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

Pat Hanna, SRK Consulting

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?

There appears to be a trend whereby the major coal mining companies are more interested in developing longer term relationships with a few consultants. This seems to be so in the hope of retaining corporate knowledge with a loyal consultant who is expected to be available at anytime as would be expected of a full time employee.

This has had the effect of alienating these consultants whereby the other major competing mining companies will not use these consultants in fear of their corporate knowledge being unintentionally leaked back to the loyal client.

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?

Consultants will (should) always charge a premium for their service as they are (should be) providing a higher level of expertise than an employee in a more efficient time to meet a deadline. The day-to-day technical workload should be undertaken by employees so as to put out the fires and retain corporate knowledge that is market sensitive.

Consultants who are not providing a specialised service are not considered by other consultants as a competitor.

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?

Our company is an international player and cannot afford to be without professional indemnity. Many of the projects we undertake involve large scale mining development and can be extremely costly if not performed with industry best practice, a level of service we pride our company on.

AL: Please comment on the impact on consultants of corporate governance protocols that mining companies are introducing.

At this stage, minimal impact has been encountered due to common sense prevailing.

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

This has yet to be fully embraced by coal mining companies whose main focus today remains the investment returns for their shareholders. Therefore, no significant impact as yet.

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

Currently finding much more work readily available offshore and with less competition than in Australia. However this trend is changing in that offshore work is attracting more international consultants who are playing bidding games to establish themselves in the large and lucrative market of the international arena, especially that of south-east Asia.

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?

We are experiencing a larger than normal turnover of experienced staff as the industry technical knowledge dries up and the mining companies are having the raise their remuneration packages to attract suitable full-time employees.

This situation is growing worse in Australia as universities are finding it difficult to attract students to mining related courses, and the consequently the courses themselves are being retracted fro the education market.

All efforts to date to change this situation have failed to achieve a turnaround in the improvement of student numbers.

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?

Mine site visits are generally viewed as necessary by consultants to provide a superior outcome for any mining study. Although these are brief, to the experienced eye they can be suffice to remain alert to current industry practice.

Learned conferences are essential for consultants to keep in touch with the latest research and technology available to the mining industry.

To this end, CP status for all consultants should be made compulsory to verify and validate the consultant’s expertise to the industry in general.

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?

Although the mining industry has the most advanced technology available to it than most other industries, mine management are either reluctant (due to budget constraints) or ignorant of the technology and therefore often are practising out-of-date methodologies that continue to hamper production.

The Australian mining industry management has a lot to answer for, and is regarded by many as the worst quality of management in the world. Unless you can improve the top level of a company, the overall performance of the company will always suffer.

AL: The last few years have seen the use of more and more advanced technologies in mining. To name only a few: 3D seismic has had a huge impact in resolving structures ahead of mining; computer technology continues to have a major impact, from bringing real-time monitoring of mining closer to improving communications systems underground. From your point of view, which tools (existing or conceptual) hold the most promise, in terms of safety or productivity? And why?

All these tools are important, and often it is a combination of tools and technology that will bring an improved result in safety and production.

However, it should be noted that without the consultant’s expert advise and assessment of the results generated by these technologies, the wrong conclusions can be easily drawn when the correct result is not readily recognised. In other words, the technology is valuable, but “garbage in” equals “garbage out”

Continues, click here.