Epiroc still on acquisition, growth path

WHILE he does not see a future without mining’s traditional major suppliers, Epiroc president and CEO Per Lindberg is mindful technology can radically change the supply landscape and level the playing field for new market entrants.
Epiroc still on acquisition, growth path Epiroc still on acquisition, growth path Epiroc still on acquisition, growth path Epiroc still on acquisition, growth path Epiroc still on acquisition, growth path

Epiroc president and CEO Per Lindberg

Little more than one year ago Epiroc split away from Swedish industrial giant Atlas Copco.

Lindberg said the mining-dominated business had been re-energised by the separation and was running hard to reinforce its position as a leading niche manufacturer and technology frontrunner in the capital-intensive mining market.

The company has made nine acquisitions in the past 18 months, spends more than US$100 million a year on research and development, and is building its physical footprint to expand its service reach.

Lindberg said automation and information technologies had produced big productivity gains at brownfield sites, both underground and surface.

Major miners and some investment banks say automation and digitalisation could seriously alter capital and operating costs at greenfield mines in future.

Battery-powered vehicles and electrification of mines could further impact operational outcomes at established mines, and have a far bigger bearing on new mine designs and costs.

Advances in ore sorting and pre-concentration also point to leaner, smarter mine designs with smaller capital and physical dimensions.

What does all this mean for suppliers of capital equipment?

"That's a good question," Lindberg said.

"We have to see how exactly this is going to play out.

"We clearly see a productivity increase from automation - 15-20-25% depending on the application - and if you just deploy that you may just think that's what the corresponding reduction in the number of machines is going to look like.

"But at the same time we see mines going deeper and we see ore degradation, therefore we need to excavate more tonnage. And then of course in terms of replenishment these machines will be used more intensively which means the number of hours utilised per calendar year is going to be higher.

"It could be if we now see the beginnings of mines being designed for automation, and deploying massive automation and digitalisation, we'll probably see [bigger gains] than we see now in brownfield. As far as I know there is no such mine in operation at the moment so exactly what that is going to mean … we'll just have to wait and see.

"So it is hard to know really how this is going to play out … in terms of the number of machines [supplied/used]. I don't think it's going to have a huge impact, but we're certainly monitoring that development.

"We, as a supplier, do need to think about what kind of business model we should be working with in that context."

Automation, interoperability - information and communication - and battery technology and innovation are primary targets of Epiroc's R&D spend.

Technology, consumable and service companies have been the focal points for its acquisition spree, which has netted small companies that have added about US$130 million of annual sales, and remain foremost on the merger and acquisition radar for now as Epiroc completes a "clean up" of its consumables business.

That means further corporate activity in the rock reinforcement and drilling consumables area is on hold for now.

"Of course not all acquisitions are equally successful, but across the board I think we're very happy with the acquisitions that we have made and the integration that we have done into Epiroc," Lindberg said.

"We will continue to make acquisitions into technology with a focus on automation and digital solutions, and [assess] possibilities also when it comes to electrification. If we find some interesting targets we'll go in that direction as well.

"Overall, when we look at our product portfolio we're reasonably well off. It's not easy for us to make acquisitions when it comes to equipment. Of course we continue to look at our position in the value chain and whether it would make sense to expand our position, and I'm not ready to make any statement at this stage, whether we have any conclusion to go either way, but we are evaluating options when it comes to our overall footprint in the value chain."

What about expanding further beyond Epiroc's traditional underground equipment stronghold, and its presence in the surface drilling market?

"Of course the question has arrived several times, should we expand into other types of surface equipment, and the answer is, well, we are looking at different options, whether it would make sense for us to expand into other areas," Lindberg said.

"We are looking at our alternatives and our options, and we do not want to end up in a situation where we are very diluted in terms of the overall company performance.

"But at the same time we're also looking for the potential benefits of being a more complete supplier on the surface. So we'll see what kind of options there will be for us moving forward.

"The key for us going forward is to maintain our very strong position in the niches where we are, and whether we go in any other direction we just have to see."

Lindberg said competition for mining-technology acquisitions included non-mining parties, among them the world's major tech corporations - "they are visible to us, absolutely" - but he did not see the industry's traditional lead suppliers necessarily being mugged by some of the world's massive disruptors, even if big miners and their investors were starting to see better ways to run mining enterprises and deploy capital.

"I think what they lack and what we have is the domain knowledge," Lindberg said of the interlopers.

"We've been working with mining and mining equipment for decades, and certainly they have not. And I think that is clearly an advantage that we have and as long as move with the current pace I'm not so worried that we will not be able to fend off that competition.

"There certainly seems to be pressure on our customers to deploy capital slightly differently to the way they have done it traditionally. And I think we see that also when it comes to our orders [which currently] tend to be very much brownfields expansion [orientated], very much focused on automation to capture the cost saving opportunities.

"So I think that's where we are seeing that shift in expression.

"The industry also seems to be very ripe in terms of changing the approach to how mines are operated, including of course automation, but we're not talking only about automating individual operations and machines, it's really about digitalising the entire value chain.

"And yes I think you're right, I think this opens up various areas for new approaches, new technologies and possibly also new entrants. We do not ignore the fact that there are potential new entrants, and also there are technologies that the traditional OEMs have not developed so far.

"However, the progress that we've made at the company in terms of finding what we feel are relevant solutions has been significant and I think as long as we continue to do that we'll continue to have a competitive advantage given that we do have the long-standing relationships and also the knowledge in terms of how mines operate."