Moving into 2007 their order books are virtually full, some are expanding internationally, several long-term contracts are in place with both major and mid-tier mining companies, especially in Western Australia, and they see the boom continuing providing further opportunities for increased revenue and profits.
Fighting nationwide skills and labour shortages in all areas of mining operations and long lead times in product supply the contractors are forging closer relationships with their clients. Indeed, those mining companies are becoming increasingly involved in mine management and across the board full production and development contracts.
The most positive changes for the major contractors are coming through the development of their relationships with the mining companies and working with them in management.
“We are getting away from the ‘them and us’ attitude and that is important,” Barminco WA general manager Neil Warburton told . “That is where the contractor game has matured in the past two to three years.
“We are no longer seen as a contractor but a partner, a co-employer of senior people onsite, and work together to achieve the best results and benefit each other.
“Five or six years ago the attitude was ‘let’s screw the contractor’ – provide a schedule of rates, let them squabble and they may go broke but we’ll get the job done cheaply. That attitude and philosophy has now gone out the window.
“We are very much part of the management team on most of our sites. We get involved in mine planning, mine issues and heavily involved in bringing in our own experts to assist their technical people.”
Byrnecut Mining managing director Steve Coughlan said one of the major changes was with mine owners trying to structure contracts more sensibly to maximise the people available.
“When there is a mature and sophisticated approach you can do that effectively and minimise the number of people managing a job,” he said. “In a good relationship you can eliminate duplication of people.”
Macmahon Holdings, based in Perth, is undergoing a transformation from a small contracting business into a large diversified contracting and services group.
“As an organisation our capacity to maintain long-term service relationships with major customers remains a key plank in our growth strategy,” Macmahon managing director Nick Bowen said.
Recently ASX-listed Walter Diversified Services, a specialist provider to the underground coal industry, also backs this strategy saying the success of providing professionally managed services that integrated with customers’ existing operations had been demonstrated by long-term relationship-based contracts.
Such relationships are providing the base for the optimism of the contractors with more operations becoming long-term repeat work and renegotiated extended contracts.
Labour and skills shortages remain the biggest obstacle, with companies turning to overseas workers to fill the gaps through the 457 business sponsorship visas as they step up their own training and upskilling.
They all agree it will take a long time to build skill levels back up in the workforce. The vacancy rate in the mining and oil sector in WA alone from senior managers to trades assistants is estimated to be between 5000 and 8000.
Barminco has hired about 50 skilled workers – mainly from the Philippines – under the visas, Byrnecut has brought people in from Germany, Africa, Slovenia and Britain, and Macmahon also sources overseas staff.
None of the companies sees a short-term solution and each are heavily into skills upgrading, training and apprenticeship schemes.
“There is a long time for Australia to provide the work base for the industry. Skilled labour and products shortages are common to the whole industry at present,” Byrnecut’s Coughlan said.
“There are simply not enough people in Australia to go round. The Government has made it easier to sponsor people but that is a lengthy process, two to three months. We are looking at people working for us overseas with the potential of bringing them within the organisation to Australia and similarly upskilling people there so we can bring expats back.”
Warburton said the group of about 50 skilled overseas visa workers had helped Barminco get over some issues.
“They are experienced on a practical point of view but need training up on safety and our work practices onsite,” he said. “There is a huge shortage of qualified tradespeople, especially in WA, and it will get worse with oil and gas and iron ore expansion and Boddington.”
But the underground contractors are in a buoyant mood as the resources juggernaut continues and they come off one of their best ever years in 2006.
Macmahon Holdings, with more than 2700 employees, had a 72% after-tax profit increase in 2006 and said the company was “well placed to benefit from the greatest level of infrastructure and mining activity in Australia’s history”
It said the 2006 financial year was one of the best in the company’s 43-year history and the major economic drivers across its business sector remained strong centring on the continuing demand for base metals and bulk mineral commodities.
Bowen said the company had almost doubled its revenue during the past two years and expected continued strong demand in the next three to five years. Its total order book has passed $1.75 billion.
In February it won a $90 million three-year extension to its underground mining contract at the Leinster nickel operation with BHP Billiton.
Barminco, a private company, has 16 Australia-wide contracts and 1530 employees plus 200 contractors.
Warburton said it had expanded substantially over the past three to four years and put systems, management and financial structures in place, allowing it to make its first foray into the international market in Africa.
The company is currently tendering on three more contracts in WA and Queensland and says the overseas expansion will be a major step.
Byrnecut, with 1800 employees and an international division, works in several countries including New Zealand, Indonesia and Ireland, and Coughlan said he wanted the company to get to the point where overseas work is a third of its turnover.
Its major Australian operations are in WA and the company grew 30% in 2006.
“It is not realistic to sustain that type of growth. The restriction is not financial but resources. We are doing about $500 million a year and have a strategic plan to grow that to about $750 million a year by 2010,” managing director Coughlan said.
Walter Diversified Services is based in Sydney and raised $65 million from an initial public offering. It has a forecast financial year 2007 revenue of $214 million, which would be a 75% increase from the previous year.
It says the company is well positioned to benefit from the expected growth in demand for mining services.
