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The Development of Mining Equipment, Technology and Service Suppliers [METS] in Australia

Don Scott-Kemmis, October, 2014

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EntrepreneurshipNew Venture

Formation

Risk Capital Knowledge BaseResearch, Transfer

Exemplars, MentorsNetworks, Angel investors

Market Entry to MTSE Sector

Firm Growth

UpgradingNew products & services Internationalisation

Prior experience

Role of the customer

Demand, customers[primary & intermediate]

Talent –knowledge & skill resources

Knowledge BaseResearch, Transfer

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Education &Training Organisations

Coordination & Collaboration

Customers

Challenge, Competition & Technological Opportunity

Research & TechnologyOrganisations

Complementary suppliers

Investment in R&D & Knowledge acquisitionSpecialisation,

Capability Upgrading & Innovation

Collaboration & Acquisition

Collaboration & Problem Solving with customers

Competitors

Rivalry, competition & collaboration

Internal Knowledge Development

Labour Market Hiring

Sectoral, regional & cluster organisations

Coordination & promotion of research & education initiatives

Networks

Cluster Dynamics: Drivers & Shapers of Specialisation & Capability Development

Hiring & coordination

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Major role in economic and industrial development in many countries: United States, Canada, Sweden, Finland, Norway, South Africa, Australia. These histories suggest:

A strong foundation of capability is important in capturing the opportunities

New challenges/ discontinuities often present major opportunities Relationships with the mining firms, Tier 1 suppliers, and ‘owners

of the problem’ are important Opportunities for entry are often better in the production than in

the investment phase Entry is only the starting point for evolution and capability

upgrading Wider knowledge resources and infrastructure vital for upgrading In most cases an active industrial development strategy was

necessary to address barriers to entry and to promote upgrading.

Resource-Based Industry Development

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Largest exporter: coal, iron ore, bauxite, lead, zirconium, titanium

Second largest exporter: gold zinc & uranium

Third largest exporter: silver, nickel, aluminium

More recently major gas exports

Mining accounts for 8% of GDP, but indirectly for probably 20%.

Exports about $140b in 2011 – approx 50% of exports

Investment approx $86b in 2012

Exploration approx $6b in 2011

R&D by mining companies approx. $4.2 b in 2011.

Currently cooling quickly

Economic resources increasing over time not depleting.

Australia – a major minerals producer

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Low visibility of the Mining Supplier (METS) sector;

Mining seen as extractive, old, low tech

Not metropolitan – most very remote

Diverse minerals and locations– no geographical focus

Supplier (METS) sector diverse and not a statistical sector and hence low visibility.

Recent rise very fast after a long quiet phase

But….

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Size – at least 250 significant firms (40% <10 employees)

Turnover – A$71b in 2012

Employment – Over 250,000

Rapid growth – increased 500% over 15 years to 2012

Diverse

Exports – about 20% of sales in 2012

Offshore expansion – 27% of firms had offshore offices

METS Sector in Australia

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INTERNATIONAL MINING EQUIPMENT SUPPLIERS IN AUSTRALIA

Exploration

Mapping, Geological & Geotech Surveys,

Borehole Drilling

Hatch

Bulk Material Handling

Conveyors, Crushers,Winches, Vehicles,Weighing & Measuring

Sandvik – Tamrock

Detroit Diesel

Hitachi

Terex

Surface Mining

Drilling, Electrical &Hydraulic Eqp’t, Shovel buckets

Sandvik – Tamrock

Caterpillar

P&H Minepro

Atlas Copco

Hitachi

Liebherr

DBT

Komatsu

Bucyrus

Underground Mining Blasting, Drilling,

Electrical &HydraulicEquip’t, Communications

Caterpillar

Sandvik - Tamrock

Atlas Copco

Hitachi

Joy Mining Machinery

DBT

Komatsu

Michelin

Health and Safety

Ventilation, Dust control, Waste Mngm’t, Safety Eqp’t

3M Mining

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Major Categories of METS

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METS Sub-groups

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Changing role of the major mining companies – greater outsourcing released staff and grew a constellation of suppliers;

Local ‘unique’ challenges eg regolith

Long history of development of the knowledge infrastructure / strong knowledge base: education, organisational development (associations, AMIRA & tech organisations), research (univ, CSIRO, specialist, CRCS)

Increasing knowledge intensity – cost pressure, safety, environment

Technological discontinuity

Assets (knowledge, networks, relationships) development & reuse

Australian METS Development -Critical Factors

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Services (eg maintenance) specialist equipment or components

Problem solving new software, equipment or service

Tier 3 project management Tier 2 Tier 1 Entrepreneurial spin-off professional service

provider Research organisations specialist supplier (few

cases)

Overall Systems integration innovation on a wide frontier Local national international

other user markets?

Paths of Evolution for METS

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Vital for METS firms:

Most collaboration is with the mining companies or higher tier suppliers

For innovation/research activity:

Major mining companies prefer to collaborate with platform mechanisms eg AMIRA or CRCs

METS most likely to collaborate with universities

Some METS can see universities and CSIRO as competitors

Collaboration

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Australian ‘Minerals Innovation Complex’

Mining Companies

Mining Equipment &

Services Suppliers

CSIRODivisions &

Mineral Down Under Flagship

Mining Technology Innovation Centre

Universities

GeoScience Australia

CRCsUniversi

ty Centres

ACARPAMIRA

International

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  Level of Challenge for Local Content and Supplier Development

  1 (Low

)

2 3 4 5 (high)

Capability gaps          

Product or service specialisation & complexity

         

Criticality          

Single supply opportunity (lack of repetition)

         

Supplier development potential declines from 1 to 5Time and cost for supplier development rises from 1 to 5

Supplier Development Opportunities – Scope & Effort

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Supplier Attractiveness

ReputationProven Product/ Service

Solves a Significant Problem

Commitment to support

Proximity

Fit with existing Technology/systems

Familiarity withkey people 1

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Finance and human resources for firm growth

Spatial dispersion- mining areas distant from major centres and from each other

Core technology and major project management largely imported

Research METS links not strong

Development of new learning processes- limitations of problem solving and experience-based learning

Cluster Development Constraints in Australia

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EnablersLinking MechanismsIntermediaries, Information resources, procurement policiesCapability DevelopmentFormation, learning & growth capabilityStrengthening the ContextCluster development

PullEntry in production phaseAddress all barriers to firm development: skills, capital etc

PushEngage competent resources firms in knowledge transferLicence to operateExplicit but flexible strategiesAddress barriers to entry

Drivers of Supplier Development

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Risk – that the use of local suppliers, in response to political pressure, will lead to higher costs and project delays, reducing returns to investors;

Compliance – meeting regulatory requirements may avoid sanctions and delays with approvals etc.;

Reputation – with the host government as a firm able to develop strategies to effectively build local capability and potentially be a preferred investor;

Cost reduction – greater development and use of local suppliers may lead to cost savings on imported equipment, parts and services;

Social licence to operate – use of suppliers based in local communities can provide benefits from resource projects to those communities, hence providing some compensation for the costs of such projects.

Maintenance and problem solving – capable local suppliers can reduce downtime and deal with production and development problems quickly.

Procurement strategies resource - project developers

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Demand – particularly whether that demand is specialised, unusual or ‘leading’, in that it anticipates patterns of demand that will be more widespread in the future;

Input factors – The availability of high quality inputs of eg capital, labour, natural resources, infrastructure, knowledge;

Complementary and supporting industries and organisations – which provide goods and services (including research and education) to different stages of the value chain;

Competition and rivalry in the core sector – which drives competition and the ongoing search for sources of improved performance

Eg Porter

Frameworks for Cluster Development

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Four key processes which reinforce each other:

New Entrants - the entry or formation of more, and a more diverse range of, organisations (suppliers, customers, intermediaries, sectoral organisations, research and education organisations etc.)

Interaction - increasing interaction (user-producer, competition, collaboration) among these organisations

Specialisation- increasing specialisation and capability upgrading within organisations (and through complementarity and cooperation at the level of groups), and

Institutional innovation - the development of institutions, policies and shared priorities.

The role of “cluster” development

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Increasing

Demand[economic

growth, urbanisation,

industrialisation]

Increase Output[access to economic

resources] Mine & refine

efficiently

Win license to operate

Find- high

quality resources

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Win license to operate

Mine & refine

efficiently

Find high quality

resources

Mineral Resources*deeper *lower grade*more remote *more complexHuman Resources*ageing workforce*skill shortages*hazardous workplaces

Environmental Resources*water scarcity *energy costs*fragile ecosystems *more wasteSocial & Corporate Resources*accountability *community devel’t *sovereign risk *scrutiny

High Level Objectives

High Level Challenges

Increasing:* Costs* Technical complexity* Social & polit. complexity * Risk * Capital requirement

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Mineral Resources*deeper *lower grade*more remote *more complex

Human Resources*ageing workforce *skill shortages*hazardous workplaces

Environmental Resources

*water scarcity *energy costs*fragile ecosystems *more waste

Social & Corp. Resources

*accountability *community develop’t *sovereign risk *scrutiny

FindDiscover Tier 1 depositsExplore deeper depositsImprove resource assessmentSecure rights

MineLower mining costs- labour, capital & energy efficiencyMine in more remote locationsLower mining impacts – water, emissions, safety, local community benefits

RefineMore efficient extractionProcess complex oresLower impact separation – energy, water, waste

SustainAttract talent & capitalMaintain reputationSustain ‘licence to operate’Respond to greater regulation

ChallengesPerformance Objectives

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FindDiscover Tier 1 depositsExplore deeper depositsImprove resource assessmentSecure rights

MineLower mining costs- labour, capital & energy efficiencyMine in more remote locationsLower mining impacts – water, emissions, safety, community benefits

RefineMore efficient extractionProcess complex oresLower impact– energy, water, waste

SustainAttract talent & capitalMaintain reputationSustain ‘licence to operate’Respond to greater regulation

Sensing & InterpretingSatellite remote sensingRapid & mobile field geochemical analysis On-line analysisContinuous slope and wall stability detection

Decision Support ToolsData integration & 3D modellingWhole of mine planning & scheduling software

Smart MachinesAutomation & remote controlRobust low maintenance equipment

FragmentationBlock caving & low energy miningSmart blasting design & formulation

ExtractionSmaller in-mine primary recoveryDry processing & on-line automatic sortingIn-situ leaching

SustainabilityWhole of life social & env’l assessment & planningLower energy & water using techniques

Innovation TrajectoriesPerformance Objectives

Mining Innovation Roadmap

Increased demand

Mining developmen

t opportunity

Challenges

New Performan

ce Objectives

New Innovation Trajectorie

s

Enabling Innovation

Deepening and Distributed Knowledge BaseGeology, Geo-Chemistry, Mining Engineering, Fluid Dynamics,

Mechatronics, Signal Processing, Civil Engineering, Mechanical EngineeringSoftware engineering, Microelectronics, Communications Technology,

Simulation, Artificial Intelligence, Plant and Animal Ecology 26

Step Change Innovation in Mining: the case for institutional innovation

Corporate Innovation

• Miners / Suppliers

• Strategic differentiation

• Appropriation of IP

Collaboration

• Complexity

• Cost & risk

• Avoid dependence on one supplier

• Shared knowledge platform

• Equity in cost & benefit

Coordination

Global/NationalStandards

Organisations Funding

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Core Mining & Processing Equipment

Core Engineering Design

& Project Management (EPCM)

Contract Operations

Consulting Services

General Equipment

& Components

Specialised Technology

Information Technology Equipment and Related

Services

Other Services

General Support Services

Drivers of Opportunity, Innovation and Capability Development

Mining co’s outsourcing exploration

Mining co’S outsourcing

EDPM

Mining co’s outsourcing mining operations

Mining co’s outsourcing specialist analysis

Demands for improved control & safety

Rising knowledge intensity of

mining

Local innovations & adaptations to

imported equipment

Local innovations to meet new needs

Local innovations to meet new needs

Local innovations and adaptations to

replace, improve, extend imported

equipment

Innovation in management systems

to underpin productivity

Increasing scope and capability

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