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?
Our group is largely involved in providing technical information and advice to assist mine management in making informed decisions. Companies want to, and should be, involved in making their own strategic decisions. However the industry is currently short on expertise, a trend that has not necessarily been improved with company consolidation, and input from outside groups is required to support technical development plans.
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?
With the shortage of skills in the market, the trend is for consultants salaries (and charge out rates) to increase in proportion with those of site-based personnel in order to attract and retain staff. At first glance, consulting rates do not appear comparative with rates for permanent employees, until one considers the utilization value of consultants: namely, the targeted nature and timeframe of most consulting tasks, together with the experience that is being applied.
Sites are examining how best to utilize and retain the scarce professional skills that they do have available. This means determining what tasks can be outsourced and how consultants can assist in this enforced rationalization, without necessarily losing the company’s intellectual property. It is likely that the reality of staff shortages and retention will provide new opportunities to traditional consulting groups.
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?
The option of us operating without PI doesn’t exist because the large mining companies insist on us having it if we want to work on their behalf. We do what we can to minimize the cost but we have no alternative but to purchase the insurance. It is a cost of doing business. Ultimately the cost of PI finds its way into our consulting rates and it makes us more expensive than the smaller company and individual operator who choose not to have cover. Eventually it all comes down to the risk the consultant is happy to take and the risk the client wants to take.
AL: Please comment on the impact on consultants of corporate governance protocols that mining companies are introducing.
There has been no particular impact on our business other than us continuing to ensure that we maintain a high standard of reporting of all that we do for our clients. Our objective is to make it as easy as possible for our clients to maintain a high level of corporate governance within the fields that we cover.
AL: How has the issue of ‘sustainable mining’ impacted on your business? And what impact has it had on your clients?
There has been no direct impact on our business. Indirect impact arises from many of our clients wishing to address the TOTAL optimization of their operations and to ensure that they are being managed in the most professional way possible.
AL: What has been your experience with regards to international vs Australian work? How do you see this trend going into the future?
Some 40% of consulting from our Australian offices is performed off-shore, despite having offices abroad. This has not changed significantly from three years ago, and we expect that this level of international work will continue.
AL: Three years ago consultants expressed concerns about the industry’s ability to adequately replace the aging experience base. How has the industry shortage of experienced personnel impacted your business?
There is definitely a shortage of specific experience in the industry and we see this in applicants for our business too. There is no sign of this changing in the near future, and in fact, the rationalization and changes at the tertiary institutions indicate that this will become even worse. This means more competition for all staff, including younger, less experienced staff, and the increased challenge of providing them with suitable experience and reasons for remaining within the mining industry. There is no simple answer to the skill shortage, and the industry should work together to try and address it.
AL: As in corporate mining offices, many consultants active in the industry have not been operators for quite some time. What are the key measures available to consultants to remain current in industry? How do you view looming professional engineer registration impacting this?
There are a couple of options available, including closer working relationships with, and on, our clients operations, including occasional operational roles where appropriate.
AL: On the question of productivity gains, a recurrent theme in 2001 was regular shortfalls in longwall mine output compared with nameplate capacity. Today poor utilisation still dogs the industry: consulting company McAlpine B calculated a 9% drop in average utilization in 2003, to around 41%. In your opinion what, if anything, has changed? And where could mines better channel energy/resources?
The underground mines are perhaps getting into more difficult ground and conditions as they mature. Out-by coal transport systems are becoming longer and more complex, and hence have a higher possibility of down-time.