Pitfalls aplenty as supply sector pushes overseas

The Mets Sector has grown big on the back of Australia’s mining boom, with industry group Austmine valuing the sector at over $35 billion. However, even on the back of this success, expanding into foreign markets can be difficult.

Elizabeth Lewis-Gray, director of Austmine in Victoria and managing director of Gekko Systems warned “the most stupid thing that anyone could think is that having a great invention makes it worth a lot of money. Having a great invention is meaningless unless people want it and you can promote it.

“I am a great believer in that it is not the quality of the invention, it is the quality of the how the company presents and delivers its projects and how the company markets itself. That is what really creates value for a young METS company.”

Peter Harrison, global leader of Austrade’s infrastructure, mining and resources group said negotiating the pitfalls in unfamiliar markets can be challenging for METS companies. He pitched the services of Austrade to help them blaze a trail.

“The imprimatur of the government badge in many cases is a great assistance in opening doors. That is essentially what Austrade’s job is… to open doors, make the right contacts and facilitate the business development process,” he said.

Harrison explained that Austrade “ensures the company has access to all the advice it needs to make that decision themselves. We don’t recommend a particular method or structure of doing business… we are not accountants or lawyers, we are match makers.”

A successful Australian METS company operating in a foreign market will no doubt appear on the radar of foreign investors. Takeovers often result. But are they inevitable?

“I don’t think it is inevitable,” Lewis-Gray said. “I think it is dependent on who owns it and what they are developing it for.

“I am not completely against international investment… Australia has an opportunity to be the brains trust in this area, and I don’t think that just because a company is owned by someone from overseas, we will lose that.

“I would prefer to see the companies remain Australian owned and domiciled…but at least they are being fully funded and I think they will grow our knowledge base in any event. The most important thing is that the sector grows and the brains and knowledge grow in Australia.”

Foreign takeover or not, it appears imperative that Australian METS members maximise foreign markets opportunities. “In Australia with our juniors, our METS and our miners, there is not a high degree of collaboration or integration when you compare them to the Canadians. Especially in South America,” Harrison said.

“The Canadian juniors get in there and prove a resource and typically pull through their METS companies and their miners into that opportunity quite successfully.

“I think there is an opportunity in Australia for our juniors to work more closely with local METS, to be more competitive in the international market place. The deposit owners and the miners are looking for integrated solutions, not individual companies.”

Harrison emphasised that whatever the lack of integration in the sector may be, it did not signal reluctance from METS to enter foreign markets. Judging by the latest industry figures, taken from a survey of 480 METS companies, international expansion is high on the agenda.

Almost 9 out of 10 METS companies export to multiple markets. The average Australian METS company sells into eight foreign markets, “which is quite amazing,” Harrison said.

Out of 408 respondents, 52% were active in Indonesia, 50% in New Zealand and 44% in Papua New Guinea.

The future aspirations of METS companies are far less parochial though. Respondents said they are keen to break into Brazil, China, Chile, Argentina, Malaysia, Vietnam, Russia, South Africa and India.

Contact: www.austmine.com.au