The Development of Mining

Equipment, Technology and

Service Suppliers [METS] in
Australia
{ Don Scott-Kemmis, October, 2014
 Upgrading
New products
Internationalisation
& services

Knowledge Base
Research, Transfer

Talent –knowledge
Firm Growth & skill resources

Market Entry to Demand, customers

MTSE Sector [primary & intermediate]
Role of
the customer

New Venture
Entrepreneurship
Formation
Prior experience
Risk Capital Knowledge Base Exemplars, Mentors
Research, Transfer Networks, Angel investors
Cluster Dynamics: Drivers & Shapers of Specialisation
& Capability Development
Challenge, Competition &
Technological Opportunity

Competitors
Customers
Collaboration & Problem
Rivalry, competition
Solving with customers
Complementary & collaboration
suppliers
Collaboration &
Acquisition Investment in R&D
Specialisation, & Knowledge acquisition
Labour Capability Internal Knowledge
Market Hiring Upgrading & Development
Innovation
Education & Networks
Hiring &
Training coordination
Organisations
Coordination & Coordination & promotion
Collaboration of research & education initiatives

Research & Sectoral, regional &

Technology cluster organisations
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

Surface Mining Underground Mining

Exploration Bulk Material
Blasting, Drilling, Health and Safety
Handling
Mapping, Geological Drilling, Electrical & Electrical &Hydraulic Ventilation, Dust
& Geotech Surveys, Conveyors, Crushers, Hydraulic Eqp’t, Equip’t, control, Waste
Borehole Drilling Winches, Vehicles, Shovel buckets Communications Mngm’t, Safety Eqp’t
Weighing &
Sandvik – Tamrock Caterpillar 3M Mining
Measuring
Hatch Caterpillar Sandvik - Tamrock
Sandvik – Tamrock
P&H Minepro Atlas Copco
Detroit Diesel
Atlas Copco Hitachi
Hitachi
Hitachi Joy Mining
Terex
Liebherr Machinery

DBT DBT

Komatsu Komatsu

Bucyrus Michelin
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 & AMIRA ACARP
Mineral Down International
Under Flagship

Universities
CRCs
GeoScience
University
Australia Centres

Mining
Technology Mining Equipment
Innovation Centre & Services
Suppliers
Supplier Development Opportunities – Scope & Effort
Level of Challenge for Local Content and
Supplier Development
1 2 3 4 5 (high)
(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
Supplier Attractiveness

Solves a Significant Reputation

Problem Proven Product/ Service

Commitment
Proximity
to support

Familiarity with Fit with existing

key people 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 Pull

Engage Linking Mechanisms
Entry in
competent Intermediaries, production phase
resources firms in Information resources,
knowledge Address all
procurement policies
transfer barriers to firm
Capability Development development:
Licence to skills, capital etc
operate Formation, learning &
growth capability
Explicit but
flexible strategies Strengthening the Context

Address barriers Cluster development

to entry
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.
 Find- high
quality
Increasing Increase resources
Demand
Output Win license
[economic
to operate
growth, [access to
urbanisation, economic
industrialisation] Mine & refine
resources]
efficiently
High Level High Level Challenges
Objectives

Mineral Resources
*deeper *lower grade
*more remote *more
Find high
complex
quality
resources Increasing:
Human Resources * Costs
*ageing workforce *skill shortages * Technical complexity
Win license *hazardous workplaces * Social & polit. complexity
to operate * Risk
* Capital requirement
Environmental Resources
Mine & refine *water scarcity *energy costs
efficiently *fragile ecosystems *more waste

Social & Corporate Resources

*accountability *community devel’t
*sovereign risk *scrutiny
 Performance Objectives
Challenges
Find
Mineral Resources Discover Tier 1 deposits
*deeper *lower grade Explore deeper deposits
*more remote *more complex Improve resource assessment
Secure rights

Human Resources
*ageing workforce *skill shortages
*hazardous workplaces
Mine
Lower mining costs- labour, capital &
energy efficiency
Mine in more remote locations
Lower mining impacts – water, emissions,
safety, local community benefits

Environmental Resources Refine

*water scarcity *energy costs More efficient extraction
*fragile ecosystems *more waste Process complex ores
Lower impact separation – energy, water,
waste

Social & Corp. Resources Sustain

Attract talent & capital
*accountability *community
Maintain reputation
develop’t *sovereign risk *scrutiny
Sustain ‘licence to operate’
Respond to greater regulation
 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, 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
Innovation Trajectories
Sensing & Interpreting
Satellite remote sensing
Rapid & mobile field geochemical analysis
On-line analysis
Continuous slope and wall stability detection
Decision Support Tools
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

Mining New New

Increased Enabling
development Challenges Performance Innovation
demand Innovation
opportunity Objectives Trajectories

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 • Complexity
• Cost & risk
• Miners / Coordination
Global/National • Avoid
Suppliers
Standards dependence
• Strategic on one
Organisations
differentiation supplier
Funding
• Appropriation • Shared
of IP knowledge
platform
• Equity in cost
& benefit
 Drivers of Opportunity, Innovation and Capability Development
Mining co’s outsourcing exploration

Mining co’s outsourcing mining operations Contract Other Services

Operations
Innovation in management
systems to underpin
productivity

General
Mining co’S
Equipment
Core Engineering Design & Components
outsourcing
& Project Management
EDPM Local innovations and
(EPCM)
adaptations to replace,
Increasing scope and capability improve, extend imported
equipment
Consulting
Mining co’s outsourcing specialist analysis Services Specialised
Rising knowledge
intensity of mining Technology
Local innovations to meet
new needs
Core Mining
Demands for improved control & & Processing
safety
LocalEquipment
innovations &
adaptations to imported
equipment
Information Technology Equipment
General Support and Related Services
Services Local innovations to meet new needs