Full transcript of Minarco's response to Australia's Longwalls second exclusive survey of consultants servicing the underground coal market.

Boyun Xu, Minarco

Staff Reporter

Australia’s Longwalls: Three years ago, respondents remarked on the growing role of consultants in strategic decisions in Australia's underground coal mining industry. How has the role / use of consultants changed over the last three years with the mining sector consolidation? How do you see roles developing in the future?

The consolidation of the coal industry has, obviously, seen the reduction in the number of small and medium sized miners and the growth of the larger mining houses. It is my experience that the larger corporations have very good in-house technical and commercial expertise and are able to make sound strategic decisions and judgments within their corporate framework.

The role of consultant services has probably not changed greatly. There is still a need for these larger corporations to supplement their teams from time to time and to use specific expertise when required. The revolving door for mining engineers on site has not been removed and keeping skilled professional expertise on site remains a challenge. Consultants are therefore still often required to fill skill vacancies onsite for critical projects. This is a particular issue relevant to planning software skills.

Over the last three years, in parallel to the consolidation of the existing industry, the industry has seen the emergence of a number of smaller entrepreneurial players taking advantage of a strengthening market and removal of some of the previous barriers to entry into the industry. These entrepreneurs have had a need for consulting services and in some cases strategic advice.

I don’t think there will be a major shift in the roles of consultants in general in the short to medium term. There will always be a requirement for supplementary or specialist services. However what we will see is that some consulting companies that maintain stable skill bases may move along the service spectrum from the position of providing basic technical services to providing higher level services.

How competitive do you see consultancy rates vs costs for permanent employees? What are the key factors determining why consultants are used and how do you expect these factors to change in the future? How will these changes impact the way consultants do business and the nature of consulting?

As a consultant we all like to think that our rates provide a cost effective alternative to full time employees. And the truth is they must otherwise consultants would be going out of business. However, general mining professional skill shortages, higher cost of living in cities and increasing insurance costs has put pressure on charge out rates. I believe where a mining company can offer a stable position with a career path for professional people they should consider employment of staff. Where a company needs specific skills intermittently or they cannot provide a suitable career path, they should consider using consultants.

I think in general this is the philosophy of the larger corporations who try to develop there own skilled teams. What we often see is that some of these team members are accommodated within a suitable career path and stay with the company, others develop highly specialized skills that cannot be accommodated within a career path and they often leave and join consultants who then provide these specialised skills more generally to the industry.

I don’t think the increasing costs of consultants will have as much of an impact on services as the general industry cycle which sees companies build teams in good times and shed them when things get tough. At present we are seeing companies build their teams on the back of a healthy industry. In time this process will no doubt be reversed.

AL: An emerging issue is the impact of increased professional indemnity insurance premiums on consultant’s ‘license to operate’. Some smaller companies have chosen to operate with no cover. What is your company position on this issue and how has it affected your company?

We operate with cover and we expect all our sub-consultants to do the same. Where they cannot get cover, and many of the smaller groups cannot, we endeavour to cover them under our policies.

AL: How has the issue of ‘sustainable mining’ impacted on your business? And what impact has it had on your clients?

There is no doubt that over the last few years the trend of increasing environmental awareness and conscience has increased. This has, and will continue to impact on the consulting business. The next phase of this process has started and I believe will gain greater momentum and that is increasing responsibility on mining companies to increase mining recovery.

AL: What has been your experience with regards to international vs Australian work? How do you see this trend going into the future?

Our Australian business continues to grow at a steady rate and our international business has grown significantly. I would expect this trend to continue.

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