Tightening market conditions and a transitioning mining sector means Australia’s burgeoning equipment, services and supplier sector is having to up the ante when it comes to securing mining contracts.
General manager of mining supplier company Quarry Mining, Phill Breese said adding to the troubles of a contracting market is the influx of imported products and high Australian operating costs.
Speaking at a recent Austmine Event, Centennial Coal’s group contracts manager Stewart Jolly explained there are a few tricks of the trade when it comes to getting your product onsite and keeping them there.
In 2013 Centennial Coal had a capital expenditure budget of $160 million, spending on average about $300 million a year on operations.
On the miner’s books there are currently about 2000 suppliers, servicing its operations in the Hunter Valley and western regions of New South Wales.
“Centennial has been working with our top 200 suppliers on cost reduction initiatives,” Jolly explained.
How do mining companies engage suppliers?
Mining companies engage suppliers through a number of different means Jolly said.
This includes utilising existing vendors, tender processes, reaching out to industry networks and formulating agreements.
Jolly said tenders are often used for capital equipment but stressed not to underestimate the power of industry networks like ICN, Hunternet and Austmine when it comes to getting your foot in the front gate.
”We do run tenders for major capital investment, mining equipment, and infrastructure,” Jolly said.
In 2013 Centennial ran approximately 12 tenders.
“In all cases we rely heavily on ICN, Hunternet and directories,” he said.
“They provide an interface with access to who’s who.”
Jolly also recommended visiting and exhibiting and conferences and industry events.
“We are regularly attenders of these types of [seminar events] as well as AIMEX and conferences,” Jolly said.
“Our engineers are the ones with the requirements, the more you get in front of them the more chance you’ll have of success.”
Getting new innovation on site can be an uphill battle.
He said miners can tend to be risk averse and getting involved with industry networks can help overcome some of those early barriers to entry.
“Miners tend to be a very staid bunch, they tend to stay with what they know, what they trust, trying to get them to change something as simple of roof bolts was a nine month project, I can’t stress strongly enough [the importance of being involved in] industry expos, trade publications, [and industry associations], get involved with ACARP is also a very good way to get in,” Jolly said.
“It’s always good to see what’s out there and we do use ICN and Hunternet regularly.”
Jolly said relationships are the key to becoming a preferred supplier.
“One thing I don’t want to discourage is relationships with engineers on sites, you may be providing a niche or bespoke service for them, don’t give up on that, please keep doing that because at the end of the day we’re only buying what the engineers want,” he said.
With over 3000 METS companies in Australia standing out can be difficult but Jolly said companies need to identify their competitive advantage and innovate.
“Innovation and standing out from the competition, you need to do that,” he said, adding: “Our preference is to source locally, regionally, nationally and then internationally.”
He also warned off cold calling, saying purchasing officers and engineers deal with hundreds if not thousands of existing suppliers in the first instance, and fielding calls only makes the job harder.
“Cold calls are really hard for us, we have some 2000 suppliers and even if only 10 per cent of them call us up the phone would be ringing off the hook,” Jolly said.
Instead he suggested forming relationships with site engineers so you aren’t going in cold.
“Talk directly with engineers.”
Ken Raymond from supplier network ICN agreed saying forming relationships is key to becoming a supplier to the mines.
Raymond added that if companies want to supply to the mines their offering has to stand out.
How do suppliers deal with mining companies?
Once a METS company has captured the attention of an engineer, mine manager or procurement officer the company needs to be familiar with how miners engage preferred suppliers.
“What we do with preferred suppliers is submit a deed of standing offer,” Jolly said.
“In some cases we’ll only have one of those for a particular service, I won’t call it exclusive but that supplier is more or less our sole preferred supplier.”
But in other situations logistics or specific site requirements means miners need to have multiple suppliers on the books for a particular product or service.
“One example is we can’t rely on one train supplier so we have something like 65 deeds with train suppliers,” Jolly said.
“When we’re after specific deliverables or specific activities we use fixed contracts or equipment and fixed service type agreements.”
Jolly said mining companies are increasingly moving away from traditional purchase orders because of the inefficiencies that are inherent with POs.
“We have been moving away from purchase orders, that piecemeal approach over the last couple of years, at Centennial there are only eight of us in procurement, we are quite thin [on the ground],” he said.
“Our preference is to move to group arrangements.”
How does a supplier get site ready?
Before securing a supplier deal with a mine Jolly said there are some critical requirements which need to be considered, including ensuring all insurance is up-to-date, medical inductions are completed, contract agreements are current and equipment meets statutory compliances.
“Be mine site ready, that’s our perennial,” he said.
If sub-contractors are being used to complete the project, mining companies need to know.
“Coming and doing business with Centennial, please let us know if you’re using subcontractors because the same obligations apply to those guys as you as a contractor,” Jolly said.
He added that scheduling for delivery of an item or a whole project plus turnaround times are very specific when dealing with mining companies.
“For us, our profit comes from the marginal tonnes, what I mean by that is the base tonnes we produce covers our costs, for every deadline that’s missed or every late delivery costs us tonnes,” Jolly said.
Centennial employs 1600 workers across seven operations, adding up to an annual wage bill in excess of $190 million.