recognised.
It is to be understood that consulting is not a role for all professionals and, except for the most experienced and comprehensively skilled people, it is not a career that should be taken on in isolation from their peers. Consulting is a very challenging career. It requires the person taking up consulting to have been well tutored academically, on the job and by their mentors and more experienced colleagues. Consultants need to pay rigorous attention to the detail of the brief. They should also have developed mutually respectful relations with their clients and potential clients such that the final briefs for work are pragmatic and relevant to resolving the issues requiring attention. This involves getting to know the client and the full spectrum of their concerns relative to the brief so that a working atmosphere of mutual trust and respect will apply. With these foregoing matters addressed it is likely clients will have their problems and expectations addressed on time or at least, if it is not, there will be understanding as to how and why the expectations have changed and time deadlines changed.
The Consultants Society
The AusIMM Consultants Society was formed in September 2012, and is dedicated to meeting the professional needs of those professionals employed, operating or interested in mineral industry consulting, and to promoting their profiles in the community. Members of the Consultants Society may also be members of other AusIMM societies and our members represent a wide range of technical professionals, namely environment, geology, geotechnical (mining), management, mining engineering, and metallurgy.
The twelve person Consultants Society committee represents a range of AusIMM professional disciplines, geographic locations and consulting experience. The committee and society members share their industry, consulting and AusIMM experience with our more than 2200 society followers through newsletters, Bulletin articles, online guidelines, technical seminars, webinars and participation in a range of other AusIMM groups, events and advocacy forums.
The Guidelines for Consultants is available through the Consultants Society page on the AusIMM website. The articles are regularly updated and appended to, written or sourced by our members, for our members to provide articles and useful links to help consultants navigate through their chosen career path. The articles represent a wealth of information and knowledge acquired by the authors and grouped to cover topics of management, legal and insurance, professional development, standards, valuation, cost estimation, resources and reserves, professional bodies and online news links. So if you are looking for advice on charge rates, travel risk, writing reports, preparing proposals, insurance or intellectual property considerations, then the guidelines are a great place to start.
Register of Minerals Consultants
The AusIMM Consultants Society provides a publically accessible and searchable online Register of Mineral Consultants. The Register of Mineral Consultants currently has over 250 active profiles. The consultants’ profiles include the full range of their experience and capabilities, including qualifications, specialities and contact details. The register allows potential clients and others to search profiles of appropriately qualified and experienced consultants by keyword, profession, expertise, commodity experience and/or region of experience. The register is promoted by the AusIMM through its website and has also featured in newspaper and online Google advertising. While any financial member of The AusIMM can belong to the Consultants Society – simply by nominating it in the online profile page or by email – only those holding current AusIMM Chartered Professional status are eligible for inclusion in the online Mineral Consultants Register.
Getting value from your professional advisors
The Consultants Society will host a one day seminar in Brisbane on 25 August 2016 to provide consultants and mining industry leaders with an opportunity to consider issues around achieving the best value from the use of consultants while informing consultants what the industry expects of them.
In the present downturn, we hear that some active mining operations had concerns that during the recent mining boom they sometimes received less than value for money from what they saw as the many highly-priced consultants they engaged. Thus a question which needs to be debated is whether these perceptions are valid, and if so, why?
Consulting skills of relevance to the mining industry derive in part from academic training and thereafter from industry and industry related experience learned on the job. This latter learning however, to be comprehensive, requires experience derived from many different work and work place experiences. In addition, it requires that the experiences acquired should have been subject to rigorous technical oversight and review. Without this oversight, successful solutions arrived at may be understood to have been successful, but for the wrong reasons. This can lead to failures where significant variations giving rise to underlying problems are not recognised. Regrettably, the pressure on mining company staff during the recent mining boom led to reduced senior staff technical oversight in many cases. Thus, some legacy of mistrust may exist in relation to skills derived by both some mining and some younger consulting staff within that period.
With presenters from both the industry and consultant perspectives, the seminar offers a well-rounded view of getting value from professional advisors. Speaking from their own experiences, the presenters will deliver practical and relevant commentary, covering topics such as:
- when and where consulting services are, or should be engaged and why
- differences between consulting and contracting
- establishing equitable and meaningful consulting briefs
- types of consulting briefs across the mining project life-cycle
- pre-qualification of tenderers
- consulting staff employment conditions and retention risks
- equitable risk distribution and provisions
- importance of strong relationships between consultants and clients
- adequate sources of training and experience within the industry to create excellent consultants
The Consultants Society committee hopes this article provides some background to the relationships, the challenges and the rewards consulting can bring both to those involved and to the industry as a whole. The objective is to ensure that in the future the relationships between consultants and clients is soundly and fairly established. This should ensure that the industry’s need for advice and assistance is properly and expertly catered for by competent practitioners on both sides.