Engineering and Construction [Engineering and Mining Journal]

Designing and delivering the highest standards

Australian companies have developed engineering skills and technologies that address all aspects of mining infrastructure. From installations at the ore body, through processing and beneficiaton plants to transport facilities, rail, roads and ship loading, Australian companies have across the board experience in most mineral commodities, in remote areas and in harsh conditions.

Engineering on big projects in Australia's challenging environment, within which processes must be conducted as efficiently as possible to counter high labor and material costs and able to bare extreme weather conditions while being exceptionally sensitive to local ecologies and communities, has fostered innovations that are especially appreciated in the global marketplace. Engineering company and environmental specialist GHD, for example, have a history of rolling out novel solutions from their Australian offices. "A lot of our current clients have been affected by the recent natural disasters in Queensland, and our dealings with them will provide us with extremely valuable learning for future projects," said David Luscombe, GHD's global market leader, energy and resources.

GHD is currently pioneering a system of Climate Resilient Infrastructure on the back of such learning. In 2006, the company won Australia's Engineering Excellence Award for developing the world's quietest Caterpillar truck for Westrac.

This unique Australian environment has led to the emergence of many companies specializing in turnkey solutions for brown field and green field projects. Many of these companies have a renowned reputation for high levels of diligence and integrity at the planning stages, ensuring that contractual and organizational criteria are fully addressed.

"It is recognized in the engineering sphere that Australian companies will be of a high standard. A lot of international mining houses will come all the way to Perth to have their project designed by Australian resident engineers. It is common to see North Americans getting work done out of Australia," said Rod Leonard, managing director of Lycopodium, a Perth-based engineering and project delivery firm. The mineral sector represents around 90% of its business.

Leonard believes there is a unique mentality to Australian mine engineers that makes them internationally competitive. "There is a can-do attitude here. It's a very hands-on 'make it happen' work philosophy. I'm from the U.S., but that was one of the things that struck me when I first came here. When you see Australians in the various communities they go to, they also have a strong community focus. There is a big demand in the industry to be as cognitive of the soft issues as of the actual project implementation and I think that is a positive," he said.

Peter De Leo is Leonard's colleague and managing director of Lycopodium Minerals, Lycopodium's subsidiary that specializes specifically on minerals processing, materials handling and infrastructure projects. He believes that the high demands of Australian miners have led to the development of the nation's high engineering expertise. "The ore bodies now being developed would have been considered very marginal in the past. You need to be pushing the boundaries in order to develop them effectively. In the early days it was that and the similarities between the style of mining and processing that took Australian miners into Africa."</p>

Many of Australia's leading multinational EPCMs have sophisticated systems for mobilizing staff and transferring expertise between their international offices. In this way, knowledge gleaned in Australia can easily be made available overseas. Similarly, Australian operations are able to benefit from experiences gained elsewhere. World-renowned engineering and construction player SNC Lavalin has taken this one step further in developing a global procurement system. "If I want to go and buya machine, I could refer to the database and find all the machines that we'd bought in the last projects, where they were bought from, what the quality was like, the risks involved etc. It helps us to price projects very accurately, and also to source equipment," said Luscombe.

Though Australia's engineering prowess is widely acknowledged, EPCMs with a strong overseas presence have been able to bolster less well-developed aspects of the Australian contracting value-chain. Headquartered in Canada, multinational Hatch has a strong heritage in aspects of mineral processing that are less commonplace in Australia. "Australia traditionally had a digit-out-of-the ground culture; there wasn't a lot of secondary processing in the past, whereas in North America that was not the case . A lot of the skills we've been able to bring to Australia come from our background with some of those more difficult processes, hydrometallurgy, pyrometallurgy and so on," said Eric Kolatchew, managing director of Hatch in Australasia.

The large number of big projects coming on-stream in Australia has served as something of a calling card for foreign EPCM's with specialist skills. In 2008, Canadian firm Redpath Mining entered the Australian market through its acquisition of Queensland underground mining and tunneling contractor, Eroc. "Redpath are global players and have offices in Canada, the U.S., Mongolia, Indonesia and South Africa, but in the mining contracting sense, the Australian market is one of the largest," said Rob Nichols, CEO at Redpath Mining Australia.

Since Redpath acquired Eroc, the company has grown by 30%-40% in terms of turnover. This can, in part, be attributed to the financial clout and extensive client network that the Canadian company brought to Eroc's business. "The balance sheet support and introduction to clients from Redpath has enabled us to introduce the skills that we already had to more clients. We have more equipment and manpower for larger projects and a lot more corporate support," said Nichols.

Redpath Mining has also brought in a range of specialist skills, such as raise boring, shaft sinking, and technical engineering, to augment Eroc's already strong reputation in the underground space. Though Redpath Mining is not currently engaged in shaft sinking, raise boring now accounts for 15% of the company's business in Australia. Raise drilling is currently in operation at four mines in Western Australia and is a strong growth area for Redpath Mining. "We aim to provide a whole range of services to our clients that other contractors can't offer," said Nichols.

Como Engineers initially started as a contracting company, but the fierce competition led it to look for niches in the engineering business where it could have a distinct advantage. The modular stripping plant, launched in 1982, was its first product, and Como has focused its expertise on building equipment that would fit in sea containers in order to be shipped all over the world. Overseas activity has become an important part of Como's business. "Australian services are highly regarded across the world, because of their excellent quality. Our standards are a lot higher than most countries. Currently, a third of our activity comes from overseas, and we would like to take it up to 50%. We have worked in Indonesia for years, and we consider it a good place to open an office. We have recently been in Morocco, in Finland and in Sweden to deliver a modular plant to a new gold miner," said CEO Richard Ladyman.

Como has evolved into providing complete turnkey solutions to its customers, offering consulting services that include feasibility studies and design and construction. "We take projects all the way through from concept to completion, which means we start with the studies, and go all the way through to build and commission of the plants," Ladyman said.

The history of AMEC Minproc's development is indicative of the transformations that the Australian mining industry has gone through. Minproc was originally an engineering services company and focused its expertise on the gold sector. Over the years, Minproc diversified into a range of commodities and became involved in a number of projects worldwide. In 2009, it became part of the larger AMEC organization, welcoming AMEC's expertise in heap-leaching technology and tailings management.

Dr. Stuart Ratcliffe, general manager of development for AMEC Minproc, foresees new trends for the company to focus on. "The global demand for iron ore has increased, especially from China and, as a result, there has been huge growth in iron ore development. There are numerous new clients and projects that are being developed in Western Australia and other parts of the world, both in DSO and iron ore which requires mineral processing. A lot of the current work is related to magnetite developments and that requires large scale mineral processing capabilities, so we are able to apply the skills that we have developed over the years in other commodities to the iron ore industry. In central and western parts of Africa, our focus will be increasingly on iron ore as time goes by. With plants that are able to process 75 million mt/y, AMEC Minproc is determined to maintain their iron ore beneficiation and processing expertise.

A Union of Subcontractors

The plethora of new projects coming online may provide a wealth of opportunities for Australia's large EPCMs, however, for the country's smaller specialist sub-contractors, tighter regulation, rising costs and increased competition from overseas players are making industry conditions tougher and tougher. "The barriers to entry keep increasing with legislation and company requirements. The bar keeps being lifted for subcontractors," said Terry Young, managing director of Diversified Mining Services Group (DMS).

Before Brisbane-based DMS burst onto the Queensland scene with six rapid acquisitions of service companies across the underground and open-cut spaces in 2009, the company undertook extensive research into market conditions for Australia's subcontractors. "We noticed there was a lot of imminent retirement from the baby-boomer generation in the mining services sector, and also that all of the major miners were outsourcing most of their traditional services to contractors. On the mine siie there are thousands of vendors or subcontractors. At the same time, the major miners are looking to narrow or specialize their vendors, in some cases from 5,000 to 50."

According to Young, the increased barriers to entry that these conditions precipitated meant that managers and owners of subcontracting companies, most of who started off as entrepreneurs, were having to spend the majority of their time dealing with lawyers and bankers instead of focusing on their employees and customers, "A common complaint that we heard at industry meetings was that there was too much red tape. We say to the owners go back to doing the entrepreneurial thing that made you successful," said Young.

DMS Group's service office in Brisbane supports the operational activities of the initial six and two subsequent businesses that the company acquired. The Brisbane office carries out all of the HR and business development strategy and the company have also integrated all non-mine performance activities: safety, quality, and marketing and sales campaigns, and IT systems.

All of the managers from the businesses DMS has acquired have stayed with the company since acquisition. Unifying subcontractors in this way has saved DMS's constituent companies money on finance and insurance - by having one bank rather than eight banks, for example, However, the most fundamental impact has been on profit margins. "Because the entrepreneurs get released from all of their administrative and corporate duties, they naturally go back to doing what they did best: improving sales. Since we formed the company, we've gone from A$70million in sales, to this year's forecast of A$190 million. We started with 350 employees and last week we paid 605," said Young.

Having one point of contact also makes things simpler for clients. "We think we replace anywhere from 10 to 20 different smaller subcontractors, which means one safety protocol, one point of contact, and one invoice. We're able to standardize across numerous sites for our clients. On shutdowns we achieve safer performances result because you don't have the Interfaces between people working at different levels and on different aspects of the process," said Young.

Contracting Through the Global Financial Crisis

When Managing Director Fred Vidaic started Queensland-based Global Cranes in 2005, the company underwent a period of rapid growth. On the back of planned infrastructure work for Brisbane City in 2006, Global Cranes purchased Millers Cranes and Transport to keep pace with demand. This was followed by the acquisition of Nebo Cranes in 2008. The prognosis for Global Cranes was great. And then the global financial crisis hit.

Many small Australian contracting firms endured a torrid time through the global financial crisis and some went under completely. For Vidaic, employing a lean management strategy was the key to survival. When work began to dry up, Global Cranes adopted a strategy of dry-hiring a portion of their fleet to ensure that the company was able to generate as much revenue as possible. "All we've done is tighten our belt, our revenue stayed the same, but the profitability last year was minimal because of all of the overheads. Our profitability now is much better," said Vidaic.

Coming out of the global financial crisis, Global Cranes find themselves well placed to serve Queensland's booming resources sector. To augment their current operations, the company is now looking at possible acquisitions in the Surat Basin, with work in the Galilee also mooted for the future.

Global Cranes has a fleet of around 210 vehicles: rough terrain cranes, all terrain cranes up to 220T, frannas, and crawlers; with jobs completed for the likes of Sedgman, Leightons, Hatch and Bechtel.

Vidaic attributes the company's success to the reliability and service they have been able to offer their clients, even through the turbulence of the global financial crisis. "We've got a relatively modern fleet, our 220's are 2010 models. Service really differentiates us: when we say we'll be there, we'll be there," said Vidaic.

The Last Breath of Australian Manufacturing?

The conjunction of a formidable Chinese competition and the extremely high cost of labor in Australia have turned manufacturing into an increasingly difficult challenge, and for many, it is already a distant memory.

Erich Hofmann, managing director of the family company Hofmann Engineering, founded by his father, is the first to acknowledge that "manufacturing is dying in Australia." To try and remedy the issue, Hofmann joined the Government Innovation Council, made up of leaders from the unions and from some of the leading manufacturing companies. They meet on a regular basis in order to address these daunting issues and suggest solutions. Hofmann takes a leaf out of Germany's book and maintains a positive outlook of the future of Australia's manufacturing. "We particularly benchmark ourselves against Germany, because they have similar standards of living, with similar tax rates and hourly rates. Last year, Germany still had the largest manufacturing exports in the world, thanks to its technology. As a company, we are looking at getting the latest technology in order to manufacture our production much more efficiently. Even though Australia has one of the highest labor rates in the world, we can still be competitive."

Thanks to an inspiring A$36 million a year investment in R&D, Hofmann Engineering remains at the cutting edge of innovation and is able to develop its exports, which represent half of the company's activity.

Hofmann's key differentiator is its initial expertise in extremely sophisticated aircraft parts. They are able to transfer their aerospace competencies into the manufacturing of mining equipment that is comparatively easy to make. "As we are at the extreme end of technology , we use our aerospace know-how in mining. Our aerospace expertise led us to a new way of manufacturing. Traditionally, in the manufacturing industry, everything is made to drawings. But the aerospace industry uses 3-D models instead of drawings. We have now adopted the 3-D models and we acquired a new machine that is used to make gears as well as aircraft parts," said Hofmann. This uncommon expertise has so far allowed Hofmann Engineering to gain and retain the trust of its no less than 5,000 customers around the globe, providing them with the world's largest gears, as well as the world's largest ball and SAG mill shells. Through a continuous process of re-engineering and product improvement, they manage to anticipate customers' demands and to pioneer new areas of expertise, such as forged steei gearing, that, after having been running for 22 years, "are still going strong."

Leading the Drive to Automated Operations

Around the world, mining companies are looking to reduce operational costs and increase safety. One of the most effective methods for achieving these twin goals in any business is the incorporation of automated operations.

Australia has become a hub for these developments. In addition to Rio Tinto's Mine of the Future, other players have worked to incorporate automated elements wherever possible. Fortescue director, Russell Scrimshaw, believes this should be a paramount concern for everyone in the sector. "It is key that our next stage of development also uses technology to its greatest extent and that wherever possible our operations are automated. The mining sector absolutely needs to embrace this."

Scrimshaw feels this drive has arisen in Australia due to the particularly high cost pressures being felt across the country. "The biggest cost to mining companies is people and salaries here are much higher than other countries across the world. We must overcome that disadvantage by being smarter and using our brains instead of our cheque book."

This demand for automation has not gone unnoticed by Australia's mining service industry, which has developed world leading expertise in this field.

Essa Australia has roots in the construction of sample equipment for the gold mining industry. The company's history saw it expand its service offering across the sample preparation business, until this year, when it was acquired by FLSmidth.

It was the demand for automation across the sector that led Essa into discussions with FLSmidth. "Mining companies are looking to automation to reduce labor reliance and increase the quality of their operations. Thai's how we first came in contact with FLSmidth. We knew that was the market we wanted to be in, but we aren't a software company. They had the software which was already in use in a vast number of cement laboratories," said Darryl Stevens, CEO of Essa Australia.

On FLSmidth's part, Essa Australia represented and opportunity to translate its expertise in sampling automation from the cement industry into the mineral sector, as Peter Sandager, general manager global business development for automation at FLSmidth explains. "It was a natural development for FLSmidth, as we had begun to make a series of acquisitions in the mineral space in the 2000's. It was logical for the automation division to look at bringing the value-add that we bring to cement in process and quality control, to the mineral industry," Sandager said.

Sandager acknowledges it might take time for automation to become as accepted in mining as it has in the cement trade. "In the cement business, it took time for automation to penetrate, so we expect that this will be the case in the minerals industry as well, but we were surprised to see the lack of automation and the understanding of what process control and optimization could do for the minerals industry."

However, Sandager thinks the eventual benefits of this acceptance to miners could far exceed those seen by cement makers. "The volumes involved in the cement business are smaller in relation to those in mining and so ihe benefits of our products are also magnified when applied in the minerals industry. If you, for example, save 0.5% of your energy costs, the cost of investment is returned within a measure of hours. Therefore we see a huge potential, but we also recognize that it takes time for automation to penetrate. Having the sampling expertise is crucial because an optimization system relies on the quality of information that is fed in and now we have both."

Stevens feels Australia is the perfect place for this drive to flourish. "Australian mining has been so successful because it has been innovative and mining houses have been prepared to trial new technology. Equipment doesn't change unless it is driven by something, sometimes it's a necessity, but sometimes it can also come from just looking at opportunities to advance."

Brand Australia

In 1985, in Tawoomba, Queensland, engineer John Russel set up a business aimed at designing and manufacturing world-class mineral processing equipment. In those early days, Russel was the sole employee of his own company.

Today, still operating from the small town of Tawoomba, Russell Mineral Equipment Pty Ltd. (RME) is recognized as the world's leading designer, manufacturer and supplier of mineral grinding Mill Relining Machines and has sold its products in more than 50 countries.

While the Australian manufacturing industry as a whole endures a turbulent time, from meager beginnings John Russel's company is now thriving. Like Hoffman Engineering unparalleled engineering expertise has been the key to RME's success. Also like Hoffman, John Russel cites Germany as an apt basis of comparison for Australia's specialist manufacturing capabilities.

"Australia in general isn't well recognized as a manufacturing hub, but in the specific mining and technology services sector, brand Australia is very strong. I see the potential for Australia to be a little Germany in that regard," said Russel.

In keeping with the spirit of innovation that RME was founded on, the company invests about 4% of its yearly turnover back into R&D. "If you look at the mill lining machines we were doing 10 years ago, you can see that we've been continually refining and simplifying: they look better, they're cheaper to make and they're more reliable," said John Russel.

Although each machine is unique in that it must be made to fit the individual specifications of a given mill, the company also produces one or two special custom machines per year, such as the Alcoa High Reach Descaling Machine. For this project, RME won Alcoa'sAustralia wide competition for developing a solution to descale problems experienced in red mud settling tanks.

RME developed a special, remote controlled device that included a 4WD vehicle with electronic traction control and a powered tool incorporating hydraulic hammering with a high-pressure water jet. According to Russel, engaging in these types of special projects enables the company's R&D department to spread its wings. "The design team battle hard because if you build a special machine, then you're forced into being brave. This makes it easy to make a definitive change in design."

Innovation at RME, however, is not restricted to product design. RME has partnered with the Southern Queensland Institute of TAFE to offer a training course and subsequent qualification for operating its mill relining machines. The company has also recently begun applying LEAN, a system designed to eliminate waste expenditure and inefficiencies, to its manufacturing process. Through these initiatives, Russel has been able to mitigate the effects of two of the Australian manufacturing industry's most pressing concerns: the skilled labor shortages and decreased cost competitiveness.

For Shane Dunstan, executive vice president at Aran International, who design and manufacture specialist mixing plants for the mining and construction industry worldwide, the strength of Brand Australia is a key factor in maintaining an Australian base, in spite of the fact that 80% of the company's business now comes from overseas markets. "The real reason we keep our core base in Australia is the excellent perception of Australian engineering. Australia and New Zealand are the Antipodes we have come to be resourceful," said Dunstan.

Rapid national and then global expansion, primarily on the back of construction for road-based materials, enabled Aran to develop awareness of its brand on the international market, but it wasn't until the late 1980s the company entered the mining space. "As gold mining in particular began to recover, a lot of underground miners were looking for better recovery. Two things that were holding them back were structures to prevent the mines from collapsing and tailings including substances such as cyanide. We first worked with AMC to use our road equipment in mining on a gold project in Western Australia. Mixing the tailings with cement to fill up underground voids, we found ourselves in a new niche market," said Dunstan.

Labor laws and inflated costs forced Aran to close the last of its Australian manufacturing facilities in 2010. The company now manufactures its products entirely in Asia. "We do not feel it impedes on our brand or our ability to market. We continue to market ourselves as an Australian brand, albeit one that, like many others, outsources production to cost-advantage regions," said Dunstan.

Not every manufacturer, however, is deserting Australia in favor of lower cost environments. While it may be cheaper to massmanufacture in Asia, Australia remains strong in the manufacturing of complex bespoke products.

"Our products have a high assembly component and a high level of complexity involving combining fabricated steel. We can offer engineering companies flexibility by allowing them to change their minds throughout the process. We can accommodate minor flaws right up until the shipping date," said Grant Steward, whose company Consep is the number one supplier of slurry samplers in mineral processing for base metals and specializes in manufacturing and distributing a range of concentration and separation equipment for the mining and mineral processing industries.

Steward attributes Consep's ability to remain competitive in Australia's high-cost manufacturing environment to the high value and level of customization of his products. "You cannot control your costs if every time there is a change then a third-party is involved," he said.

Conclusion

Australia has been blessed with incredible resources that have allowed its economy to flourish. The mining industry that has developed has had to fight for its success through exploring and developing mines in some of the harshest terrains that the world has to offer. Most players that we spoke to while researching for this report have survived numerous commodity super cycles and, as such, see the current high caused by the Chinese demand boom as a fleeting opportunity.

Whether this time the demand will truly prove to be 'stronger for longer' remains to be seen, but what seems clear is that Australia has an industry equipped, through its adherence to best practice and innovation, to not only extract maximum value from the enormous resources that no doubt remains to be uncovered within its borders, but also to participate in the development of mines across the globe.

Despite these strengths, the challenges that have been outlined are not insignificant and industry leaders and policy makers must work closer together through improved communication to maintain Australia's reputation as a mining investment hub. The government demonstrated a naivety that is unlikely to be forgotten by international investors quickly and regaining the reputation for stability will now necessarily take time.

Despite their complaints, most Australian mining executives will quietly admit this is one of the most exciting times the industry has ever seen.

Most issues are focused on how to extract maximum value from this moment, always a preferred consideration to concerns of mere survival.

The opportunities available to Australian miners and service providers, both at home and abroad, seem so great and so diverse it seems highly probable that a great many more success stories will register on the international market from this region in the coming years.