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What shapes the future in castings

These five trends are important for foundries in 2019

Topic of the Month

Aluminium is displacing classic steel, the shortage of skilled workers is to be compensated for by progressive automation, and environmental protection is increasingly becoming a priority – this is only a small part of the topics that will dominate the foundry industry this year and in the years to come. We present you with five trends that you should keep an eye on this year.

1: Aluminium instead of steel

Ever more products are produced with the material aluminium. There are numerous reasons for this: The automotive industry is just as pleased as the avionics sector when it comes to lighter components. However, the stability of aluminium is also a major factor. In mechanical engineering, this material is also used for mechanically demanding tasks.

In 2017, approximately six per cent more aluminium was produced than in the previous year. The higher price of the material becomes an ever smaller argument against this metal: The price of the finished product decreases due to advanced manufacturing methods and state-of-the-art machinery. Raw material prices have been comparatively high for years, but they are not affected by as many fluctuations as metal.

2: Automation due to lack of skilled workers

Fewer and fewer people are working in the foundry industry. Harsh working conditions and falling training figures suggest further declines. In order to remain competitive, companies rely on semi-automated or completely autonomous systems to maintain or even increase their production.

By no means does this lead to further job cuts. Quite the opposite: Employees are able to invest more time in designing or testing instead of pressing buttons on machines, transporting raw materials or filling molten metal at high risk. At the same time, this increases the interest of younger generations to get involved in the design or the development of the foundry industry.

3: Digitisation and Industry 4.0

Sensors, linked machines and smart controls have no fear for the foundry either: Numerous production sites are already centrally connected. Not only foundries, but also customers and potential clients benefit from the data. Processes can be optimised with big data and possible bottlenecks and errors in the system can be detected at an early stage. Manual adjustments in the operating procedure are less necessary.

New technologies like virtual reality help companies to present themselves to the outside world. Thus, a virtual tour of the production halls becomes possible for everyone. Safety concerns are no longer necessary – furthermore, a presentation of the company is possible everywhere. Thanks to augmented reality, technicians can easily adjust or repair machines with a superimposed virtual image. Also virtual learning becomes easier with the new technologies. Meanwhile, numerous CAD programmes can also be used by way of 3D glasses to make prototyping more efficient.

Read more in our Topic of the Month 07/2018!

4: Environmental protection and eco metals

Foundries are considered to be amongst the most energy-hungry industries in Germany. The plants, which are often fed by coal, use around 16 per cent of the total electricity produced in Germany and 12 per cent throughout Europe. A study by the Federal Environment Agency proves that the majority of foundries could get their energy requirements from renewable energies. For this, however, energy storage devices are necessary that can meet the enormous requirements for continuous day-night operation.

Through the use of more efficient casting moulds, fewer raw materials are required, which also do not need to be transported. The energy requirement can be further reduced by using more efficient furnaces in order to make the entire production process more environmentally friendly.

5: Additive manufacturing

Particularly for smaller cast products, things could change soon: More and more 3D printers are managing to deal with metals. Selective laser sintering (SLS) applies metal layer by layer in order to produce small components cost-effectively, quickly and more accurately than with conventional processes. Depending on the individual application, additive manufacturing offers various sizes ranging from half a cubic metre to entire warehouses that can be converted.

The innovative technology is already being used in projects that require only a small quantity of the final product. Structures, which would not be possible in normal casting, pose no problem for additive manufacturing either. For large quantities and parts with larger dimensions, not much will change for the time being.

Editor: Mika Baumeister/Jonathan Kemper

RCR finds buyer for energy division

The Environmental Group Limited (EGL) has secured a deal to purchase RCR Tomlinson subsidiary RCR Energy Service.

Melbourne-based EGL is dealing with the beleaguered engineering group’s administrator McGrathNicol to make the acquisition, which should be completed within the next week.

RCR Energy Service’s primary focus is on commercial gas and steam boilers, as well as thermal oil heaters and hot water heaters.

Perth-based RCR Tomlinson made headlines last November with the announcement of its administration due to insurmountable money problems, including around $630 million in debts.

The company saw a massive 60 per cent share wipe out in August last year and by the time of its administration its value hovered around 85–87 cents, down from $2.12 at the end of July.

In particular, the company suffered severe financial issues related to several failed solar farm investments — two Queensland solar projects saw a combined write down of $57 million, for example.

Despite this, EGL has cited RCR Energy Service’s “strong track record of profitability” as an attractive quality of the acquisition.

The company generated $21.5 million in sales and $1.5 million in earnings before interest and tax (EBIT) in the 2018 financial year.

RCR Energy Service’s senior management team will transfer to EGL once the acquisition is complete and the company will operate under the name Tomlinson Energy Service.

“EGL will continue to pursue new growth and acquisition opportunities that fit our environmental platform,” EGL chairman Lynn Richardson said.

“This will provide existing and new shareholders with the benefits of investment in a company committed to reducing pollution and the effective use of world resources.”

EGL did not reveal the cost of the acquisition at the request of McGrathNicol, but this information should be made available by the end of January. The acquisition will be funded by EGL’s existing debt facilities.

Massive steel plant plans for SA

INSIDE CONSTRUCTIONJanuary 8, 2019, 9:28 am 150

CFG Alliance is planning to construct a steel plant in Whyalla, South Australia, which will be the largest in the western world, according to company chairman Sanjeev Gupta.

Gupta announced the new project, Next-Gen Steel, alongside Prime Minister Scott Morrison and leader of the opposition Bill Shorten at a press conference in Whyalla on December last year.

“This is the turnaround state, and this is the comeback city in Australia when we’re talking about Whyalla,” Morrison said.

The project will create a new steel plant for Whyalla capable of producing 10 million tonnes a year.

Gupta also announced that the existing Whyalla steelworks would also be transformed through a $600 million investment into a 1.8 million tonnes a year steel producer.

GFG Alliance purchased the steelworks in 2017, saving hundreds of jobs in the process.

The company signed two contracts with Danieli and CISDI Engineering for the development of rail and structural heavy section mill and a pulverised coal injection (PCI) plant respectively over the next three years at Whyalla.

“The transformation will vastly improve the operations, financial and environmental performance of the operations, paving the way for Whyalla to become an enticing, global hub for innovative industry,” Gupta said.

The creation of the new next-gen steel operation with a capacity of 10 million tonnes a year (and the infrastructure to eventually double that capacity) and the upgrades to the current Whyalla operation is expected to increase the town’s population fourfold to around 80,000.

“This is a major boost for our long-term outlook and gives Whyalla City Council and other industries and businesses more confidence to be able to plan for the future,” said Clare McLaughlin, Whyalla mayor.

“The plant will also have state-of-the-art environmental controls, which is yet another positive for the community on top of the financial investment and job creation.”

Australia sees continued strength in construction applications

Australian is seeing continued strength in construction applications, with 2,210 new projects entered in the country’s construction work pipeline in November 2018, with a combined worth of $25 billion – nearly double the three-year median value.

Infrastructure projects continue to dominate new project work in both quantity and value, although apartments and units are a close second for quantities of projects, according to CoreLogic’s latest Cordell Construction Report.

“The number of new construction projects entering Australia’s pipeline was just below the yearly high of 2,292, which was recorded in October 2018,” said James Shang, CoreLogic commercial research analyst.

“Although the total estimated value of new projects is approximately 16 per cent lower than the yearly high, it’s a strong indicator of continued strength in construction applications.”

A stand-out infrastructure project is the Aerotropolis project in Western Sydney, which is described as a ‘game-changer’, the project has an estimated cost of $8 billion, accounts for 50 per cent of the total new project applications in NSW for November and is expected to create 200,000 new jobs.

Whilst the number of new project applications is strong, the picture for projects further down the pipeline and actually moving into construction is less positive. These projects have fallen for a third consecutive month – the impact from a tightening credit environment clearly extending beyond the residential market.

“The estimated value of projects shifting into the construction stage during November was just over $2 billion,” Shang said.

“Whilst this figure is 53 per cent higher than the recent low (in October), it’s actually low when you factor in the strong level of activity in new development applications and when compared to historic levels too.”

Civil engineering projects accounted for 52 per cent of those projects moving into construction phase, whilst 54 per cent of value for projects moving into construction was thanks to the commercial sector. Mining held the highest median project value at $4.15 million.

For detailed industry and state-wide analysis, including project specifics, head over to the CoreLogic website.

Your customers are killing your business, here’s how to sack them

In the early days of starting up my company Smart Books Online (SBO), I had no idea what I was doing.

Ok, I knew how to do the technical work, but I had no idea of what my ‘ideal customer’ looked like.

Accordingly, when it came to engaging new clients — I wasn’t fussy.

I needn’t care who they were, as long as they had money to pay me. I was just focused on sales to make payroll.

The challenge with business, particularly in the early phases of starting a new venture, is that it’s very difficult to say ‘no’. You take every meeting, every phone call, every bit of work that comes your way.

Even if you know in your heart and on paper that you might just break even or even lose money on a customer or project, you’ll say yes because you never know, it may lead to something bigger.

My newly formed habit of being a ‘yes man’ proved to be completely flawed as my business grew rapidly, from a revenue perspective anyway. Although sales were growing, we were losing money. Profit margins were getting squeezed due to discounting to win work.

Furthermore, due to misaligned client expectations, service declined. Customers were getting frustrated and were churning. As a result, I was losing more customers than I won. My financial and mental health was suffering as a result.

I was slaving away — 14 hours a day, 7 days a week, feeling overwhelmed and too busy to realize what I was doing wrong.

I mean, it could have been okay if I was profitable, but the truth was that I wasn’t. From a revenue perspective, I was crushing it. My business was consistently doing 20% month-on-month revenue growth (which is impressive growth for any business, irrespective of industry or size).

The problem, however, was while top-line revenue was growing, I was actually losing money. I was servicing unprofitable customers. I hadn’t designed a process on how to service our customers consistently, and profitably.

I was stuck in a profit losing machine of my own design, relentlessly spinning cogs.

I was trapped.

Higher thinking

With the business spiralling out of control, something had to change.

My business partner and I spent a Sunday afternoon taking time away from the business and objectively analyzing it. We wore our ‘business owner’ hats and assessed our financial performance.

What we unearthed validated our gut feel assumption: Our business was a disaster.

The irony was that while we were supposed to be helping our customers with their firm’s financial performance, I couldn’t even do it myself.

“How ironic,” I thought to myself. I felt like an imposter.

Quickly snapping myself out of an emotional state, my rational brain got to work: Starting with a customer profitability analysis.

In our analysis, we discovered that the profit generated by the top 20% of our customers were absorbing the losses of the bottom 80%.

In other words, we were suffering because we were not selective about our ideal customers.

Being a yes person was killing our business.

Chances are, it’s also killing yours.

A practical guide to analysing the profitability of your customers

Here’s a step by step guide of how we undertook our customer analysis. I’ve tried my best to document all the steps, but if you get confused or lost — feel free to reach out.

Step one: Export a sales report

Export a sales report from your accounting system to a spreadsheet. Filter this data by customer name and dollar value of sales for the last 12-month period.

Step two: Ask questions

For each customer ask yourself the following questions:

Are they easy to work with?
Do they pay their bills on time?
Are they a brand ambassador/influencer to your product or service?
Do I like them as people?

For questions one, two and three, assign a score out zero to three (zero being terrible, three being amazing).

For the fourth and final question, make that it binary. Either a zero or one.

Tally your results, which will give you a qualitative score out of ten for each customer.

Example:

The process of allocating a score against each question helps you to assess your customers objectively. This quantification serves to eliminate any biases you have to your customers.

Step three: Calculate the direct cost

Calculate the average direct cost to service each customer and enter the value in a new column. You can allocate this off your timesheet data or project management system.

Step four: Calculate the gross profit

Calculate the gross profit earned on each customer by deducting the average costs to service each customer from the sales dollars.

Step five: Sort your customers by gross profit

Filter the spreadsheet by gross profit of each customer and rank them per step two. The result is a list of your most profitable, desirable customers. They’re the ones you want to clone. And, at the bottom of the list, are the ones you want to cull.

The table above is a sample customer profitability analysis for a fictitious company called Voltage Media.

Here are the key observations:

The customers under note one are the customers you should fire. They rank low on the qualitative customer score, and they are loss-making. Fire them quickly.
The customer SaaSy under note two is less binary. This company brings in a lot of revenue and is ranked highly on the customer score. However, it is being serviced unprofitably. It’s fundamentally a great customer to work as it’s ranked eight out of ten, but ultimately, you cannot continue to service them profitably. In situations like this, dig deeper to understand why this client is unprofitable. Perhaps because you’re over-servicing them or not producing their work efficiently? Use this as a prompt to unearth the underlying issue.
The customers under note three are fence sitters. They rank in the middle from a customer perspective, and they generate a small profit to the business. You’re ok to hang on to these customers, but keep track of how they rank in the future.
These customers rank highly on the customer score and bring in the most profit to the business. Notice how the profit generated from these four clients carry the losses of the bottom half? These are the customers you want to replicate.

How to sack your customers

In the 24 hours that followed our customer analysis, I made several simple, but emotionally difficult decisions that literally changed my business. I took steps to fire the unprofitable 80% of my customers.

My outreach email was something like this:

Me: Hey customer, I’m reaching you to inform you of a few internal changes at our company. We’ve spent the last 12 months servicing our customers of all shapes and sizes, from startups to larger businesses. To date, we’ve been flexible to cater for all these different businesses as we want to help as many businesses as possible. As you can appreciate, being tailored for everyone does come at a cost. After reviewing our service offering and the associated fees, we are changing our prices. Your account will fall into the new package at $XX per month. I can appreciate this comes at a higher price, and this investment will ensure we’re able to continue to maintain our level of service.

Please reach out if you have any thoughts on the above. If I don’t hear from you in the next ten days we’ll assume you’re comfortable with the new arrangement.

Customer: I must say it is not an appealing proposition at all. As we have always been dealing with this issue fail to see what is different now and more surprising how it can double the monthly cost of the service you provide to us.

Me: I agree nothing has changed since engaging us, however our recent review showed we cannot service you profitably at the current rates. I hope you appreciate this doesn’t make business sense for us. I can refer you to a cheaper alternative if you wish. Let me know and I can make the introduction.

As expected, a handful of customers left us with and were happy to accept our referral recommendation to another service provider.

What we didn’t expect however was that the majority of customers accepted the price increases, and continue to be customers of ours today.

Giving your customers clear options to either pay a higher rate or, be referred to a cheaper alternative makes the decision binary, leaving no room for time wasting negotiations. Make the decision easy for your customers. They are busy people as well.

The net result was that we actually increased revenue because the price increase offset the churned, unprofitable clients. Making the decision cull these bad customers built a platform to maintain efficient and sustainable longer-term growth.

Although we had fewer customers, we were more profitable at a gross profit level, had more time and were most importantly, less stressed.

As business owners it’s easy for us to get stuck in the trenches, feeling overwhelmed and stressed with the state of your business. If you want to grow but not sure what to do start by reviewing your current customers.

Indeed, it sounds counterintuitive to sack customers in order to grow revenue and profitability.

But, to move forward, you need to start by getting your house in order.

This is an excerpt from Jason Andrew’s book, Stark Naked Numbers: Uncover Your Financials, Unlock Your Cash, and Unleash Your Profits, which launches on the 21st of January 2019.

RCR Tomlinson administrators reveal debts of up to $630m from collapsed engineering firm

By Kathryn Diss

Updated Tue at 12:20am

A line of about 30 people holding takeaway coffees and folders.

PHOTO: RCR Tomlinson creditors are owed hundreds of millions of dollars. (ABC News: Glyn Jones)

The administrators of failed engineering firm RCR Tomlinson have revealed the company has debts totalling hundreds of millions of dollars, including up to $250 million owed to about 4,000 subcontractors and suppliers.

Key points:

The engineering firm ran into trouble after an aggressive move into solar
A total of $630 million is owed to creditors, subcontractors and suppliers
The collapse came after a $100m injection of funds just three months ago

Administrators McGrathNicol revealed to creditors across the country that RCR’s total unpaid debts amounted to up to $630 million, but it could not say how much was recoverable until it started to sell off parts of the business.

The company, which employed 2,800 people directly and engaged with thousands of subcontracting firms across dozens of projects around the country, went into administration last month after its bank refused to lend it more money to pay its debts.

At its peak in August last year, RCR Tomlinson was valued at almost $1 billion.

Since McGrathNicol was appointed, the company’s workforce has reduced by 270, with most of the redundancies coming from the infrastructure arm, which includes its solar contracts.

Employee entitlements excluding redundancy total $32 million. Under the Corporations Act, employees are paid first, followed by secured creditors, unsecured creditors and shareholders.

RCR creditors — who is owed what

Trade creditors (subcontractors and suppliers) — $100-250 million
Secured creditors — $235 million
Unsecured bond issuers — $113 million
2,800 employee entitlements totalling $32 million, excluding redundancy

Burned by solar

McGrathNicol partner Jason Preston told creditors initial investigations revealed the company’s collapse was largely caused by problems with its solar farm developments, which left the business exposed to a number of risks, particularly if there were project delays.

This was attributed to the way in which the contracts were structured.

RCR signed engineering procurement and construction contracts, or EPCs, for its solar projects, in which it provided a fixed price for its customers.

If the contract took longer to complete, and therefore cost more to deliver, RCR had to absorb the increase.

PHOTO: RCR Tomlinson’s work on two solar farms in Queensland were hit with a $57m writedown. (Supplied: RCR Tomlinson)

This meant the company consumed “significant amounts of cash very quickly,” McGrathNicol told creditors.

The administrators indicated they were likely to apply to push the next creditor’s meeting back by three months due to the complex nature of the business, adding the RCR group was made up for 41 companies spanning a number of sectors including, energy, mining, resources, water and renewables.

The company had been a successful engineering firm for 120 years — predominantly in the mining and resources industry — before making its aggressive move into the solar industry.

RCR ran at the solar power movement hard and has been involved in building farms across the country, but it was a $57 million write-down on the value of two of its Queensland projects that burned it.

A stunning collapse

It was the failure of an engineering firm that left many reeling — so what went wrong for RCR Tomlinson?

At the first meeting creditors, held across four states, McGrathNicol told suppliers, contractors and employees it was working to sell the business but could not quantify how much it would raise in the sale.

McGrathNicol last week managed to secure funding to support ongoing trading of the company and said it hoped to find a buyer or buyers by the end of the year, having received interest from more than 180 parties.

“Our priority is to prepare the business for sale to bring certainty to employees, customers and suppliers,” McGrathNicol partner Jason Preston said.

“The business has been challenged by unprofitable solar contracts within its renewable operations, however the balance of the business operates across industries which are seeing increasing demand for services.”

Among the solar projects left in limbo include the expansion of Synergy’s Greenough solar farm in Western Australia’s Midwest.

A wide shot of rows and rows of solar farm panels on the ground at a solar farm under a blue sky.

PHOTO: RCR Tomlinson was working on the expansion of the Greenough River Solar Farm in WA’s Midwest. (ABC News: Sarah Tallier)

The energy utility has terminated its contract with RCR and has started the process of finding a new contractor.

Site activities will remain suspended during the replacement process.

Subcontractors gravely concerned

The company owes between $100 million and $250 million to 4,000 trade creditors across the country, which includes subcontractors and suppliers.

A line of people snakes through the foyer of a building.

PHOTO: Dozens of creditors queued up to find out how much money they could expect to get back following the collapse. (ABC News: Glyn Jones)

Mike Hollier runs a metal fabrication business which was working for RCR’s power division.

“I’m owed $42,000, part of that is made up of $27,000 of gear that they have and the rest sitting in the yard, which is about $13,000,” he said.

“It was a big shock, they’re a big company, you don’t expect that sort of thing. No, I didn’t think they’d go under.

“I don’t really know what will happen to all the stuff I have supplied to them when they sell it off. It seems I’d lose that from what I can gather.”

Mike Hollier in mid-speech, wearing a yellow shirt and reading glasses on his forehead.

PHOTO: Mike Hollier runs a metal fabrication business and is owed about $42,000. (ABC News: Glyn Jones)

Marco Da Silva said he was hopeful the business would be sold, but was not confident of getting the $25,000 he was owed.

“Ideally, we’d like to get our money, so hopefully they can sell the businesses off in their individual capacity and we can continue to trade out of that,” Mr Da Silva said.

“It’s negative, but one has to remain unemotional and try and apply themselves and focus on the business and do the right things by the staff.”

Marco Da Silva wearing a blue and green shirt, speaks to a journalist.

PHOTO: Marco Da Silva is not confident of getting the $25,000 he is owed. (ABC News: Glyn Jones)

Australian Subcontractors Association board member Louise Stewart said she had grave concerns leaving the meeting.

“I’m very concerned. There was no talk of a project bank account being set up. RCR haven’t been paid by a number of their clients, the project owners, the principals that actually own the projects,” Mrs Stewart said.

“What we don’t want to happen is for those funds to be paid directly to RCR, who are now in administration, and those monies to be used to pay secured creditors.

“Subcontractors are the biggest class of creditor affected here.

“We want to see that money going to subcontractors who have done the work, they should be paid and it’s very important that happens.”

Collapse after a $100m injection of funds

The collapse of the business, which is one of the oldest engineering names in Australia, stunned many in the investing world.

Just three months ago, RCR raised $100 million from shareholders to buffer itself against the losses it had incurred on the solar projects, but it wasn’t enough to save the business.

The move led many in investor circles to question what the board had not been telling shareholders and raised questions about whether the nation’s corporate regulator, the Australian Securities and Investments Commission (ASIC), would get involved.

Areial shot of the Curtis Island LNG plant

PHOTO: The collapse of the business stunned many in the investing world. (www.rcrtom.com.au)

The company is also facing a class action which was launched on behalf of shareholders in the New South Wales Supreme Court.

Lawyers Quinn Emanuel Urquhart and Sullivan filed the action, saying investors paid too much for their shares because the market was not informed of the problems the company was having with their solar projects.

Fundamentally, many analysts said the company ran too hard at the solar game without knowing enough about it, and found itself working in an environment of rising equipment costs, increasing wages and a lack of workers skilled in the renewable energy space.

Penrith substation maintenance work being done by RCR Tomlinson emplyees

PHOTO: RCR Tomlinson has more than 3,400 employees working on projects around Australia. (Supplied: RCR Tomlinson)

It also underestimated the time it could take to gain grid approval from the nation’s electricity regulator, the Australian Energy Market Operator (AEMO), which has toughened its testing regime to ensure reliability of the network.

RCR’s collapse prompted AEMO to issue a warning to all new entrants to “discuss early with network businesses … prior to making commercial commitments” so as to “avoid delays during project development, registration and commissioning”.

McGrathNicol said it would like to ask for a three-month extension for the second meeting with creditors to give more time to investigate what went wrong with the business.

EMBED: RCR Tomlinson share price

Topics: business-economics-and-finance, industry,

STRONG DEMAND DRIVES RECORD PRODUCTION YEAR

The boom in public infrastructure projects, particularly in Melbourne, has contributed to a record production year for the concrete, cement and aggregates industries.

More than 30 million cubic metres of pre-mixed concrete were produced across Australia in the 2017 calendar year, according to a survey commissioned by Cement Concrete and Aggregates Australia.

The boom in public infrastructure projects, particularly on the east coast, and continuing strong demand for high rise residential buildings, have driven a record production year for the concrete, cement and aggregates industries.

The sector has experienced steady growth in the past few years. In the report commissioned from the industry research and forecasting company Macromonitor, the 2017 results eclipsed the 27 million cubic metres produced in 2015 and the 28.5 million cubic metres in 2016.

“In essence, all of that material is provided from Australian quarries,” said Ken Slattery, chief executive of the CCAA. “There’s no significant imports of quarrying materials here in Australia.”

More than 30,000 people are employed directly by the industry, with another 80,000 estimated to be employed in work related to the industry, according to the CCAA.

“About 12,000 to 13,000 people are directly employed in quarrying and you can extend that out at a similar sort of ratio of 4:1 to get the indirect figure,” Slattery said.

The industry contributes over $15 billion to the national economy every year.

“The boom in infrastructure projects, such as WestConnex and NorthConnex in Sydney and the West Gate Tunnel in Melbourne, is good news for the heavy construction materials industry and for the more than 110,000 Australians who are employed directly or indirectly in the sector,” said Slattery.

Steady growth, supply

Future growth is projected on the back of planned projects, again driven by government-funded infrastructure projects on the eastern seaboard.

A recent report by consulting firm Deloitte concluded that infrastructure projects worth at least $324 billion were in the pipeline, an increase of almost $50 billion over the past two years.

Slattery said the building of the new Western Sydney Airport at Badgery’s Creek alone was expected to further lift demand for concrete and related products by at least another one per cent over the next five years.

The Melbourne Metro Rail Project, which is currently under construction, would also result in demand for concrete increasing by another two per cent, he added.

Slattery expects that Australian quarries will be able to continuing meeting demand. “That’s the big issue around all of this. Sydney and Melbourne have some particular challenges around how long it can take quarries to get approval.

“We’re not anticipating any shortages, provided governments’ approval processes are responsive to keeping up with demand,” he said.

The Victorian Government released a supply and demand study in 2016 that considered the state’s challenges to 2050. The Victorian Earth Resources Regulator has also subsequently launched a streamlined regulatory process for the management of basic operational changes, sparing producers the time and paperwork of having to prepare work plan variations. As of October, the regulator had received 16 requests under the new, fast-tracked process.

New South Wales has also engaged in recent studies considering the availability of resources for the burgeoning Sydney market. Infrastructure NSW commissioned a study from BIS Oxford Economics which recommended construction materials strategies for developing new sources of supply and the simplification of approval processes for quarries.

The NSW Department of Planning and Environment has also collaborated with consultants RW Corkery and Ecoroc on a study examining the supply constraints across NSW and projections about the quantities and quality of aggregate that will be required up to 2036.

BHP’s South Flank to receive world’s largest rail-mounted stackers and reclaimer from thyssenkrupp

thyssenkrupp Industrial Solutions has been awarded one of the largest fabrication and construction projects the company has ever handled in Western Australia, with an order from BHP’s South Flank iron ore operation.

Under the €150 million ($171 million) contract, thyssenkrupp will design, supply, construct and commission large-scale stockyard machines for South Flank, in the central Pilbara region.

BHP is targeting first ore extraction at the operation in 2021 and expects to ramp up to 80 Mt/y of output. This will replace production from the existing Yandi mine, which is reaching the end of its economic life. The company carried out the first blast at the project in September.

thyssenkrupp will supply two stackers that deposit iron ore into stockyards for loading, and a reclaimer for loading the ore on to trains for transport to Port Hedland. The machines will have a capacity of 20,000 t/h, making them the largest rail-mounted stackers and reclaimer in the world, according to the company.

Torsten Gerlach, CEO Mining Technologies at thyssenkrupp Industrial Solutions, said: “South Flank will be one of the largest iron-ore operations worldwide. We look forward to contributing to this project by combining longstanding global expertise in the mining business with local experience.

“Our strong partnership with BHP extends globally, but the Pilbara region is a core area where we have provided material handling solutions for decades. With our field service teams, we are supporting our customer on a daily basis.”

The design of the machines incorporates the latest Australian design standard requirements and technology improvements centred on safe construction, operation and maintenance activities, according to the company.

Subbies call for overhaul of system to protect themselves from corporate failures

Australia’s subcontractors are demanding the government legislate on how building firms structure bank accounts amid claims that corporate failures in the construction sector are causing a “crisis” and leaving suppliers without payments.

The Australian Subcontractors Association (ASA) demands that the Federal government take swift action to protect suppliers who are being “forced into insolvency” by the collapse of larger construction firms.

This comes after the recent collapse of engineering giant RCR Tomlinson, which had delayed payments to suppliers for up to 12 months.

“When it comes to the collapse of companies that rely on subcontractors to undertake the work, the domino effect can be devastating. Unfortunately, the subbies are often left to fend for themselves,” said Loise Stewart, ASA spokesperson.

“When companies fail to pay subcontractors for work done, the subbies still have to pay employee entitlements and taxes.

“Thousands of subcontracting businesses will be adversely impacted by the recent collapse of engineering firm RCR Tomlinson – in just the latest example of the flow-on effects to SMEs from corporate failures.”

A 2015 Senate inquiry into insolvency found that the industry is burdened every year by an estimated $3 billion in unpaid debts, including subcontractor payments. In 2018 alone, there have been 1,642 construction businesses that have become insolvent. A high percentage of these is attributed to misconduct.

“Sadly, non-payment issues have long plagued the industry – as evidenced by the subcontractor to RCR Tomlinson that has lost $9 million due to the company not paying for work done,” Stewart said.

“We have been advised by subbies that RCR has been delaying payments as far back as 12 months in order to prop up its own cash flow. And it’s unlikely any of these subcontractors will see their money.”

The ASA is now calling on the Federal minister for small business Michael McCormack to take action to protect subcontractors “all the way down the supply chain in the event of an insolvency”.

“The Federal government Review of Security of Payment Laws by John Murray has already made recommendations for cascading statutory trusts to be rolled out across the industry, however, there has been no further action,” Stewart said.

“When Craig Laundy was minister for small business, he said if state governments did not act before the end of the year, the Commonwealth would take action. We are still waiting for that to happen.”

Stewart added that national legislation is needed, and either cascading statutory trusts or cascading project bank accounts must be mandated.

“The Queensland government is certainly taking the lead on this and has made project bank accounts a legal requirement,” Stewart continues.

“However, greater responsibility needs to be taken at all levels. Governments need to act to legally impost these solutions and ensure pay subcontractors, rather than spending their money.”

RCR Tomlinson announced on November 22 that it had entered voluntary administration with the intention of commencing an immediate sale process.

McGrathNicol is the appointed administrator. The first meeting of creditors will be held simultaneously in four locations (Sydney, Brisbane, Melbourne and Perth) on December 3, 2018.

At the time of its collapse, the ASX-listed group employed more than 3,400 people in Australia, as well as in New Zealand and other areas within Southeast Asia.

Hail Victoria: The new five-year state plan for mining

Australian Mining looks over the latest mineral resources strategy from the Victorian Government, which aims for a spend of $220 million over the next five years.

On August 28 2018, the Victorian Government released its mineral resources strategy for 2018–2023, identifying key challenges and opportunities in the state’s mining sector.

The government report, entitled State of Discovery: Mineral Resources Strategy 2018–2023, lays out five key action areas that explore different segments of Victoria’s minerals sector. The Victorian Government is aiming to spend $220 million in exploration investment by June 2023 to help meet these goals.

While not the largest Australian mining state, Victoria is home to several large mining companies, including BHP, Newcrest and OceanaGold, with Melbourne-based firms accounting for 65 per cent of mining stock from the ASX100 in 2018 ($188 billion in all).

Meanwhile, major mines such as Fosterville (Victoria’s largest gold mine), owned by Canadian-Australian miner Kirkland Lake, have posted record results recently, with production at said mine up 21 per cent to June 2018.

In addition, mineral spend is increasing significantly in Victoria, up 79 per cent year on year (YoY) in March 2018 compared with 27 per cent nationally according to figures from the Australian Bureau of Statistics.

The minerals industry in Victoria also employs around 121,000 people and made a total direct and indirect contribution of $13.6 billion in 2015–16 for the state coffers (around four per cent of gross state product).

State of Discovery: Mineral Resources Strategy 2018–2023 is championing ambitious growth for Victoria’s minerals sector. Megan Davison executive director of the Minerals Council of Australia (MCA), posted a warm response to the report, stating that, “Victoria is blessed with a diverse commodity base including operating gold, antimony and brown coal mines, world-class mineral sands deposits and highly prospective precious and base metals provinces.”

The Victorian Government cites Victoria’s “intensively developed” landscape as a potential challenge for exploration expansion in the report, and as such has emphasised responsible minerals exploration as a key point of its strategic overview.

To advance geoscience and encourage mineral exploration and development to Victoria, the Government plans to release a Victorian resource prospectus that integrates resource and freight transport planning. It also plans to conduct competitive tenders to attract “high-performing” explorers.

The meat of the report lies in its five key action areas, however; key points to be addressed over the next five years.

The five action areas include (in order) Confident Communities and Responsible Explorers; Advancing Geoscience and Encouraging Mineral Exploration and Development; Victoria as a Global Mining Hub; Improve Regulatory Practice and Industry Compliance; and Deliver Modern, Fit-For-Purpose Laws.

The report’s introductory strategic overview states that “gaining and maintaining community confidence in the social, environmental, and economic performance of mineral exploration and development [is] critical for the sector” and the first of the five key action points builds on this.

Confident Communities and Responsible Explorers relates to improving community acceptance of the mineral resources industry through better understanding of the attitudes of Victoria’s community towards the sector and improved support of landholders in their negotiations with the industry.

The State Government hopes to build this trust by improving transparency and social responsibility standards for explorers, while also securing enduring benefits for host communities.

In addition, the Victorian Government hopes to provide more information to local communities about mining’s value and build a socially and environmentally responsible mining environment.

The second key action area, Advancing Geoscience and Encouraging Mineral Exploration and Development, refers primarily to the Victorian Government’s plan to create a Victorian resources prospectus to increase interest in mineral investment to Victoria. The Victorian Government will also attempt to make use of freight transport for mineral operation expansion and support skills development for mining (and mining services) through apprenticeships and TAFE courses.

The third action area, Victoria as a Global Mining Hub, is to focus on Victoria’s expansion as a mining exports provider. It cites factors such as the continuing growth of Victoria’s mining exports as a percentage of total exports, increase in mining companies, and hosting of events such as the annual International Mining and Resources Conference (IMARC) in Melbourne as evidence of this.

The fourth and penultimate action point, Improve Regulatory Practice and Industry Compliance, will see the creation of a robust regulatory system that builds on the Victorian Government’s current Earth Resources Regulation (ERR), part of the Department of Economic Development, Jobs, Transport and Resources.

ERR has seen backlog reductions in the last year for work plan and licence applications since the commencement of reforms last year, and the 2018-19 Victorian Budget will include $12.7 million of funding to support the implementation of further regulatory streamlining procedures, including an upgraded online system for mining applications.

The overall aim of this section will be to “simplify processes, sharpen risk focus, provide clear and timely information” as well as to “improve coordination between regulators”, “build regulator capability to support industry compliance,” and “measure, evaluate and report on regulatory and industry performance”.

The final key action point is Deliver Modern, Fit-For-Purpose Laws, which will allow for increased options for “responsible and safe” mining and mineral exploration. In August, the Victorian Government introduced the Mineral Resources (Sustainable Development) Amendment Bill 2018, which declared that a new Mine Land Rehabilitation Authority (MLRA) be implemented to succeed the current Latrobe Valley Mine Rehabilitation Commissioner (LRMVC).

Mines are to develop post-closure rehabilitation plans, with said plans a legal obligation of the landowner, with MLRA able to take on this role and responsibility in exchange for payment from the mine owner.

The action point states that the Victorian Government will develop on this bill by increasing transparency for investors and the community, amending the Mineral Resources (Sustainable Development) Act (MRSDA) to allow for the publication of non-commercial-in-confidence mining licences and work plans.

Information disclosure requirements will be revised, as will requirements for the timeliness of the release of mineral exploration data. Commercial-in-confidence data will be” appropriately protected where there is a genuine need for non-disclosure,” the report states.

Overall, the Victorian Government has delivered an ambitious report that suggests a confidence in mining’s returning optimism. As Davison says, “State of Discovery provides an opportunity to grow the state’s minerals industry through greater investment attractiveness, more engaged communities and modern regulatory regimes.”

This article originally appeared in the October issue of Australian Mining.