More and more mining transactions are likely to be driven by a need to innovate.
Where once, mergers and acquisitions (M&A) were primarily about growth, or divestment of non-core assets, transactions are now increasingly likely to be driven by innovation, whether it’s to reduce carbon footprint, cut costs or improve performance and safety, or to differentiate or attract new sources of capital.
Mining services providers, in particular, are eager to offer new capabilities to their clients by acquiring start-ups and established businesses. In Australia, KPMG’s ‘Energise’ accelerator program has generated interest from Tier-1 resource houses looking to partner with technological solutions providers, including start-ups and more mature companies.
New financiers are also emerging, notably private equity (PE) houses, such as North American-based Resource Capital Finance, whose Jolimont technology fund invests in high growth mining equipment, technology and services.
The decline of coal and the increased focus on optimization and cost reduction has opened up opportunities in the hard rock sector, leading to Joy Global‘s 2014 purchase of MTI, to access its range of hydraulic drills and shaft sinking equipment.
Robotics is also evolving, with new maintenance systems such as Sandpit Innovations “Spidler” conveyor system, enabling rollers to be repaired or changed while still operational, avoiding costly shutdowns and improving safety levels.
The skies above many mining sites are increasingly filled with hovering drones, mapping deposit sites, exploring for minerals, monitoring stockpiles and spotting faults on pipelines, fence lines and tenements. Rio Tinto has stated that its ‘Mine of the Future’ will make wide use of drones, while mining computer tech company Maptek made a significant investment in start-up drone specialist DroneMetrex in 2014.
Like every industry, mining is benefiting from innovative new software, to speed up processes and reduce the need for laborious, manual tasks. Automation can record and manage land inventory and history, report on accident, injury and illness, design open and underground pits, and enhance planning and production, mining and exploration, including estimating reserves.
Not surprisingly, mining services providers are active in the M&A market, to acquire the latest intellectual property. Mines also need fast, reliable networks, hence Northern Light Technologies’ (NLT) 2015 acquisition of ActiveControl Technology Inc.’s mining division, bringing high-speed, broadband Wi-Fi across their sites.
According to SAP’s Digitalist magazine, natural resource industries are under-investing in technology, spending just 1 percent of revenue on information technology (IT) compared with 5–7 percent for most other sectors.
Mining and other resource companies must decide whether to outsource or own innovation and technology. If they choose the latter, they will undoubtedly seek suitable acquisition targets. The industry might also attract potential new entrants from the technology sector, adding a new layer of competition and shaking up the mining transactions market.
© 2017 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.