Mining consultants are as essential in the make-up of a mining operation as is having the actual commodity to be mined. They bring an assortment of expertise to the mining sector that covers most aspects encountered in the development of a mine.
These include geological expertise as well as legal, financial, environmental and managerial, to name a few. They are able to provide solutions to engineering challenges, due diligence for mergers and acquisitions, feasibility studies, health and safety services, geotechnical assessments and the list goes on.
The services of these consultants are also an integral part of the cost of running a mine. So what happens when these mines begin to slow down, go on care and maintenance or just shut down?
“At times like these, when things do slow down, we tend to do a couple of things,” Golder Associates mining market sector leader for Australasia John Battista said.
“One is we get more involved in due diligence type work as companies or operations may be sold. There is usually a lot of merger and acquisition and property sale activity in these sorts of environments and we tend to get involved in that.
“The other thing is that we tend to get closer to the actual mining operations and we switch from doing feasibility studies to doing optimisation studies.
“So we’re helping our clients that are in business, with operating mines, to become more efficient and competitive.”
This change in operational tack is probably the best indication of the effect the financial meltdown is having on the sector.
“It would be misleading if I was to say there has been no impact,” Battista said.
“We are starting to see a slowdown in activity. However, on the positive side, when these things happen, Golder, as an organisation, has a lot of diversity in the range of services that we provide.”
While some companies have been quick to see a noticeable drop in their workload, Palaris Mining managing director John Pala said it was still business as usual.
“We really haven’t seen any change,” he said. “We just have a heavy workload, period. It has just not been a problem for us.”
Pala identified a factor behind the company’s good position was the nature of the work it performed as a consulting company.
Palaris carries out a considerable amount of project evaluation work, a lot of which is closely aligned with operational work.
“It is very much mine planning and productivity study type work,” Pala said. “It is project management and it sort of dovetails to a broader base of work that we do anyway.
“In a downturn people are looking at business optimisation and business improvement and so the cost improvement type projects and the productivity study type work, there is actually a stronger demand in that.
“A number of the projects that we have are two to three-year timeframe type projects so there is a heavy commitment for our clients.”
This forward-looking outlook is important, especially since mining is so cyclical.
A project with a seven or eight or more year development timeframe needs to be looked
at in terms of everything from exploration programs through feasibility studies to getting approvals.
A lot of time goes by before construction begins and production starts.
“If you take your foot off the gas now then essentially you are in no position to capitalise on the upturn when it comes around,” Pala said.
“Most of our clients see that, they take a long-term view and that is the nature of the work that we generally specialise in.”
Even with the mining industry seemingly in the doldrums there are still pockets providing some light and encouragement.
Battista identified the uranium sector, particularly in Western Australia where the state government rescinded a ban on mining the commodity last year, to be an area experiencing quite a bit of activity.
“We’re certainly not seeing a slowdown in that area,” he said.
“There are a few companies that are trying to get operations up and running and are looking to do so as soon as possible. There has been a lot of work done on a lot of these uranium deposits in the past in WA.
“But it has been quiet and in the background, and now it is much more in the forefront.
“If there is anywhere in the mining sector where there is a bit of urgency it is in uranium in WA.”
The WA government may have given the local uranium mining industry a kick along but it has also borne the brunt of some criticism over infrastructure.
State Opposition Leader Eric Ripper has been critical of the government’s response to several events including Rio Tinto’s announcement of a slowdown at the Argyle Diamonds underground project and BHP Billiton’s announced closure of its Ravensthorpe project and the downsizing of its Mount Keith nickel mine.
Ripper said the government should be outlining its infrastructure spending priorities.
“At a time of increasing uncertainty it was essential for the government to immediately decide which major infrastructure projects would be funded in the years ahead,” he said.
“The time has passed for discussions about how we share the dividends of the boom, it is now time for decisive action.
“The state government must announce its infrastructure priorities and provide some much needed confidence and certainty. Business and the wider community need to know how the government will deal with the challenges of this downturn.”
Ripper is not alone in such views.
RSV Australia managing director Allan Mulligan said Rio’s Argyle decision had cost RSV a significant amount of work.
“We were heavily geared to Rio Tinto, first in regard to the Argyle project and potential work after that and also in Queensland, where we believe things are slowing up for them in the coal division,” Mulligan said.
“The biggest problem is that we are not seeing any direction from the [Western Australian] state government. They were talking of infrastructure programs; well, where are they?
“If the state was to announce it was investing in the infrastructure it said it was, there would immediately be a lift in confidence among the market and that would rollover into companies dipping their toes into the study phase of projects.
“So I think the absence of any direction from the state, particularly during the January period, has just extended the dead Christmas period.”
WA Premier Colin Barnett was quick to respond to BHP’s closure of Ravensthorpe. He broke his holiday to fly to the mine.
Meanwhile Mines Minister Norman Moore said the government’s focus in the wake of BHP’s Ravensthorpe announcement was on supporting the communities of Hopetoun, Ravensthorpe and Esperance.
One positive that has emerged from the industry slowdown has been time.
In some respects the fact that the market has dropped so dramatically has given a lot of people, consultants and operators alike, some much needed breathing room.
That is the short to medium-term effect. However, if the sector stayed weak for an extended period there might be a different outcome with more people bound to lose their jobs.
For the moment people are still being absorbed into the system.
“We still have a capacity to recruit people,” Pala said. “We have probably recruited, since all the woes began around November, another four or five people.
“If we find good people – particularly we are on the look out for operations people who have got plus 15 years experience and especially engineering people, that are mechanical, electrical engineering type people – if we find those people we have a job for them.”
The final question to address is whether the consulting sector can look at the coming year and feel optimistic about what is ahead.
“Put it this way: I would have to say that I’m not totally pessimistic,” Battista said.
“We are certainly not going to be in the times that we have been over the past three or four years, that’s quite clear.
“I think it is going to be a rough ride, particularly the first half of this year.”
Pala shared Battista’s cautious outlook.
“A measured outlook is probably the case. I certainly wouldn’t use optimistic but it is measured,” Pala said.
“We take a long-term view. If good people come along we will employ them.
“We have quite a full work order book and we haven’t really seen a tapering off of demand.”
Mulligan also envisaged a trip through a long tunnel but was sure there would be some light to see.
“We are going to get through it but will probably be a vastly different organisation to what we were a year ago,” he said.
