Mining Industry Upbeat at SME Show

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The Metals & Minerals Industry is happy right now: Strong global demand for coal and a variety of minerals like copper, gold and rare earth elements has pushed up commodity prices, filled backlogs and increased the stock price of publicly traded mining companies, according to interviews with attendees at the annual meeting of the Society for Mining, Metallurgy and Exploration (SME), held in Denver Feb. 28 to March 3.

"We are busy, busy, busy right now--business is as good as it gets," according to Ulrich Pahl, an estimating manager at ThyssenKrupp Robins (Greenwood Village, Colorado), a unit of industrial conglomerate ThyssenKrupp AG (ETR:TKA) (Essen, German).

Representatives from ABB Limited (NYSE:ABB) (Zurich, Switzerland) sounded the same tone: There is a strong demand for the company's control systems, which can reduce energy use at mines by up to 50% while increasing ventilation and safety, Wayne Wilson, an account manager in ABB's mining, minerals, and cement group, said in an interview at his company's booth.

The annual SME event, held in conjunction with the Colorado Mining Association's 113th National Western Mining Conference, drew more than 5,100 attendees, up about 10% from last year's event, and more than 600 exhibitors, SME event organizers told Industrial Info Resources.

Several interviewees pointed to the bigger attendance at this year's meeting, as well as rising global prices for a variety of minerals, as evidence of the robust health and positive near-term future for the global mining industry. "The mood at this year's show is more upbeat than in prior years," Mike Blois, vice president for mining and minerals at CH2M HILL (Greenwood Village, Colorado), said in an interview. Another attendee said, "Copper is over $4 per pound--what's not to like?" Walter Koellner, director of marketing and development for the mining equipment group at Siemens AG (NYSE:SI) (Munich, Germany), told Industrial Info, "The worst is behind us, and we are seeing more interest now that the downturn is over." For more information on this issue, see the March 1, 2011, article - Global Competition for Metals and Minerals Expected to Drive Prices Even Higher.

Echoing a theme from several speakers at the SME show, Blois told Industrial Info, "This industry has increased its emphasis on sustainability. Some people might think that 'mining' and 'sustainability' are an oxymoron, but that's not true. If we can't demonstrate the social and environmental benefits of a mining project, we won't get the permit."

CH2M's mining business has four segments:

• Exploration, Feasibility and Permitting
• Development
• Production
• Closure and Reclamation

The first and fourth segment typically are handled together. Planning for a mine's closure is part of its feasibility and permitting process, Blois noted, adding that the worldwide growth in mining has meant more inquiries from prospective customers involving the first and fourth stages of its business.

The CH2M HILL executive noted that the company developed its engineering and development segment internally. "We've been involved in the mining business since 1946, but about four years ago we added engineering and development to the mining life cycle.

"A lot of mining projects tend to be quite remote, and it is not unusual to have 50% or more of a project's costs go to infrastructure in order to gain access to the resources," Blois said. "Our expertise in power generation, ports and infrastructure gives us the ability to deliver the whole picture to clients. The cost of power today is a major factor in mining project economics--clients are looking into whether they should buy electricity from a local utility or build an onsite generator."

Energy issues are very important for mines now, because the cost of diesel is very high, he said. Mines are trying to reduce consumption of energy or increase the output from a given unit of energy--whether it is diesel or electricity. In his keynote speech to the conference, Russell Brand, chief financial officer for Newmont Mining Corporation (NYSE:NEM) (Denver, Colorado), said energy accounted for about 25% of the cost of a mining project.

Blois declined to provide revenue and earnings information for CH2M's mining segment, but he did say it was "relatively small but growing." The business has "definitely picked up," he added.

He did say that CH2M is the project manager for a multibillion-dollar mining project in Latin America. The company also is working on a feasibility study of a hydrometallurgy project that Blois said is the first of its kind. He would not describe the project, other than to say it is located in the U.S. and that the project is investigating dissolving the mined minerals in a water solution, instead of using a smelter, because of the reduced environmental impact of the water-based process.

Several interviewees noted that the political chaos in Libya, which has shut down the nation's 2 million barrels per day of oil exports and driven up worldwide oil prices, has been a boon for the mining industry. "Canada has huge reserves of oil sands, and we expect interest in those projects will continue to pick up as oil prices stay high," Siemens' Koellner said in an interview. He said that oil produced from those projects was competitive when oil was priced at $20-$30 per barrel. With oil prices averaging $80 per barrel for 2010, and topping $100 per barrel now, Canadian oil sands companies are probably quite happy with the profits from their projects.

Siemens provides draglines, trucks, and shovels used in large open-pit mines, Koellner said. He estimated that there were about 400 large open-pit mines in the world, noting that Siemens' largest markets are in South America, Australia, South Africa, Indonesia, China and Canada. The U.S. is a relatively mature market for large open-pit mining, he said. "We are seeing a lot of interest and potential demand in the BRIC countries--Brazil, Russia, India and China--as well as South Africa and Canada."

Click on image at right to enlarge photo, courtesy of Siemens.

Koellner estimated that 45% of Siemens large open-pit mining business comes from coal and oil sands. A similar percentage comes from ores, including copper, iron ore and gold. The remaining 10% comes from phosphate mines. He projected that the segment will grow by single digits in 2011, and he hopes that 2012 is even better. He declined to provide specific revenue and income information for his segment.

But Koellner and CH2M's Blois agreed with a number of speakers and attendees that the biggest challenge facing the mining industry today was finding enough talented people who wanted to work in the industry.

"It's difficult to get people to go to our Canadian oil sands projects," Koellner said. "It's really cold up there and very remote." CH2M's Blois made this comment: "A lot of talent left our industry after the downturns of 2007-2009, 2001-2002, the late 1990s and the early 1990s. The industry's biggest challenge is the development and retention of young talent, particularly engineering talent. Clients and prospective clients are asking whether companies have sufficient talent--in the field as well as at headquarters--to make a mining project work. There is a war for talent under way, and it's being waged globally."

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.