Speaking to International Coal News ahead of French 3D design software company Dassault Systemes’ Natural Resources Forum in Perth on September 10, Farquharson said the growing investments by Indian companies in Australia shows the opportunity that beckons.
Dassault Systemes is ramping up its exposure to the resources sector, having acquired mining software company GemCom Software International for $US360 million two years ago to enter the natural resources space.
“It’s taken us a bit of time to develop our unique proposition to the natural resources segment,” Farquharson said.
“The challenge at the moment is bringing the technology that’s been used in automotive and manufacturing for a long time to into the natural resources environment, and figure out what other types of technology we need to build to give a broad offering to the natural resources sector.”
He said that while the company was focused on mining, it was branching out to other areas, including the oil and gas sector.
Dassault Systemes knows the Indian market so well because its mine planning tools are commonly used among coal players in India, which places the company in an ideal position when Indian state-owned companies make massive investments in Australia, like Adani Mining.
While Adani has used a Dassault Systemes product to do geological assessment and planning, Farquharson said there’s a lot more his company could do for the Indian giant.
The same applied to the Chinese, where Dassault Systemes has had a long history.
The key for investors in the coal space in the current high price volatility environment is picking projects that work, because if they do, then they’re only going to be more valuable going forward, as Farquharson believes consensus among analysts has now arrived that coal has bottomed out.
“We’re at a really low point in demand for coal, and I can’t see the demand for coal continuing further south; I think it’s going to get stronger – and mining companies are banking on that too,” he said.
“It has been a tough run, but I do think analysts in general agree we’re at the bottom. So for investors and companies looking at new projects it’s probably not a bad time to do that. Still, finding the finance for it is really tricky, but we are seeing a lot of investment from India.”
India’s power shortfall is well known – it can’t produce enough coal to generate power for its businesses and homes, so needs to bring it in from overseas.
Farquharson said that by locking up resources in Australia, Indian companies would be able to ship it across at a far cheaper rate than it can produce coal itself.
“In fact, they can’t produce it themselves,” he said.
“All their power stations are built to spec for coal, so it’s a massive opportunity.
“The problem is the utility industry in India is quite risky. Power is necessarily cheap as it can’t afford it otherwise. So it’s hard for them to be profitable.
“It’s risky as it’s not like Australia where it’s heavily regulated and people pay a reasonable price and utilities make a reasonable profit.
“In India they have to make power really cheap and to produce it at those rates so people can pay for it so the population can have access to computers etc, it makes it very hard to have a sustainable business providing energy and power to the end customer.
“So a lot of power companies that are in billions of dollars in debt and the government has had to bail them out and support the initiatives quite often.”
Yet the fact remains that India will see a rising demand for power; more reforms are imminent and substantial wealth is expected to be generated in India, “so over the longer-run it’s going to be a big business to be in”, he added.