How to fill the missing link in METS innovation

AUSTRALIA has innovation to burn and ideas aplenty, however, it is missing a key ingredient that can turn that innovation and those ideas into world-changing businesses.

There is still a link missing in the chain to get Australian METS innovation to market.

There is still a link missing in the chain to get Australian METS innovation to market.

Eyes automatically turn to the government to provide that link. However, it may well be a problem outside government's ability to fill.

This is the conundrum Adrian Beer has been considering over the past several years.

He most recently led METS Ignited, one of the five industry growth centres the Australian government created in 2014 to fill the vacuum created by the implosion of the car-making industry.

It called time on its eight years of growth centre efforts in November.

Those five growth centres formed under then-prime minister Tony Abbott were expanded to six by his successor Malcolm Turnbull.

Beer said when he took up the top job at METS Ignited it was meant to be an 18-month role that turned into four and a half years.

With METS Ignited gone Beer is trying to get the Australian Innovation Exchange off the ground.

AIX's aim is to act as a matchmaker between researchers, mining companies and financiers to help get Australian mining technology commercialised - particularly what Beer calls "stranded" innovation.

METS Ignited was charged with building the capability and scale of Australia's mining, equipment, technology and services sector.

During that time it put $16 million into 35 collaborative projects, attracted two and a half times that much in industry-matched funding, supported the development of Australian technology companies with more than 1000 jobs to the local economy. Those companies are expected to provide $900 million to the Australian economy by 2025.

The projects brought more than 20 innovations to market.

At some point, though, the market has to take over.

The problem is there are gaps in the market. There is no mechanism to take an idea through to commercialisation.

This was a problem it had been hoped METS Ignited might fix, however, it was outside its capabilities too.

Industrial investment

One of the missing pieces, Beer believes, is the large, "boring" industrial company, such as the old Australian National Industries, that could take an idea, fund it, put some fiscal discipline and development skills behind it, and bring it to fruition.

ANI counted Bradken and Comeng among its subsidiaries.

It is also the sort of thing big government infrastructure businesses used to do, alongside developing a strong skills base. Sadly, most of those bodies, such as the State Rail Authority, have been privatised or become government enterprises, which can have the same effect.

"There were all these big organisations that used to make stuff," Beer said.

"They are the ones that are missing."

So what is left? Beer suggests companies such as Worley, Wesfarmers and Washington H Soul Pattinson as potential replacements.

He also sees the likes of Imdex and Perenti as potential players in helping get Australian METS to market.

Investment avenues

Laing O'Rourke is one company helping get METS companies going.

An example is its investment in Presien, a company using artificial intelligence to analyse camera feeds and prevent collisions.

Laing O'Rourke wanted a collision avoidance solution to keep its workers safe. It brought together technologists to find a way to protect people around heavy equipment.

As the Blindsight technology started to take shape it was spun out into Presien with Laing O'Rourke keeping a stake in it and providing some management assistance.

"They [Laing O'Rourke] have a measured approach to technology investment," Beer said.

"That's the way I think Australian technology needs to go."

Imdex's plan is to invest in technologies that can help it build its own technological aims.

In 2021 it took a 30% stake in Australian geoscience and data science company Datarock.

That was followed in 2023 by a $6.42 million investment to get a 40% stake in Canada-based software-as-a-service company Krux Analytics.

Imdex will buy a business outright if it suits its aim. In 2023 it grew its drill technology game by buying Norwegian drilling technologist Devico for $334 million.

Mining services provider Perenti believes technology is a key part of its offering, which is good news for technology developers. In 2022 it bought Orelogy and Atomorphis for undisclosed sums.

Orelogy is a resource consultant, while Atomorphis is a resource data science group delivering agent-based software modelling capability.

Perenti managing director and chief executive officer Mark Norwell made technology one of the company's five strategic pillars in 2021.

Its Idoba business arm makes up that pillar.

Idoba was created out of Perenti's purchases of Sandpit Innovation, Improvement Resources and Optika Solutions.

Beer said Perenti was interesting because it was an operator first and foremost, which was informing its technology investments.

Orica is investing in METS to grow its service offering while also developing its own technologies. Coming from a blasting background it created a suite of technologies built around its BlastIQ software.

It too has set up a technology arm, in this case Digital Solutions.

That business segment posted its first full year in 2022-23, bringing in sales revenue of $211.7 million and had earnings before interest, tax, depreciation and amortisation of $96.9 million. Putting that in context, Orica's sales revenue was $7.9 billion for FY23 and its EBITDA was more than $1 billion. Still, the growth potential is clearly there.

The start of Orica's Digital Solutions business can be tracked to its Groundprobe purchase in 2017, and it has added to that over the years including its $260 million Axis Mining Technology acquisition in 2022 to the Terra buy in January.

Stranded capability

While these companies offer an avenue for METS companies to move further down the path, the story of stranded market capability will continue.

"There's no-one to do the transaction," Beer said.

"That's what I'm trying to work out. The vehicle to market is the weakest link. We didn't find it [at METS Ignited].

"In Australia we can't tell the difference between distribution and consumption. We completely ignore the distribution part - how do I get that piece of innovation to the end market. We think industry is entirely consumption.

"If there's one thing the government has done poorly, it is to bolster the end market to grow massively without building the supporting infrastructure at the same pace.

"It's like stranded assets. You get these stranded market capabilities.

"We've never focused on that link."

What invariably happens is the technology starts to get some traction and then it is bought by an overseas player. Good news for the technology developer, sure, but for the country yet another business is heading overseas.

"All the overseas guys are looking at the Australian technologies they want to build or buy," Beer said.

He had firsthand experience of that. It was his job at GE and ABB.

However, the big multinationals learned to look at the smaller end of the market.

"The problem with big acquisitions at ABB and GE, they were so big some of the prices were so high, you couldn't make a deal out of it," Beer said.

"You would cull as much as you could out of the running costs.

"Multinationals are thinking a lot more about buying small businesses with higher upsides now.

"When I was doing it at ABB there were five or six of us in this area and we all knew each other. There are now about 15-20."

So where does AIX factor into all of this?

Beer was considering giving up on AIX and going back to doing the sort of things he had been doing for GE and ABB.

"I've come to the realisation that there's nothing to lose and no-one else is going to do it," he said.



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