Mining consultant Q&A

AJM spoke to the chiefs of four major mining consultants about their businesses and the sector, as the post-GFC boom fuels expansion and skills shortages. Mike Foley reports.

John Buffington, managing director, Runge.

 What’s new for Runge this year?

JB: Our Smartminer product. It is an online training product that we have combined with Catalyst Interactive to put together. It is aimed at educating people in the mining industry, taking them from initial exploration, through mine development, mining processing to marketing. We are starting to get good take up on that. It was rolled out in Durban last week.

What are you busy with currently?

JB: At the moment there is still a lot of activity globally on the merger and acquisition front, or the due diligence study front. We are doing lots of independent technical reviews, technical audits and due diligence studies all around the globe – for both investors and mine operators and owners.

Are software services a big part of your business?

JB: We have always felt that one of our competitive advantages is having the combination of domain knowledge and operational experience. A lot of our guys come out of mining operations. Runge combines that knowledge with our software and technical capabilities, so we see that many of our competitors are more pure consulting firms, that often use our software and then there are software competitors that tend to implement the software but don’t get involved in some of the feasibility work.

How many staff do you have?

JB: We have staff just short of 400 in total. I think we are up to 19 offices globally in 12 countries. Out of those we are looking at around 230-40 full time consultants, the others are software developers or in management or administration roles.

How do consultancies attract staff in such a competitive and lucrative market?

JB: Sometimes there are fellows who have been in operational roles, they may have been mine managers or senior executives, and they are looking to get away from the 24hr a day stress of what safety incident might occur on the mine today? Some of them are looking for a change of lifestyle. Sometimes we get fellows who have been in a management role who say I would like to go back to the tools and work in that sort of role.

Can you identify any opportunities in the region?

JB: If you look at where the mines are opening up, they are in China, Mongolia, Mozambique, Guinea, Russia and all over the world. We have got some areas in Australia that are continuing to open up too, the Galilee Basin and in Queensland for coal.

What trajectory do you think the mining boom will follow?

JB: Obviously there is underlying growth, and we have been reading about it for years. The Chinas and the Indias are giving electricity to people and living in bigger houses. There is always going to be the need for commodities and that means underlying demand will continue to grow. Also, we will see things like the recent floods continue to cause some spikes in prices on the metallurgical coal front. I think we will see ups and downs along a general upward trend.

Is the mining boom creating a skills shortage for consultants? JB: In the Australasian region, the two animals that seem to be rarest are the open cut metals engineers with deep pit metals experience, including in-pit conveyor experience, then on the other side it is underground coal engineers. In talking to colleagues in the industry, both customers and consulting competitors, these seem to be the two hardest people to get.

Craig Morley, chief executive, Snowden.

What’s the news at Snowden?

CM: The cooperative agreement between SGS Group and Snowden, so on the geometallurgy side that is pretty exciting for us getting that activity going. We are already working with SGS on projects in Australia and Canada. We have just been awarded the contract to do the majority of FMG’s due technical work, which adds to the work we do for BHP Billiton and a range of other large iron ore companies.

Can you identify any emerging industry trends?

CM: I guess we are seeing a lot of companies that are wanting to look at their operations as a whole package rather than the traditional isolated way of doing a single bit of optimisation. A lot of companies are looking at how their whole portfolio fits together.

Any concerns as industry activity gains speed?

CM: As the market heats up, the ability to get that quality work done is going to become increasingly an issue, as the independents like ourselves are becoming more and more stretched for resources. We can end up in this messy phase within a boom time, where the one-man-bands and fly-by-night consultancies are picking off projects that ultimately end up in grief, because of the organisations that just tick the boxes and don’t do quality due diligence.

How hard is it to find staff in the current environment?

CM: The skills shortage is the biggest issue that we have, but we have managed to put on 24 people over the last 24 months, and the quality of the candidates that we are getting is quite high. I think that to a certain extent, companies that do have a good reputation and can offer that kind of portfolio and exposure to exciting projects and global opportunity will still get people coming in.

How do you see the trajectory of the boom?

CM: I have been in the industry long enough to know ups and downs come and go. There will definitely be another downturn in the future, that’s the way the economics of the world work. The optimist in me likes to believe the reports the Australian treasury came out with last week. I think it was with a forecast that we are going to see this mining boom for the next 15 years or so. That would be nice, but the realist in me says we will get another good five to seven years run out of this, that is what we have normally seen in the past.

Does Snowden have plans for expansion?

CM: We will be expanding into Russia in a fairly large way, both on the coal side and on the metals side. From Snowden’s perspective, Russia is becoming increasingly important to us. In terms of a region, we are still ramping up our expertise in Africa and South America. We have offices in Johannesburg and are still growing those offices quite aggressively.

Brian Middleton, managing director, SRK.

What is new for SRK?

BM: We were part of the Leapfrog development, which is a nice visualisation tool for geology and the guys in Leapfrog have expanded that model to deal with not only mining issues but other geology issues. We are just opening in Mexico, which is a new development. Our second new development is in Kazakhstan and an office now in Mongolia. There is a lot of interest from Australia into that area. And lastly, we have recently opened in the Democratic Republic of Congo.

Current operations at SRK?

BM: At the moment we are busy in West Australia with iron ore, which is keeping us very busy, but we have other projects as well. Over east we are at Brisbane and Newcastle in the coal areas. There is also quite a lot of work external to Australia, which has always been the case. We have got current projects in Mongolia, joint projects with our Chinese guys – projects in Mongolia and projects in Russia.

Will the mining boom cause staffing problems for SRK?

BM: In Australia, we are short of resources. I think we are going to get into a spiral of just churning the people in Australia round and round. So they will be with us and then someone else and that kind of deadly spiral will keep on going.

Is software development a key differentiator for consultants?

BM: Obviously all consultants use the same tools, it is just that we hope to have more skilled guys driving them, and in terms of new developments, we try to get onto the front of them. A lot of development now looks to see how we can present information in a much easier and accessible way. I think we are all getting more and more iconised and want to see visualisation tools rather than tables with lots of numbers on them. That is a huge advance in software in the last couple of years.

How do you attract staff into consultancy?

BM: What often happens is that we provide a slightly different lifestyle choice. Certainly, if guys want to be in the mining industry, fly-in fly-out is a particular choice. But if the guys want to be in a city environment and the kids are growing up, consulting is an option for guys who have been involved in mining and now they want to change course a little bit, be home when the kids do their homework and so on.

How do you think the mining boom will play out?

BM: Things cannot go up forever. There is going be a correction at one stage. Maybe there will be a limiting resource and that will hinder development, because frankly we just don’t have the people. There might be a limiting resource which is water. There will be natural constraints of some sort, there will be environmental constraints – there is no doubt about it. Energy constraints will probably be a factor as well as people constraints.

Mark Noppe, managing director, Xstract Mining.

Has the mining boom affected recruitment?

MN: It has been a lot tougher for us to find staff. The major mining companies have been recruiting pretty hard for the last several months, so that makes it tough. We have been extremely fortunate though, in that over the last few weeks we have hired six new staff.

What is your mainstay for ongoing business?

MN: We continue to be approached by companies to perform different levels of due diligence in projects that interest them, in all corners of the world, so it is certainly encouraging that we have managed to get a reputation for that type of work. Also, we have been working on two feasibility studies – one in base metals and one in bauxite alumina. Feasibility studies probably contribute a quarter of our steady income. The rest is a combination of resource or mining evaluations and due diligence studies.

Can you identify any trends in the local industry?

MN: With the resource super tax debacle of last year, even though we are Australia-based, probably a third of our work has been for offshore projects. That trend certainly looks as if it is here to stay. A number of our offshore clients, who have been evaluating opportunities in Australia, have actually said to us they have found a number of the projects in Australia overpriced or difficult to get into. They have shifted their focus to other areas of the globe and, in some cases, particularly into Africa, and in other cases into Asia.

Can you identify any particular skills shortages in the industry?

MN: Looking across the county, and talking to people both in consultancies and mining companies, they say that capable, experienced mine planning engineers are in the greatest demand. People will often comment that it is that seven-to-fifteen-year group that is seriously lacking in our industry.

Future plans for Xstract?

MN: We are very focused on Australia and moving into Asia. Particularly, we have been very busy in Mongolia. We continue to be interested in the opportunities outside of the local time zones, both into Africa and into the Americas and that is because some of our clients are based in those areas. It is an interest of ours to identify, not for immediate gain but for long term return, whether there are the right people to help us set up local offices which could help us service clients in those areas.