The runaway growth of a key mining service sector could be facing a roadblock in the next 12 months in the form of human resource shortages, which have severely hampered mining companies over the past two years and fuelled increasing demand for external mining and engineering consulting services over the past five years.
Now mining consulting firms themselves are finding the available pool of talent – experienced and new – is drying up.
Most recognised mining consulting firms providing services in the Australasian market were still growing revenues and staff numbers strongly in the 2004-2005 fiscal year, according to an exclusive Australia’s Mining Monthly survey of the sector. Latest feedback to the magazine’s annual survey indicated many mining consulting firms remain optimistic about maintaining the strong growth trend of the past five years.
However, they say recruiting key personnel has become more challenging and that this is the case worldwide.
Four leading Australian-based mining consulting firms aggressively extending their offshore reach are AMC Consultants, Runge, RSG Global and Coffey International.
All four have plans to pursue international expansion this year and say conditions for engineering consulting organisations serving all facets of the mining industry – from exploration and mining engineering to mineral processing plant design and construction – are as buoyant as they have ever been.
Twenty-two-year-old Melbourne-based company AMC Consultants – Australia’s largest mining engineering consulting firm – has seen its staff numbers climb by nearly 50% in the past four years. Its annual revenues have increased by more than 25% during the same period.
Managing director Peter McCarthy said AMC was growing strongly on the back of rising demand from both the underground and openpit market segments.
“We have a market opportunity to grow at 20% per annum for the next five years,” he said. “The constraint is availability of people, which is the same problem for our clients.
“We expect that our number of full time salaried employees will pass the 100 mark (this year.” That is up a further 18% on the current number.
Brisbane-based Runge is coming off a 30% rise in 2004-2005 revenues. Consulting services manager John Buffington said demand for services was rising across the spectrum of consulting disciplines.
“Worldwide resources are being bought, sold and traded very quickly,” he said.
“Services to our larger customers have continued to expand, and we have also seen an influx of new smaller customers trying to capitalise on the boom. This has translated into more due diligence projects and property valuations.
“Greenfields projects which were previously not viable are now back on the drawing board with current commodity prices allowing these projects to grow wings.
“Similarly, we have seen increased demand for our services and products resulting from the fall out of the HIH and Enron disasters. These events have dramatically increased all directors’ and managers’ focus on corporate governance and reporting standards. Full disclosure, accuracy and transparency have become paramount in all business planning and reporting.”
Buffington said Runge was seeing more and more of its opencut coal mining customers reviewing opportunities to go underground, as costs associated with opencut mining rose dramatically.
Existing mines were getting deeper and at the same time there had been a step function change in the cost of labour, fuel and tyres for earthmoving equipment.
“All of this is happening at a time when human capital is low, resulting in a huge demand for mining professionals,” Buffington said.
“There is a consistent in-flow of requests from customers for work and projects putting pressure on the consulting groups to respond. Many groups are combining their resources to meet this demand.”
Runge recently acquired US-based Pincock Allen and Holt (see separate report this section), expanding its staff complement to 140, in one of a number of the sector’s high-profile mergers and acquisitions of the past few years.
Consulting group leaders interviewed by Australia’s Mining Monthly in the course of compiling this review were almost unanimous in predicting further consolidation of consultancy numbers.
RSG Global principal Rick Yeates said bigger firms would continue to lead the way.
“The listed engineering and consulting companies are attracting a considerable premium in the market, due largely to significant project development opportunities in the mining and infrastructure sectors,” he said.
“The capitalised listed entities are seeking to capture smaller private firms at a relative discount to the market, thereby adding considerable value, (while) consolidation among the private firms is continuing in order to achieve the critical mass necessary to access growth capital via a listing or, alternatively, attract equity funding.
“In the present circumstances, consolidation of the engineering and consulting sectors will undoubtedly continue through 2005-2006. This represents a logical strategy in order to access market premiums or attract funding for further expansion.”
Yeates said for engineering and consulting entities with the critical mass to support a successful listing, there was no better time to pursue this objective to maximise enterprise value and access significant capital for growth.
Runge’s Buffington said the consultancy’s staff mix was changing. “Corporate governance and a focus on transparency and reporting is impacting on the style of work undertaken,” he said.
“Runge’s business analysts and software developers are working hand in hand with mine planning experts to set up the full technical and financial aspects of the mine planning systems suite.
“This allows the engineer to provide mine design and scheduling as an integrated business planning process. This has been largely driven by the requirement for site engineers to provide planning from the pit to the customer.
“Working smarter, not harder, has become a primary focus,” Buffington said.
“Runge is in a unique situation as a consulting group with in-house software development staff producing best of breed technology solutions. This means Runge is able to work with business planning systems which are more efficient to leverage our customers’ human capital.
“Our mining consultants can focus on what they are best at while allowing other tasks to be done more efficiently through the use of non-traditional human resources – programmers, non-mining engineers – and systems.”
RSG Global has recorded an average incremental growth rate over the past three years of about 22%. Barring acquisitions or mergers, said Yeates, this was expected to…
