Mine

Report
The Development of Mining
Equipment, Technology and
Service Suppliers [METS] in
Australia
{
Don Scott-Kemmis, October, 2014
Upgrading
New products
& services
Internationalisation
Knowledge Base
Research, Transfer
Firm Growth
Talent –knowledge
& skill resources
Market Entry to
MTSE Sector
Demand, customers
[primary & intermediate]
Role of
the customer
New Venture
Formation
Entrepreneurship
Prior experience
Risk Capital
Knowledge Base
Research, Transfer
Exemplars, Mentors
Networks, Angel investors
Cluster Dynamics: Drivers & Shapers of Specialisation
& Capability Development
Challenge, Competition &
Technological Opportunity
Customers
Complementary
suppliers
Collaboration & Problem
Solving with customers
Collaboration &
Acquisition
Labour
Market
Education &
Training
Organisations
Specialisation,
Capability
Upgrading &
Innovation
Hiring
Competitors
Rivalry, competition
& collaboration
Investment in R&D
& Knowledge acquisition
Internal Knowledge
Development
Networks
Hiring &
coordination
Coordination &
Collaboration
Research &
Technology
Organisations
Coordination & promotion
of research & education initiatives
Sectoral, regional &
cluster organisations
Resource-Based Industry Development
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.
Australia – a major minerals producer

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.
But….

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
METS Sector in Australia

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
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
Drilling, Electrical &
Hydraulic Eqp’t,
Shovel buckets
Underground Mining
Blasting, Drilling,
Electrical &Hydraulic
Equip’t,
Communications
Ventilation, Dust
control, Waste
Mngm’t, Safety Eqp’t
Sandvik – Tamrock
Caterpillar
3M Mining
Caterpillar
Sandvik - Tamrock
P&H Minepro
Atlas Copco
Atlas Copco
Hitachi
Hitachi
Liebherr
Joy Mining
Machinery
DBT
DBT
Komatsu
Komatsu
Bucyrus
Michelin
Surface Mining
Health and Safety
Major Categories of METS
METS Sub-groups
Australian METS Development -Critical Factors

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
Paths of Evolution for METS

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?
Collaboration

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
Australian ‘Minerals Innovation Complex’
Mining
Companies
CSIRO
Divisions &
Mineral Down
Under Flagship
AMIRA
International
ACARP
Universities
CRCs
GeoScience
Australia
Mining
Technology
Innovation Centre
University
Centres
Mining Equipment
& Services
Suppliers
Supplier Development Opportunities – Scope & Effort
Level of Challenge for Local Content and
Supplier Development
1
(Low)
Capability gaps
Product or service
specialisation & complexity
Criticality
Single supply opportunity
(lack of repetition)
Supplier development
potential declines from 1 to 5
Time and cost for supplier
development rises from 1 to 5
2
3
4
5 (high)
Supplier Attractiveness
Solves a Significant
Problem
Proximity
Familiarity with
key people
Reputation
Proven Product/ Service
Commitment
to support
Fit with existing
Technology/systems
Cluster Development Constraints in Australia

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
Drivers of Supplier Development
Push
Enablers
Engage
competent
resources firms in
knowledge
transfer
Linking Mechanisms
Licence to
operate
Explicit but
flexible strategies
Address barriers
to entry
Intermediaries,
Information resources,
procurement policies
Capability Development
Formation, learning &
growth capability
Strengthening the Context
Cluster development
Pull
Entry in
production phase
Address all
barriers to firm
development:
skills, capital etc
Procurement strategies resource - project
developers

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.
Frameworks for Cluster Development

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
The role of “cluster” development
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.
Increasing
Demand
[economic
growth,
urbanisation,
industrialisation]
Increase
Output
[access to
economic
resources]
Find- high
quality
resources
Win license
to operate
Mine & refine
efficiently
High Level
Objectives
High Level Challenges
Mineral Resources
Find high
quality
resources
Win license
to operate
Mine & refine
efficiently
*deeper
*more remote
complex
*lower grade
*more
Human Resources
*ageing workforce *skill shortages
*hazardous workplaces
Environmental Resources
*water scarcity
*energy costs
*fragile ecosystems *more waste
Social & Corporate Resources
*accountability *community devel’t
*sovereign risk *scrutiny
Increasing:
* Costs
* Technical complexity
* Social & polit. complexity
* Risk
* Capital requirement
Challenges
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
Performance Objectives
Find
Discover Tier 1 deposits
Explore deeper deposits
Improve resource assessment
Secure rights
Mine
Lower mining costs- labour, capital &
energy efficiency
Mine in more remote locations
Lower mining impacts – water, emissions,
safety, local community benefits
Refine
More efficient extraction
Process complex ores
Lower impact separation – energy, water,
waste
Sustain
Attract talent & capital
Maintain reputation
Sustain ‘licence to operate’
Respond to greater regulation
Performance Objectives
Find
Discover Tier 1 deposits
Explore deeper deposits
Improve resource assessment
Secure rights
Innovation Trajectories
Sensing & Interpreting
Satellite remote sensing
Rapid & mobile field geochemical analysis
On-line analysis
Continuous slope and wall stability detection
Decision Support Tools
Mine
Lower mining costs- labour, capital &
energy efficiency
Mine in more remote locations
Lower mining impacts – water,
emissions, safety, community benefits
Refine
More efficient extraction
Process complex ores
Lower impact– energy, water, waste
Sustain
Attract talent & capital
Maintain reputation
Sustain ‘licence to operate’
Respond to greater regulation
Data integration & 3D modelling
Whole of mine planning & scheduling software
Smart Machines
Automation & remote control
Robust low maintenance equipment
Fragmentation
Block caving & low energy mining
Smart blasting design & formulation
Extraction
Smaller in-mine primary recovery
Dry processing & on-line automatic sorting
In-situ leaching
Sustainability
Whole of life social & env’l assessment & planning
Lower energy & water using techniques
Mining Innovation Roadmap
Increased
demand
Mining
development
opportunity
Challenges
New
Performance
Objectives
New
Innovation
Trajectories
Enabling
Innovation
Deepening and Distributed Knowledge Base
Geology, Geo-Chemistry, Mining Engineering, Fluid Dynamics,
Mechatronics, Signal Processing, Civil Engineering, Mechanical Engineering
Software engineering, Microelectronics, Communications Technology, Simulation,
Artificial Intelligence, Plant and Animal Ecology
Step Change Innovation in Mining:
the case for institutional innovation
Collaboration
Corporate
Innovation
•
Miners /
Suppliers
•
Strategic
differentiation
•
Appropriation
of IP
Coordination
Global/National
Standards
Organisations
Funding
•
Complexity
•
Cost & risk
•
Avoid
dependence
on one
supplier
•
Shared
knowledge
platform
•
Equity in cost
& benefit
Drivers of Opportunity, Innovation and Capability Development
Mining co’s outsourcing exploration
Contract
Operations
Mining co’s outsourcing mining operations
Other Services
Innovation in management
systems to underpin
productivity
Mining co’S
outsourcing
EDPM
General
Equipment
& Components
Core Engineering Design
& Project Management
(EPCM)
Local innovations and
adaptations to replace,
improve, extend imported
equipment
Increasing scope and capability
Consulting
Services
Rising knowledge
Mining co’s outsourcing specialist analysis
intensity of mining
Demands for improved control &
safety
General Support
Services
Specialised
Technology
Local innovations to meet
new needs
Information Technology Equipment
and Related Services
Local innovations to meet new needs
Core Mining
& Processing
LocalEquipment
innovations &
adaptations to imported
equipment

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