“The growth of the mining technology services sector in Australia parallels the growth of the Australian mining industry and is a response to demand from mining companies for innovative technologies necessary to remain competitive,” said report author, PKF director Brett Plant.

PKF’s analysis found public mining services companies across Australia/New Zealand, Europe and the US generated an EBITDA ratio of 10.8 times, based on forecast earnings for the 2005 financial year.

Growth for the sector is predicted to continue at a healthy pace with revenues possibly reaching $6 billion by 2010 from $4.4 billion in the 2005 financial year.

Consolidation opportunities stem from the sector being currently highly fragmented – more than 70% of businesses turn over less than $5 million a year while a small number of large companies generate the bulk of revenue.

The mining services sector is diverse with services spanning mining software and equipment, scientific analysis, exploration assessment technology, mineral processing technology, environmental services, health and safety services, and equipment.

Western Australia is the single largest mining state in Australia, responsible for an estimated $1.9 billion share of the mining services sector, followed by the Queensland market accounting for revenues of $1.1 billion, or 26% of total turnover.

Queensland is a major exporter of mining software, supplying 60% of global industry demand. The world’s largest mining software company, Mincom, is headquartered in Brisbane and recorded an 18% increase in sales revenue for the half year ended December 2005. As the biggest player, Mincom is already contributing to greater consolidation given recently announced plans to acquire several other companies, though not all these are mining related.

During 2004 Indonesia was the largest recipient of Australia’s export services and was responsible for $382 million in sales revenue, followed by other East and South-East Asian nations at $319 million. Surprisingly, China only generated $90 million in 2004 but rapid growth of the mining sector is expected to substantially drive up China’s demand for mining services.

The sector contributed on average 7% of total sales revenue, or $339 million, to research and development in 2004. This came mostly from the large players with almost 60% of companies spending less than $100,000 on R&D.

The sector needs access to investment for further growth but this can be difficult given the small size of the companies, Plant said.

“Several government initiatives have been implemented to unify the sector and encourage investment. These strategies aim to increase awareness of available financing in the industry and improve growth and penetration into new export markets,” he said.

The largest category of service offering is exploration and other mining services, contributing about $2.3 billion or 51% of total industry revenues in 2005. Equipment manufacturing generated $1.1 billion in sales revenue in 2004 and remained stable in 2005. The sector accounted for 25% of the total gross sales revenue and was the second largest service offering in the mining services industry.

Some future directions are expected to see the mining services sector raise its profile by contributing to productivity and safety improvements as well as greater levels of innovation.

“As the minerals industry changes in response to globalisation and industry consolidation, so too will the Australian MTS sector. The sector is expected to see an increase in its global perspective to ensure sustainable growth over the coming decade continues,” Plant said.

Future growth for the sector is also dependent on plugging shortages in skilled labour and more efficient management of intellectual property, given the high-tech nature of the sector.

“In Australia, there have been mergers and acquisitions across all business sectors. We believe the opportunity for consolidation is set to continue in the future,” Plant said.