Consultants have ridden a wave of success through 2006 and are expecting more of the same through 2007 with the scent of strong fee growth heavy in the air as the commodities boom looks set to continue through 2007.

Besides the strong growth that typified 2006, consolidation has also been one of the most notable things about the consulting sector over the past year.

Coffey International, the company behind Coffey Mining and Coffey Environmental, has been one of the most aggressive in the timeframe, with its 2006 acquisitions including Tennant Isokangas and RSG Global. Downer EDI subsidiary Roche has also been active on the acquisition front, picking up tyre management specialist Otraco.

Buying in skills has been one of the drivers behind some of the acquisitions. But that does not address the overall problem of attracting more people to crucial mining disciplines such as engineering and geology. What happened to the old engineering and geological cadetships the mining companies used to run? Consultants want to know.

The rapid staff turnover on mining sites caused by the skills shortage is also bringing pressure to bear on consultants to become more involved with their minesite clients. In some ways this involves finding ways to make better use of the people and the technologies available.

On the consolidation front, many point to the similar bouts of consolidation among the miners as a reason for the frenzy of buying that has gone through the consulting sector.

As the miners get bigger the consultants that service them feel the need to also grow and, while most are enjoying strong organic growth, acquiring others is a quicker way to get big.

Coffey has been arguably the biggest mover in terms of acquisition in 2007. Along with its Tennant Isokangas and RSG Global buys it has added some businesses overseas and bolstered its environmental consulting offerings.

Coffey Mining chief operating officer Dan O’Toole said gaining critical mass had been a key driver behind Coffey’s consolidation push. Besides global critical mass, Coffey’s acquisitions have given it a stronger environmental and mining engineering presence than it had – Coffey started out as a geotechnical specialist – meaning it can now pitch itself as a cradle to the grave consultant for mining projects.

O’Toole said on the global front South America and North America are future targets, as is growth in Africa.

Runge is another firm on the hunt for more acquisitions. Its business development manager, Pat Williams, said size mattered to the companies Runge was servicing. “They value the critical mass that comes with a company of our size,” he said. “They want the consistency that a global consultancy can bring.”

While growing globally or to build critical mass can be a driver for consolidation, so too can synergy. This has been the force behind Resource Management & Development’s merger with the Stem Partnership to form RMDSTEM.

The new entity has a range of services including asset management; flow sheet development; commissioning and troubleshooting; due diligence studies; operational technical planning; technology roadmapping; and decision analysis.

However, there is more to this merger than meets the eye. Ian Lawrence is managing director of both RMD and STEM. Indeed, STEM grew out of RMD and was hived off in 2000 because its work was taking it into areas outside of mining.

Lawrence told AMM that the time had come to bring the two businesses back together because STEM had developed a range of systems and tools for technology evaluation that could be applied to project evaluation.

Probably the most recent acquisition in the consulting field has been Golder Associates’ December merger with New Zealand consultancy Kingett Mitchell. That merger brought Golder 73 predominantly environmental management and impact-focused staff and boosted its NZ team to more than 110 people.

What about those that could be targets for takeover? AMC Consultants managing director Peter McCarthy admitted his firm received takeover approaches from time to time but said it was happy with the sort of growth it was enjoying. McCarthy’s story is not unique among the companies AMM> spoke to. There is also the sentiment that “everything is for sale at the right price”

In some cases, the way consultants structure their ownership can prove a handy takeover defence. In the case of Golder and SRK Consulting, both have strong employee ownership levels, meaning that any suitor would have to get the approval of a number of different shareholders to make the takeover happen.

SRK managing director Peter Williams said the company’s staff – who were also its owners – were happy with the returns they were getting. The company has enjoyed 30% growth for the year April 1, 2005 to March 31, 2006.

“We talk sometimes about whether we should go public but we’re pretty happy as we are,” Williams said. “Plus we have a large global network as well.”

Besides Australia and its South African homeland, SRK is also in Canada, the UK, the US, Chile, Brazil, China, Turkey, Russia and India.

“We’ll be looking at building our new offices in Brazil, Russia and China into significant presences in those countries,” Williams said. “At the same time, Australia is targeting substantial growth. We see Australia becoming even more important for mining going forward.”

Williams said clients were also putting greater emphasis on an ability to offer a full range of services. That, in turn, was leading SRK to expand its services, he said.

The demands of life as a public company could also be one of the drivers behind the acquisitional aspirations of some. Golder mining sector leader Ian Lipton explained that public companies faced a growth expectation from their shareholders that could lead them to pursue acquisitions more aggressively than a private company would, something a private firm such as Golder did not have to worry about as much.

However, given the employee ownership structure, Lipton said acquisitions could be driven partially on personality. “We place a lot of emphasis on finding partners who are a good fit for us,” he said. “We also look at acquisitions where the target company adds to either our geographical spread or fits nicely in terms of bringing additional skills into the group.”

Consolidation can also be a good way of getting staff. However, while it might benefit the consultancy doing the buying, it is not going to increase the number of skilled people available. Admittedly, the skills shortage and staff turnovers are hitting mining companies more than consultants.

Some consultants are “giving back” to the industry through helping to train the next crop of mining professionals. For example, Coffey is funding the development of a mining engineering course at the University of Tasmania and mining consultancy SRK contributes lecturers to the University of Western Australia’s mining engineering course.

While there are costs there are also benefits for the consultants. As O’Toole explained, the courses either provided a new source of workers or, potentially, a new source of clients.

Besides helping to develop skilled workers for the mining industry, consultants are also using their abilities to help their clients work smarter. Snowden general manager Mark Warren said a lot of his company’s work was to do with operational optimisation.

“Our technological division, which is our fastest growing division, is providing a...click here to read on.