Collaborate or die

THIS is the world facing mining sector suppliers – or at least a view of it. Supply Side by Noel Dyson
Collaborate or die Collaborate or die Collaborate or die Collaborate or die Collaborate or die


Noel Dyson

After all, during the boom there was a need for all levels of service. When miners were scrambling to get trucks and the drivers to put in them it was quite okay to have a mining contractor, equipment hire firm and a labour hire firm in the mix.

Deloitte partner Gary Doran believes those days may be over – at least for a while.

“One of the sectors being challenged right now is the explorers,” he said.

“There are some 700 WA registered listed companies and about half of them are explorers.

“The capital markets are not open to them at the moment and the exploring companies, and they are feeling that.

“Most of the CEOs in mining companies are looking at cutting out costs in the supply chain.

“They are looking to their suppliers to institute their own austerity measures.

“They are looking for companies that will work with them to reduce their costs.”

Collaboration may be the answer throughout the entire supply chain.

“If you look at the industries that have gone through enormous changes, the motor industry is the classic,” Doran said.

“It was a collaborative solution. They [the manufacturers and suppliers] all worked together to drive down costs.”

Doran said it was interesting to note that Australia’s two big resources players had key players with significant motor industry backgrounds.

In Rio Tinto’s case, chief executive Sam Walsh came from the motor industry, while BHP Billiton’s chairman Jack Nasser once was in charge of Ford.

Then there are some alternative areas that mining suppliers can look at.

“If you are a mining services company you need to look through a slightly different lens, and at the oil and gas services opportunities,” Doran said.

“A big part of their business is in supplying the labour side of the business.

“We’re building projects at the moment but when we move into the maintenance space there there will be big opportunities for WA companies.

“But they will probably have to be open to an alliance.”

What Doran is suggesting is that a mining services provider with skills in the maintenance space could help provide a maintenance option to an existing or soon to be built oil and gas project.

However, and this has been raised by others, including several senior figures in the oil and gas space, what those companies are looking for is capability.

To get that capability requires size.

It might make sense for a mining services contractor to therefore hook-up with an oil and gas player. This would give them greater scale and the ability to take potentially larger roles in the oil and gas space than either would have been able to do individually.

Innovation is another key area that mining suppliers need to look at.

Here the mining companies have to lend a hand.

There have been many cases Supply Side has come across where suppliers have come up with innovative products that have been stymied because of the arrangements the big miners have put on them. They often wanted exclusive use of said innovation for periods approaching 20 years.

Rio Tinto head of innovation John McGagh has spoken out on this point saying that the big miners had to change how they went about things.

He realises that to get the sort of innovation the sector will need to drive down its costs it will need the innovation of its suppliers to do it.

Stifling that innovation by putting uncommercial terms in place will not help.

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