Creating an underground juggernaut

WHEN the dust settles on his latest deal Mastermyne CEO Tony Caruso will have created a unique beast: an Australian underground mining contractor working in both coal and hard rock.
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Mastermyne CEO Tony Caruso said both organisations have very capable and skilled personnel who collectively will give Mastermyne a far greater depth and reach.

Earlier this month Mastermyne announced its entry into the hard rock contracting arena via a proposal to acquire PYBAR Mining Services in a $99 million deal.

As part of this transaction the company is also proposing a name change for the holding group from Mastermyne Group to Metarock Group.

Caruso said the acquisition would give Mastermyne diversification into base metals and commodities outside of metallurgical coal.

He said PYBAR's revenues, predominantly drawn from gold, copper, zinc and lead, would combine with Mastermyne's to increase the combined group's earnings resilience across commodity cycles.

"There are a number of cross selling opportunities between the two organisations with PYBAR offering raise-boring services that can be utilised in coal and Mastermyne offering ground support services through its Wilson Mining business that can transfer to hard rock," Caruso told Australia's Mining Monthly.

"We also both operate an RTO [registered training organisation] as part of our businesses and there are some strong opportunities to work together to share some of our training and onboarding experiences particularly what Mastermyne learned in the coal boom when it developed the cleanskin training program using the simulated underground coal mine with the bespoke training program to train people for work in an underground coal mine.

"There are also a number of other areas where the companies will benefit from the respective areas each do well and these include safety management using our neuroscience principles, recruiting and onboarding of people and asset management.

"Through this acquisition we will also develop significant management bench strength with both organisations having very capable and skilled personnel who collectively will give us a far greater depth and reach."

PYBAR founder Paul Rouse will join the Mastermyne board as a non-executive director and brings with him more than 30 years of mining services experience.

He is a mining engineer with extensive experience across all aspects of hard rock mine design, planning, management, production and development.

"We view this as a unique opportunity to bring two quality businesses together, that are highly complementary to one another, and to accelerate the opportunities that lay ahead of us," Rouse said.

"This acquisition will be value adding for our management, our workforce and our clients and I look forward to joining the board."

Rouse did not reveal whether the timing of his agreement to the acquisition was for family reasons or in response to the business cycle.

Growth

The combined company is changing its name to Metarock once the acquisition goes through, even though the Mastermyne brand has a solid reputation in the coal mining industry.

"The decision to change the holding company name was to create a commodity agnostic brand that will sit across the coal and hard rock operating businesses," Caruso said.

"Mastermyne enjoys a very strong profile in coal as does PYBAR in hard rock. By creating a different holding structure name we can keep these strong brands focused on their respective markets.

"We believe this clearly articulates our approach to a broader commodity focused mining services business and is clear for our customers and other stakeholders. Mastermyne and PYBAR will continue as the operational brands."

Caruso said PYBAR had an excellent pipeline, which was continuing to support the growth of the business year on year.

"This transaction opens up options to access to growth capital, which will unlock and accelerate these opportunities," he said.

"We see continued opportunities in the east coast market but also opportunities in the west coast, which to date haven't been fully realised. With this access to growth capital and the combined management strength we are confident we can open up these new growth opportunities."

Culture

Caruso is keen to extend the safety culture embedded in Mastermyne's DNA to PYBAR. 

"PYBAR itself has a very strong culture and robust approach to safety which forms the foundations of a strong safety culture," he said.

"With what Mastermyne has learned and developed we have the opportunity to share this across the PYBAR business and we look forward to bringing the management teams together to work collectively on this.

"Similarly, we have already seen opportunities to take some of the learning from PYBAR and apply them to the Mastermyne business.

"There is a unique opportunity as a result of this acquisition for sharing the best of each sector - coal and hard rock - to build an overall stronger and more informed safety approach for both organisations."

On September 14 a roof fall at Sojitz Blue's Crinum underground mine in Queensland claimed the life of 62-year-old Mastermyne worker Graham Dawson.

A Mastermyne spokesman told AMM that the company was focusing on the family of the worker killed at Crinum at the moment and working on the investigations.

Diversification

Mastermyne identified some time ago in its business strategy plans that it needed to diversify into adjacent markets to ensure the business has resilient and sustained earnings.

"Along with our mine operations strategy, hard rock diversification was seen as the strategy that would deliver a more robust and counter cyclic earnings stream for the business," Caruso said.

"Coal is a great market for a contractor to be in when prices are strong but it is very tough in the cycle low points."

Mastermyne will remain very supportive of its coal business and sees that there are still significant growth opportunities in coal for the company.

"Our expansion into coal operator contracts will underpin the ongoing growth of this division and with the continuing divestment of assets and exit of the large operators from the coal sector more opportunities will present for smaller more flexible owners who will need contractors to support them to unlock the value from these operations," Caruso said.

"With this we see that our coal business will continue to expand as these opportunities come to life."

Technology transfer

Mastermyne will also seek to learn from PYBAR's different experience and technology and transfer some of that to underground coal contracting.

Caruso said PYBAR was a market leader in the hard rock sector and the business had a strong track record for embracing technology and applying it their projects.

"This, combined with many of the well proven hard rock practices will open up opportunities for our coal business to learn and apply in our coal projects," he said.

"This is a unique opportunity to bring together the best of both sectors and transfer best practice, tech and R&D to all parts of our organisation."

There are also some obvious areas of commonality between the two companies' capabilities such as shotcreting and cable bolting, however, Caruso does not foresee any downsizing as a result of the acquisition.

"Both businesses will continue to operate as they currently do and in their respective sectors," he said.

"The acquisition was not predicated on synergies or consolidation in any aspect of the two businesses and both companies will continue to operate on a business as usual basis.

"We see there is greater value in focusing on growing the respective businesses by unlocking opportunities and utilising the collective strength of the two management teams."

Caruso said that as a larger mining services business the company could create a larger and more resilient revenue base with a diverse client base and a wider geographical footprint.

"All of this will make for a more defendable revenue and earnings outlook," he said.

"With scale also comes significantly more advantage and leverage with our supply chain and key stakeholders."

This scale should provide the company with a comparative advantage when tendering for major projects with diversified mining companies in both the coal and hard rock sectors.

"We have long-term relationships with many diversified clients and both organisations are a trusted and reputable brand," Caruso said.

"With bringing the companies together we now offer our clients a wide range of services across a very large national footprint."

Mastermyne should also be able to offer greater career opportunities for PYBAR employees and training, especially if they wish to migrate across to coal mining and vice versa. 

"Through this acquisition there will be learning and development opportunities across both organisations," Caruso said.

"We see this as an opportunity for our people to learn new skills in adjacent sectors and this is something that will differentiate us from our competitors.

"A larger more diversified business with a national footprint will create opportunities for all our people to accelerate their careers, have exposure to the broader underground mining sectors and create clear and accessible pathways for progression."

The combined company will build a very strong business that will provide opportunities equivalent to some of mining's biggest names.

"We know many of our people enjoy working as contractors and with this larger more diversified organisation we are confident we will attract and retain good people in our business," Caruso said.

"Attracting and retaining good people is always front of mind for our business and we invest significantly in building a workplace that is supported with a great culture and rewards people who are invested in our and their own success. When this is done right good people stay around."

Some mining companies are starting to outsource the entire mining function of an operation while other mining companies prefer to use their own crews to conduct mining operations.

Caruso believes there will always be a demand for Mastermyne's services.

"From what we are seeing we think that there will be a mix of operating structures adopted to operate assets," he said.

"Where organisations have capability and capacity to owner-operate they likely will. However we see that that there are many owners who do not have, nor want to have, the capability to operate the asset and this is the niche that Mastermyne will continue to fill.

"What is for certain is that there is still a lot of M&A occurring in the coal space and a number of operations that will need to investigate underground mining methods to remain viable and this is what excites us and keeps our pipeline at record levels."

Caruso remains sanguine about the future of the industry.

"We are creating a very specialised underground mining services contracting business that has strong linkage to production and we will continue to grow into opportunities that fit with that strategy," he said.

"We want to create a strong regional business that is seen as an exciting opportunity for our people, a trusted brand for our clients and a well run business by our shareholders.

"We know we have some exciting opportunities ahead of us but we also know there's plenty of work to do."