Owners should beware handing over control of their operations as the Australian resources industry heads towards more ‘whole of mine’ contracts, according to long-time mining manager Mark Adams.
Mr Adams says also that principals can learn a lot from local contracting businesses when it comes to maximising uptime and use of technology to increase margins.
In collaboration with Joe Luxford, an experienced mining contract consultant and arbitrator, Mr Adams will be discussing Australian contract mining as a keynote speaker at the AusIMM Underground Operators’ Conference on the Gold Coast in October.
The pair will also be presenting a workshop on ‘making success of underground mine contracts’.
“We will be talking about some of the pros and cons of various styles of contract in the workshop prior to the conference and where we see the relationship between contract miners and owners going in the future,” Mr Adams said.
“So we’re going to talk about contract form, how risk transfers between client and contractor over the three main types of contract, and about how – as an operator – you manage a contract in those three styles.”
Mr Adams’ resume includes being the first general manager at Cannington mine, chief operating officer with underground mining contractor Barminco and general manager of MMG’s Queensland operations.
He is now senior mining manager/deputy director operations with Newcrest Mining at its Gosowong gold mine in Indonesia.
Mr Adams believes Australia boasts the best contract mining companies in the world.
“Their DNA is around drill and blast development and they are very, very good at it, but increasingly they are offering more sophisticated whole mine contracts,” he said.
“They will do production and services and they will basically run the mine for an owner. That’s where I think it doesn’t always work particularly well because what they become is quasi-owners.
“For an owner, they have to be very convinced that the profit margin is worth that and they are actually getting something better than they would do themselves.”
Unless owners fully understood the style of their contract and how to manage it, they may relinquish more control than they would like, he said.
Mr Adams also stressed that no contract, whatever style, was risk free for the owner.
“It is a common fallacy. A lot of principals or owners believe that you can de-risk everything and you can’t,” he said.
“You will pay for it in one way or another. You either take the risk on and you manage it or you hand the risk over to the contractor but you will pay for that transfer.”
Mr Adams describes Australian mining contractors as increasingly sophisticated operators, responding to a very competitive market with innovation.
“When I look at some of the stuff that Barminco, Byrnecut and Pybar are doing at the moment, it really is state-of-the-art,” he said.
This included remote-control loading operations, remote-control mucking during crib, and sophisticated computers to maximise or make visible equipment running times.
“They’ve been at the forefront of automation and I think what that has allowed them to do is get more productive hours out of their equipment and at the same time it has become safer because you take people out of the underground environment.”
Mr Adams said principals could and should be learning a trick or two from the contractor businesses.
“When I was at Barminco, they were absolutely fixated on operating hours – how many hours are we getting out of this piece of equipment every shift, every day and every month,” he said.
“Their measurement system was all around uptime because that’s what made them their money – their shift change systems and roster structures were all designed to maximise productive time.
“When I went to Century we did exactly the same thing and, I tell you what, it transformed the place, absolutely transformed it. It’s not hard, it’s just focus.”
More details on the 13th AusIMM Underground Operators’ Conference at http://www.undergroundoperators.ausimm.com.au/