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Some services firms report business revival as several commodity prices rise

6th July 2016

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – Certain mining services providers have reported increased interest from customers on both the investor and mining side, saying the slight recovery for many major commodities so far this year had translated into improved business.

“Yes, there’s definite improvement in our business, especially from the investor side, requiring due diligence studies on potential investment targets,” global mining services firm Behre Dolbear director David Linsley told Mining Weekly Online in an interview.

He stated that Behre was feeling that the mining industry was currently at the commodity supercycle bottom.

“Investors are putting their toes in the water, yet there is a long way to go yet. Contracts are not flooding in, but definitely positive,” he advised.

Companies were increasingly seeking Behre’s services owing to the need to stand out from a very crowded market of resource companies looking to raise cash for their activities. The offerings needed to be special and stand out from the rest, Linsley advised, adding that by using consultancies such as Behre, companies had better chances to woe investors and convey the message that their projects were adequately derisked.

Linsley noted that in the past, investors had more risk appetite, which had now all but disappeared, making scarce capital even harder to come by. Explorers and developers had to derisk projects as much as possible before approaching investors with potential offerings, for the best chances of success, while protecting shareholder value.

He had noted increased interest among mining companies for mergers and acquisitions. According to him, Behre had noticed that investors, especially private equity funds, were very busy behind the scenes, perhaps pointing to renewed optimism and a willingness to invest in mining development.

Based on discussions with clients, Linsley said that zinc showed promising signs for recovery as a supply gap was emerging; however, this had not yet translated into more deals. Coal had seen a notable bump in transaction activity, Linsley advised, yet he could not quite put his finger on what was the driving force behind this reinvigorated investor interest, or whether it might only be a coincidence.

Linsley expected that should Brexit go through, it could be a positive for the mining industry in the long term. His background as a fund manager prompted him to believe that market volatility was a good thing, owing to it translating into new opportunities. According to him, while uncertainty usually prompted companies to hold back in the short term, it provided them with long-term growth opportunities.

Unlike the more laissez-faire attitude in the past, Linsley stressed that the bottom line was that “investors have a lot of choice and the onus is on the companies to make a compelling case” for investors.

INNOVATION ADVANCEMENT
Mining services and products provider Dow Oil, Gas & Mining global director for mining Karen Dobson said her company had seen a surge in demand from miners for a different reason.

According to her, Dow had in fact so far this year seen increased demand for many of its speciality chemicals used in comminution, floatation, mineral mining, hydrometallurgy and water treatment applications, as miners continually endeavoured to cut costs at their operations and improve efficiency. Owing to lower grades at many mines, miners were actually processing more ore, boosting demand for process chemicals, she said.

The company had found a much greater degree of interest from mining leaders rethinking the ways in which they mined for minerals, especially in the recovery of aqueous tailings, Dobson advised.

“We have seen a genuine commitment from the industry to change the way they operate coming out of the commodity supercycle and owing to the current pressures they are facing. It’s no longer a matter of optimisation or incremental improvement, it’s really a matter of the long-term viability of players in the industry,” she told Mining Weekly Online in an interview.

Dobson said Dow was using the opportunity to seek partnerships with companies, including those from other industries, to leapfrog their innovation programme by looking to adopt proven technologies.

“We are getting excited at Dow, owing to our broad range of technologies focusing on a broad range of industries providing us the opportunity to partner with the mining industry to look for opportunities to integrate a wide range of chemistries and technologies. We see a lot of opportunities for efficiency and product improvements, both in very traditional mining processes, as well as the opportunity to consider new ways of doing extraction,” she stated.

NOT YET
Meanwhile, other service providers critical to the mining industry had not seen their fortunes improving despite the uptick in commodity pricing.

According to major Australian drilling services provider Boart Longyear, the first quarter was another challenging period for the resources sector and itself. “Though we have seen recent improvements in commodity prices, gold in particular, exploration levels remain low,” president and CEO Jeff Olsen stated at the time in its first-quarter results release.

Technology and product innovation continued to be a priority for the company, despite limited capital expenditures as it implemented productivity and cost cutting initiatives.

Moncton, New Brunswick-based Major Drilling Group International commented in June that its fourth fiscal quarter ended April 30 was “very difficult”, noting that the calendar year got off to a slow start.

“Most of our customers have reduced their exploration budgets for calendar 2016 based on low commodity prices that were prevailing at the end of calendar 2015. Although some commodity prices have improved over the last four months, most mining companies remain cautious in their spending,” president and CEO Denis Larocque said.

Edited by Creamer Media Reporter

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