Resources and Mining Services

With an abundance of mineral resources, and access to sophisticated equipment, technology and expert human capital, Australia has prospered for decades as one of the world’s leading mining nations. After years of strong growth and aggressive expansion, the sector is vulnerable to the pressures of a severe contraction in investment activity, rising production costs, diminished and volatile commodity prices – all of which have resulted in the most austere outlook for the mining sector in 20 years, and resulting in the deferral or cancellation of a significant number of major projects in key mining regions across Australia. The flow-on effect has been immediately felt most by high-cost producers, mining services companies and those with rigid financial structures.

Issues

The current slowdown in the major project pipeline across Australia has resulted in a reduced volume of future work available to mining services companies, and has put direct pressure on their growth and profit projections. Many of these companies are now struggling to rein in costs and downsize in response to changed conditions, and are actively seeking options to delay expenditure and deploy or sell their surplus and non-core assets – including large-scale mining equipment. Financiers and mining services companies must contend with some significant challenges if they are to find sustainable and long-term operational solutions until the market turns. Some of these challenges include:

  • an environment of high operating costs
  • declining investment activity across all key mining sectors
  • increased competition and pricing pressure
  • changing demand for large-scale equipment and diminished resale value
  • long lead times for delivery of large-scale machinery, and reduced utilisation.

Questions that should be asked

With industry participants responding to these pressures on varying scales, it is important to take a long-term approach and focus on options to stabilise operations, manage contract negotiations, and identify commercially viable strategies for changing labour- and equipment- hire demands.

Mining operators and service companies should be asking themselves:

  • Do we have contingencies in place to meet financing commitments if revenue falls?
  • Are our management information systems adequately reviewing profit and cash flow data to readily monitor performance?
  • How can we manage fixed costs to quickly respond to changing market conditions?
  • What are the risks associated with looking overseas for replacement opportunities?

Our expertise

Our national resources and mining services team brings together 14 professionals with specialised skills, expertise and experience to advise our clients on the risks, issues and opportunities unique to this industry.

We have worked extensively with a wide range of industry participants, including exploration companies, mine operators, mining contractors, drillers, earthmoving companies, construction companies, labour-hire companies, engineering firms, engineering, procurement and construction management (EPCM) service providers, mobile accommodation providers, and training and HSE consultants. We consider the financial and strategic aspects – as well as logistics, operations, succession planning and other issues – to achieve the best possible results with the least impact to stakeholders.

What sets us apart from our competitors is our dedicated mining practice with in-house geological, engineering and mine-management expertise, which means we can offer clients deep industry knowledge, a firsthand understanding of industry issues, and the technical expertise from our work across the sector on a daily basis. This in-house capability – particularly our expertise in valuation of mining assets and businesses – is readily accessed by our insolvency, restructuring and advisory teams for mining or mining services projects. Our advisory work also encompasses mining project planning, including determining the economic impact of delays – not only on mining operations but also to ancillary service providers.

In addition to knowing the range of technical experts across this specialised field, our team of specialists can converse with these experts on technical points to ensure we are getting the right advice and reports. One of the real benefits of this in-house technical expertise is our ability to accurately brief consultants and experts, and assess and oversee the work they undertake to ensure it meets the technical requirements critical to the assignment. The value this delivers to our clients is a coordinated and tightly managed approach, which in turn drives cost efficiencies.

We offer clients access to a highly experienced team with up-to-date mining sector knowledge, including awareness of the current projects proceeding across the country. Mining and mining services is a complex area – we understand the key issues and can readily identify the key drivers guiding and impacting the sector. We can also talk confidently to mine owners and mining service operators as experts in their field, and we understand their businesses, drivers, risks and opportunities across the full life cycle of a mining project.

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