yinghui

South32 digs in against volatile exchange rates

South32 has released its Quarterly Report for September, showing a significant reduction in financial leases as the Australian dollar has depreciated against the US dollar.

After falling to 10.3 per cent on the ASX in June earlier this year, South32 has managed to reduce its net debt from US$206 million to US$196 million during the September 2015 quarter.

Capital expenditure rates for South32 are also expected to decline further than the previously forecast nine per cent drop, reflecting the weaknesses of the average exchange rates.

According to South32 CEO Graham Kerr, “Our high quality and low-cost assets, motivated workforce and strong balance sheet remain a key point of differentiation.”

Production has increased overall within the alumina sectors, leading South32 to predict a saleable production increase of 3 per cent to 3.95 million tonnes

Manganese ore production also saw an increase during the quarter, maintaining competitiveness and sustainability throughout the cycle.

Declines of three to four per cent were witnessed in both coal sections as coal production in the 2016 financial year is forecast to decline by per seven cent to 31.95 million tonnes.

By reducing costs and de-capitalising the business, South32’s production increases may provide a temporary relief amidst the volatile exchange rate and the declining profitability in mining operations.

If we want to promote innovation we need to focus on businesses

With all of the publicity about research breakthroughs, it is easy to forget that private companies rather than publicly funded research institutions are the centre of the innovation systems.

Innovation happens in businesses, and most new businesses come from existing ones. If the system is not working at this level, the returns on investment in research are likely to be low.

Pushing more government funding into research in our present innovation system is not the way ahead. Treasury and the Productivity Commission may see this as theoretically sound, but like the mantra of strengthening research-industry links, the limited outcomes point to the need for new more experimental and pragmatic approaches.

The growth of entrepreneurship in Australia and deepening entrepreneurial ecosystems are good news. But how many of those start-ups are based on the commercialisation of public sector research? To my knowledge, only a few. Most respond to commercial opportunity and draw knowledge from wherever they can get it.

Australia is a very small but very capable player in the global research system and that is a great asset, but we have not worked out how to best govern and leverage those strengths. What is missing is a mechanism to stimulate and support innovative demand and to capture this drive in order to develop new products, services and firms.

Demanding innovation

The best recent example of harnessing the demand-side of innovation is – perhaps suprisingly – mining. Over the past 20 years, a dynamic and innovation-based mining equipment, technology and services (METS) sector has evolved in Australia.

By 2013, there were more than 1,000 METS firms with an aggregate turnover in the A$70-90 billion range, employing more than 300,000 people, with exports over A$20 billion and rapid offshore expansion.

In FY2012 the “sector” invested at least A$1.5 billion in R&D, which is more than information, media and telecommunications. Here we see demand from the user sector driving innovation in what are often, but not always, high tech suppliers, in this case often involving new applications of information technology.

It is often the quality of demand, which is related to the competency of the users, that enables innovation. In 2011-12 the mining sector invested almost as much in R&D as did the manufacturing sector. It is now very much a knowledge-intensive industry and a demanding user.

The current downturn in mining sector investment is hitting the METS sector hard. But firms are focusing on innovation and finding markets in other sectors and offshore.

For example, the 2015 survey by the METS industry association, Austmine, found that 44% of survey respondents were moving into other industries and a third had sought new export markets. One in three had also launched a new product or service. National METS Survey 2015 Results

This encouraging story of entrepreneurship and innovation has had little to do with public sector research, venture capital or innovation or entrepreneurship policy.

Despite the strengths of the CSIRO and some universities in these areas, and their important contribution to knowledge and innovation, neither this research nor public policy have been major drivers of the remarkable growth of Australian METS firms over the past 20 years.

Two reforms

Opportunities for demand-led innovation exist throughout the economy. They are likely to be greatest where there is strong market growth, sustained investment and new challenges.

Consider the cities of Australia, which can (and in some cases need to) be transformed through new communication, environmental and transport infrastructure and technologies.

But to do this we need to reform our institutions to develop new forms of system-level governance and policy frameworks that influence both the challenges and solutions. This type of innovation is often harder than technological innovation but is often the most critical for enabling other forms of innovation.

To achieve this, we need two essential changes within government.

First is to strengthen the policy advice available within government. The mainstream economic paradigms that inform Treasury and the Productivity Commission have at best a weak purchase on innovation.

Recent developments in the Department of Industry and Science, with the formation of the office of the Chief Economist and the more systematic work on innovation analysis may be the beginnings of a capable alternative source of advice able to contest the views of Treasury. But much more strengthening is required.

Second is to acknowledge that the Australian Research Council is not fit for this purpose. It is, after all, a research funding organisation run by researchers.

What is needed is a different type of innovation-oriented organisation. It would identify new challenges and help build the capabilities in industry and the research sector to respond innovatively.

But, importantly, it does not allow research organisations to monopolise public research funding, pursue their own interests and so create a commercialisation bottleneck.

An exemplar for this type of organisation is TEKES in Finland. It uses foresight and roadmapping to identify opportunities, and it proactively develops coalitions and collaborations to apply the needed competencies.

Among the critical forms of institutional innovation we need are what Dan Breznitz, in his book Innovation and the State, terms “Schumpeterian Development Agencies” which have wide degrees of freedom to undertake continuous experiment with a wide scope to act, engage, change and redefine.

Economic complexity is the answer to Pyne’s innovation problem

Australian Prime Minister Malcolm Turnbull has tasked new Innovation, Industry and Science Minister Christopher Pyne with making Australia’s economy more innovative.

The purpose of industry policy is to ensure Australia is prosperous, both now and in the future. But a nation’s potential to create prosperity is a direct function of its economic complexity.

Countries with high economic complexity have a highly diverse portfolio of firms all producing and exporting offerings few other nations are able to produce. These offerings require a multitude of inputs, a high share of which are sourced in country since they also have high economic complexity.

In this environment system integrators tend to have higher economic complexity than the producers of the components that make up the system; producers of production equipment tend to have higher economic complexity than the producers using this capital equipment; and producers of physical goods tend to have higher economic complexity than the providers of the necessary input services.

This explains why manufacturing is critical for the creation of prosperity in any nation and why prosperous nations, as a consequence of their high economic complexity, have a large share of systems integrators and advanced manufacturers in their economy (for example Japan, Germany, Switzerland, Sweden).

Against this backdrop it is very worrying that Australia’s economic complexity has declined over the last 25 years – it ranked 53 among all countries in 2012. The top three were Japan, Switzerland and Sweden.

The worry is magnified when you consider the automotive sector – the highest current contributor to Australia’s economic complexity –- will disappear over the coming two years. This is likely to lower Australia’s economic complexity by a further 5-15%, while at the same time reducing the share of manufacturing in Australia’s economy to below 5% (compared to Switzerland’s 20%).

So how can Australia use its industrial, innovation and science policy to increase its economic complexity?

1. Choose areas of comparative advantage

This means focusing on sectors like mining equipment, technology and services – a A$90bn industry with A$15bn in exports. The objective here must be to accelerate the export oriented and science and technology based growth of this industry with a realistic objective of doubling exports to A$30bn in five years. Other target sectors could include agricultural equipment, technology and services; medical equipment, technology and services; and sophisticated defence equipment, technology and services.

2. Focus on increasing the value add to raw material production

This would mean learning from the failure to capture sustainable prosperity from the mining boom through the lack of value add, and the late development of the mining engineering, technology and services industry.

We should not repeat the mistakes of the mining boom with the Asia food boom. This means driving high value add food production like science-based foods (e.g. gluten free bread, lactose free milk, fortified products) and luxury food products (e.g. selected spirits, wines, cheese, seafood). Both of these will also require a highly competent packaging industry.

Other sectors that fall under this heading would be the cellulose value chain (e.g. engineered timber products, high value chemicals, composite and fibre materials), and high value add products originating from minerals (e.g. spherical graphite, metal powders for additive manufacturing use, specialised alloys).

3. Develop tomorrow’s industries based on our comparative advantages in research

Examples here would be high-value chemicals from seaweed; advanced fibre material based production; advanced health and care solutions; advanced solutions for real life robotics applications; quantum computing; cell factory solutions.

4. Prepare for ‘industrial euthanasia’

Manage the transition out of yesterday’s industries into tomorrow’s highly service-based advanced manufacturing. In this world most manufacturing activities will take place in a virtual space with many of the key enabling technologies and their associate production systems spread across the whole manufacturing activity system. This has major implications for both productivity improvements as well as the role of people in these manufacturing activities.

For most firms the productivity improvements will outstrip the underlying demand growth. This means tomorrow’s demand can be satisfied with fewer employees, unless we dramatically grow the number of firms and move into domains where the market growth is high.

5. Ensure major government projects are not bought off-the-shelf

Instead, they should include a component of solving problems never before solved. Doing this in-country maximises the spillover effects, and as a result is important for growing economic complexity.

6. Align labour market flexibility with structural change in the economy

The shift in activities will generate very large skill gaps, meaning firms will need to vary their labour costs via new contractual arrangements with employees (more part-time work, more flexible work). These changes need to be managed with respect for the individuals concerned, recognising that the responsibility to maintain labour market relevance rests both on the employer and the individual.

A successful new industry, innovation and science policy is imperative, not only to secure our future prosperity, but also to address the already visibly declining ability to generate prosperity in our nation.

澳大利亚统计局公布2014年澳洲矿山规模数据

ABS releases mining stats for 2014

Australia’s iron ore industry added 30 per cent to its value between FY13 and FY14, according to new data released by the Australian Bureau of Statistics.

During that period sales and service income in the iron ore industry gained 25.8 per cent, rising from $62.2 billion to $78.3 billion.

The total value of the Australian mining industry grew seven per cent, from $203.5 billion to $217.8 billion, regaining FY12 levels.

While metal mining increased by 16.1 per cent, coal dragged down growth with a slump of 16.7 per cent in FY13 and 2.7 per cent in FY14, falling more than $10 billion in value, from $58.8 billion to $47.7 billion.

Despite slight drops in value, oil and gas extraction saw substantial increases in employment levels, 8.76 per cent in FY13 and a dramatic 18.3 per cent increase (3471 people) in FY14.

Overall, mining employment fell by 2.2 per cent, or 4170 people in FY14, taking national employment levels down to 186,920 people at June 2014.

Mining the value of assets

During the last couple of years mining services companies have had to rapidly adjust their strategies, shifting from a focus on growth to one of cost-control and cost-efficiency.

The challenges facing the mining industry are well known.

Declining commodity demand and falling prices have had a big impact on miners and on the engineering, contracting and construction firms that service them.

After years of investing in new assets to meet sector demand, many are grappling with the discovery that they now have expensive equipment lying idle.

In this environment, management of fleet portfolio risk is as crucial as the life cycle costs of ageing and under-utilised assets and can become a substantial drain on an organisation’s profitability.

To cope with the changes, business strategies geared around continuous growth have been replaced by strategies aimed at maximising operational performance and cost efficiency.
And in this asset-intensive industry, one of the best ways of achieving both of these goals is through tight control and smart management of assets.

The nature of assets

Typically, the assets owned by mining services organisations are costly. Whether it’s precision drilling equipment or large earthmoving trucks, the assets are expensive to purchase and to maintain.

The other fact about them is they are absolutely essential for revenue.

In large part, a mining services organisation lives or dies based on its ability to deliver the correct services and functioning equipment to the right location, at the right time.

Apart from cost and capability, one of the big considerations when dealing with any mining asset is its life cycle.

Given the conditions under which they operate and their heavy usage, these assets can have a very limited economic life.

Understanding the life cycle of assets and maximising their productive use is fundamental to business performance.

The question of ROI

The return on an asset investment is derived by balancing investment cost, the asset’s lifespan and optimal usage of the asset.

Companies will want to drive their assets as hard as possible, employing them as frequently as possible to extract maximum productivity.

They must also ensure the assets are available for use when needed. This requires maintaining assets so they comply with applicable regulatory requirements, are reliable and deliver productive output for a minimal TCO [total cost of ownership].

Take the example of a fleet of mining trucks.

We know that once they are in use, even the best of them won’t last much longer than 60,000 run hours. For the first few years, it’s reasonable to expect the trucks will operate fairly reliably with essential servicing but as time goes on, maintenance time and cost will increase, and reliability will decline.

Once this phase is reached, the need to overhaul major components and deterioration on other components means the assets will be out of action for longer and longer periods, thus reducing productivity.

Lifespan and maintenance cycles

When the recent boom was in full swing, maintenance cycles weren’t much of an issue.

The industry’s hunger to explore new sites and expand existing ones ensured demand for mining services and equipment was strong.

So strong there was a good business case for purchasing new equipment to match new contracts.

In this way companies could avoid the problems of an ageing fleet and asset downtime.

But as the market has slowed, contracts are harder to come by and these same companies are discovering they have a very extensive investment in underutilised assets.

There is little incentive to buy new equipment, but the crippling danger of an ageing asset portfolio is the slow slide towards an uncompetitive fleet.

So, what’s the best course of action for a company in these circumstances?

Striking a balance

The first step is to fully understand the impact of assets on your cost structure when you bid for work. A software system can help you to derive an accurate total cost of ownership.

It provides a means of planning asset life cycles, monitoring and tracking usage, identifying underutilisation, and analysing usage trends on costs – both now and into the future.

Through more efficient allocation of resources, effective inventory and purchasing management, the system can help reduce maintenance costs.

And it will help optimise efficiency by minimising downtime, scheduling maintenance using a risk based approach.

With this information, you can make more informed bids.

You may discover it makes sense to sacrifice gross margin because the project supports your turnover cycle of assets.

You may also find that ongoing costs are making your old equipment unprofitable and that the best option is to salvage it for whatever you can get.

It’s all about balance

When trying to contain costs and maximise efficiency, there’s another particularly important best practice. Analyse your assets in two distinct ways – in isolation and as a portfolio. It’s important to know the costs, utilisation and productivity of a particular drill, for example, but it’s equally essential to know the status of the organisation’s fleet of drills.

The condition, capability and TCO of the fleet can indicate risks.

Right now, one of the more noticeable problems for companies that bought up big in the boom is the imbalance in the age of their asset fleet.

Much of their equipment is of a similar age, which means maintenance demands will increase in sync and much of it will need to be replaced at a similar time. This points to a significant cost burden in the near future.

Good life cycle planning is essential in these circumstances.

In many ways, the best examples of asset management involve balance.

The balance between new and old equipment required to avoid risk.

Balance between productive utilisation and maintenance, so that output is maximised and downtime minimised.

And balance between cost-cutting and investment, so that financial imperatives are met while keeping the fleet, and ultimately the company, competitive.

Ultimately, today, asset management can make a considerable contribution towards business and profitability by reducing costs and increasing the productivity of assets.

The emergence of frameworks including PAS55 and ISO55000 have helped an will continue to shift the thinking of how to manage assets from that of determining what cost to meet a level of service, to one of understanding the implications of the performance, cost and risk trade-offs at various investment levels.

Iron ore to slump again in 2016

Analysts predict further slumps for iron ore in 2016, as new projects such as Roy Hill come online and swing into full production.

Weak demand growth in China and a stronger US dollar will ensure iron ore prices stay down, according to BMI Research.

A report from BMI stated that investors expect the commodity to trade between $US50-60 per tonne for the rest of 2015, dropping again to the $US45-55 range in 2016.

Market shares held by BHP, Rio Tinto and Brazilian major Vale have increased low-cost ore supplies, however China’s steel consumption will contract by 1.3 per cent each year up to 2019, BMI said.

“Global iron ore majors will continue to ramp up production to squeeze out higher-cost competitors,” BMI said.

“BHP Billiton, Rio Tinto and Vale all reported record output in 2014 and will increase output further in the quarters ahead.”

New shipments from Hancock Prospecting’s Roy Hill Project were also flagged to contribute to an increasingly apparent glut of the steel-making commodity, with productivity to increase over the next year to full capacity.

Fortescue Metals Group has also pledged to maintain their shipping levels despite weak prices, and recently gained 5.3 per cent on the ASX to a high of $2.30 on Monday, which has dropped to $2.23 and is continuing on a steady rise.

Mitchell wins Evolution mining contract

Mitchell Services has begun work under a two year contract for work at Evolution Mining’s operations.

The contract, valued at $27 million, includes both underground and surface drilling services at the Pajingo and Cracow gold mines.

It will use drill rigs acquired from Nitro Drilling (which is currently in liquidation) will be used for the surface operations, whilst underground work will use newly sourced underground drill rigs.

Mitchell Services executive chairman Nathan Mitchell welcomed the win and the start of new work.

“The award of this work is encouraging as it further strengthens an ever increasing Tier 1 client base whilst providing diversification in revenue streams through significant underground drilling programs,” Mitchell said.

CITIC sees massive funding injection

Chinese miner CITIC recently disclosed a massive injection of capital into the embattled Sino Iron project, made on April 1.

Costs in the project have surpassed $US12billion, as reported by the AFR, although $US2.5 billion has already been written off the value of the project in March due to economic considerations such as the plunge in the price of iron ore.

Still involved in a protracted and very public legal dispute over royalties with Clive Palmer-owned mine developer Mineralogy, CITIC Pacific are also ebroiled in a dispute with their lead contractor China Metallurgical Group Corporation (MCC).

The original plan offered by Mineralogy was for a $US2.9 billion turnkey construction contract, however CITIC commissioned MCC under the apprehension the company could further save on costs.

However, a fixed $US3.4 billion contract with MCC resulted in cost overruns of $US858 million, with delays blamed on adverse weather and “typhoon”, and problems with electric motors purchased by CITIC.

Fortunately the mine has been exporting magnetite since January 2014, capitalising on project costs, however only two of the six planned production lines are operational.

The AFR said the income from export sales are not being booked as income or in operating cash flow, but rather directly against the capital expenditure for construction.

With the remaining four production lines to reach operational ability by the end of 2016, it has been anticipated that CITIC will not reveal the full extent of their operating losses until 2018 when full-year reports for 2017 are released.

RPM launches new mining simulation software

RungePincockMinarco (RPM) announces the release of its latest equipment simulation software for Original Equipment Manufacturers (OEMs).

SIMULATE, a user-friendly and intuitive enterprise simulation product for OEMs is the latest in a long line of releases from RPM beginning with TALPAC, the company’s first mining simulation product launched over 30 years ago.

TALPAC’s comprehensive equipment database of trucks, loaders, scrapers and underground equipment including more than 500 trucks and 400 loaders has seen the product evolve into a go-to tool for comparison of mining equipment available on the market today.

RPM subsequently expanded their simulation offering with the release of DRAGSIM (a dragline simulation product), Underground Coal TALPAC (a longwall simulation product), and HAULNET (a haul route simulation product), all of which were readily embraced by the mining industry.

In 2014, the company released HAULSIM, a 3D discrete event simulation product simulating equipment interactions and infrastructure as well as the traditional haul cycle.

Work on RPM’s latest equipment simulation software began early this year through a collaboration with one of the world’s largest OEMs. The enterprise simulation platform enables the OEM to model complex 3D mining environments using their own mining equipment. RPM’s OEM partner has now purchased SIMULATE and intends to roll the product out to its global dealer network.

SIMULATE combines all the essential features of RPM’s simulation offerings including TALPAC, HAULNET, and HAULSIM into a single, highly visual and enterprise-enabled application. With enterprise integration, SIMULATE is a fully integrated, seamless 3D simulation solution specifically designed for OEMs.

Optimisation of haulage systems through informed equipment decisions is paramount to increasing the economic efficiency of mining operations. SIMULATE enables OEMs to use their customers’ data to rapidly model their entire mining operations and then accurately demonstrate the resulting financial value provided by their equipment and services.

Commenting on the latest release, RPM’s CEO Richard Mathews said SIMULATE has been designed to equip OEMs with a platform for providing accurate, sustainable and productive solutions for their clients.

He added SIMULATE will allow OEMs to provide their existing and prospective clients with a complete equipment solution that enables a step change in operational performance.

How Striker is serving the resources industry worldwide with heavy equipment and turnkey design

An Australian success story of design innovation, engineering expertise and product excellence, Striker is a reputed heavy equipment manufacturing company that has made its presence felt in the global market with a complete range of fixed, portable, mobile and track plants.

Striker’s modest beginnings in Perth, Western Australia in 1998 saw the company design and manufacture fixed plant for the Australian mining industry. Capitalising on the growing demand for mobile equipment in Australia’s resources sector, Striker leveraged its expertise in design and manufacturing to introduce a new range of track mounted and mobile crushing, screening and processing equipment. Today, the Australian-owned heavy duty equipment manufacturer addresses the fixed and mobile machinery needs of diverse industries from mining, recycling and quarrying to civil contracting, earthmoving and materials handling throughout Australia, the Asia-Pacific and the rest of the world.

Built to a high standard, and built to last, Striker’s machinery range from tracked crushing and screening equipment to fixed plant for quarrying and mining as well as its latest recycling line has been put to the test in some of the harshest environments around the world. From the challenging conditions of Australian mines to the coldest regions of remote Mongolia, Striker’s heavy equipment range is a proven top performer ready to meet every design and application challenge.

The 5-year structural warranty offered on all Striker-designed and manufactured plants, underlines the company’s confidence in the reliability of its equipment range.

Striker is also a well-known equipment rental company, maintaining one of the largest rental fleets of mobile crushing and screening machinery throughout the Southern Hemisphere. Striker’s rental equipment is available for both short and long term periods to clients across Australia.

Striker’s machinery range

Striker offers a comprehensive solutions portfolio spanning fixed plant and MAX plant installations, conveyors, heap leach systems, tracked crushers, Etrac crushers, recycling systems, and bare crushers and screens among many more.

Fixed plant installations are part of Striker’s bespoke solutions designed to meet specific client requirements and application challenges. Striker’s MAX Plant concept is based on a design philosophy that combines creative thinking and innovative solutions to provide the client with a versatile plant that can be simply, flexibly and easily reconfigured to any process requirement.

Engineering services: Design, construction and fabrication

Striker offers turnkey design and construction services to build mineral processing facilities for complete greenfield or brownfield projects encompassing plant modifications, upgrades and expansions; plant evaluation and condition reports; plant operations and maintenance support and optimisation; plant relocation, refurbishment and recommissioning; and consulting.

Striker’s experienced fabrication team, supported by their fabrication facilities in Malaysia and Thailand, delivers superior fabrication services to a wide variety of industries, meeting project objectives and challenging deadlines cost-effectively.

Service, repair, refurbishment and parts

Striker’s 24-hour, 7-day a week support team, operating from the four main service centres in Perth, Brisbane, Malaysia and China, ensures all plant and equipment are supported round-the-clock. Repair services are provided for both Striker machines as well as other brands of equipment. A specialised refurbishment service is also offered for all Striker equipment in need of a complete overhaul after many years of service.

Striker carries a wide range of spares for all equipment including track machines, mobile machines, fixed plant, conveyors and hydraulic systems in addition to wear parts for all crusher products. Specialised packages for operator training, service and repairs training, and electrical and hydraulic training are available for all Striker customers.

With offices located across Australia, Malaysia, USA, the Middle East and China, Striker’s worldwide presence ensures customers have access to a broad range of heavy equipment solutions, services and support from a single source.

Know more about Striker’s crushing and screening plants and turnkey engineering design services.