“Contractor” is no longer a dirty word in Australian coal industry parlance. In fact, the use of contractors is growing, particularly in project-based work.

As a result, three tiers of contractors are emerging — the large companies such as Thiess Contractors and Allied Mining Australia (AMA), which can manage entire operations; the medium-sized companies such as SBD and Mastermyne, which specialise in project-based work; and small companies, which often work as subcontractors.

While contractors were originally brought into the coal industry in the early 1980s to carry out jobs that no-one else wanted, they are fast becoming an integral part of modern day coal mining. Contractors are engaged to provide additional resources during peak periods, to meet production shortfalls in the mine schedule, to provide specialist skills and to undertake non﷓core activities. The work encompasses access drifts, ventilation shafts, conveyor installations, conveyor belt maintenance, secondary support, development drivage and longwall change-outs.

Capcoal general manager, Mitch Jakeman, said using contractors was one way of keeping the business competitive and at the same time establishing a benchmark performance for employees to achieve.

Contractors can help mining companies drive down costs through flexibility and a strong focus on the bottom line. Fixed price contracts enable companies to attain higher levels of accuracy in budgeting, as well as passing on some of the risk to the contractor.

Walter Construction Group (WCG) mining manager, Peter Roberts, said there was also a trend towards the letting of larger and longer﷓term contracts. “This will have a positive effect in terms of performance by the contractor and cost to client,” he said. The WCG mining division has the depth of experience to tackle major multi﷓disciplined projects. Last year, the overall group turned over $800 million.

According to SBD general manager, Wade Kathage, relocating longwalls is one of the main growth areas for contractors. “Longwall moves are advancing in the industry because they are peak labour demands, and mines, in the cost﷓conscious world that we are in, can’t afford to have full﷓time labour on just to cover peak periods,” he said.

Kathage said contractors could be employed to carry out the entire relocation or to work in conjunction with permanent employees. Although change-outs represent about 30% of SBD’s work, it has been inundated with contracts this year. After completion of the Newlands contract, the company will have relocated five longwalls.

Outsourcing of change-outs is so pervasive that Mastermyne director, Andrew Watts, claims every underground mine in the Bowen Basin, Queensland, uses contractors in some way to relocate their longwall. “The increase is due to several reasons. The contractor’s employees will quite often perform four to five relocations a year whereas mine employees may perform one per year,” he said. “Aside from the fact that all longwalls are different and all mine conditions are different, the methodology behind relocating longwalls is very similar in all mines. This gives the contractor a distinct advantage due to familiarity of the task and associated risks.

“Last financial year Mastermyne performed four longwall relocations ranging from total management to labour supplementation only. We were able to operate a specialist longwall crew who, for eight months of the year, were involved only with longwall﷓associated projects. As a percentage of total turnover, this equated to 30%.”

Longwall change-outs are also a significant component of work secured by WCG’s mining division. WCG’s Roberts estimated that 50% of the company’s work was in relocating longwalls. “As mines reduce their number of permanent people and focus on their core business of producing coal, the use of contractors is increasing,” he said.

AMA general manager, Brian Trinder, said while there was a trend towards contractors for change-outs, the reluctance of principals to issue adequate specifications and answer enquiries in the early stages of the tender process made it difficult for contractors to submit accurate tenders and then set up and manage the work properly. “Indefinite briefs also lead to uncertainty and, therefore, a necessity to build higher contingencies into tenders,” he said.

Despite the boom in contracts for specific projects, Thiess general manager Queensland, Northern Territory and Pacific, Murray Fox, believes outsourcing entire operations is slowing. “I don’t see any significant coal operations in the immediate term being contracted out,” he said.

A decision by major operators to retain their own workforce has driven much of the slowdown. However, Fox is convinced contractors can still add value. “I’m confident that there are coal mining operations running at the moment that we would be able to run more efficiently and at lower cost than they are currently being run,” he said. “So there is certainly room for efficiency improvement in coal mining operations in Queensland, significant room.”

One of the major issues to have emerged over the past 12-18 months has been the influx of metalliferous contractors, such as Henry Walker Eltin (HWE), attempting to break into the coal industry. AMA’s Trinder said the entry of these contractors had resulted in severe competition and tightening of margins.

However, HWE’s chief executive, Richard Ryan, believes metalliferous contractors are bringing positive impacts too. “HWE does not have a history in (underground) coal which I think plays to our advantage in that we are not caught up in the traditional coal ideologies,” he said.

Last year, HWE won its first major coal contract, at Moranbah North in the Bowen Basin, to carry out 9km of mains development using place changing. The company was awarded its second major development contract, at Capcoal’s Southern Colliery in May, for 7km of mains development and 1.5km of gateroad development.

Capcoal’s Jakeman said although relatively new to coal mining, HWE had a good reputation in hard rock mining and was committed to breaking into new business areas. “They were also at Moranbah, our sister mine, and were starting to achieve some good results. We felt there was minimal risk in using them and some additional synergies as they were already in the area,” he said.

“We have had three weeks of intensive training and testing for two crews. They have now been operating for about five weeks and a third crew is being trained.

“In the first week, they achieved about 60-70m. This was the average performance for three crews at Southern in the previous 12-15 months. The last two weeks has seen about 140-170m with the two crews. We expect to reach about 240-270m per week when we get the third crew trained. This will be about 400% better than the crews we had in this part of the mine. At this rate, we expect HWE to finish around Easter next year.”

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* This article originally appeared in the September 2000 edition of Australia's Longwalls.