There is currently an ongoing trend of significant private equity investment into the mining services space. All the mines currently being built in Western Australia will be in production for many years to come, and as they produce, they will need people, maintenance and services.”

Sherif Andrawes


May 31, 2019

BDO offers a wide range of services to the industry, including accounting, tax and business advisory. Which of your services is gaining most traction in Western Australia?

For the mining industry specifically, the service which is most prolific for BDO is M&A advisory, both in the listed space and unlisted space. We are also strong in our IPO services in Western Australia, and although there have not been many over the last few months, we expect IPOs to increase in H2 2019.

95 companies listed on the Australian Securities Exchange in 2018. What factors have led to a slowing of the IPO market in H1 2019?

Prior to 2016, exploration companies experienced a very tough market, but most of these companies have been able to raise enough capital over the last few years. Juniors were able to raise the capital needed to see them through exploration for a period of time, and so there was a lesser need to raise money, which impacts the IPO market. Secondly, towards the middle of 2018, there were a couple of IPOs that did not do so well. Consequently, the entire IPO market has been subdued since. There will be quite a few IPOs coming up in the latter part of 2019, and the makeup will probably be smaller exploration companies as well as a few in the mining services space.

There is currently an ongoing trend of significant private equity investment into the mining services space. All the mines currently being built in Western Australia will be in production for many years to come, and as they produce, they will need people, maintenance and services. 

Are you noticing a shift in the makeup of companies making acquisitions within the industry?

We are noticing a significant number of end users entering the mining industry, especially around the electric vehicle battery space. Security of scarce supply is driving this trend. For example, if an automotive company wants a security of supply, this can be carried out through off-take agreements, direct investments into mining companies or the mines themselves. Interestingly, mining companies tend to be a little behind the times in terms of their processes, and so the end users are investing in these companies to improve productivity and supply, so their demands can be met. We are seeing increased cross collaboration between industries to improve supply security.  

What are the greatest challenges and opportunities impacting the industry at the moment?   

China has been front and center in terms of any planning, and all stakeholders are trying to understand what tariffs, demand shifts and a potential economic slowdown would mean for them.  Moreover, there is a concern that in certain trades there is a shortage of talent. Companies are learning from mistakes of the past, and they appear to be more judicious in recruiting talent. Companies are recruiting people on short-term contracts and are also making use of advanced technologies to decrease reliance on manpower.

Are you seeing the rate of adopting of new technologies increase, and how is BDO guiding its clients through this process?

There is a great adoption of technologies at the top end of the market.  The major players are increasingly willing to implement technologies that will improve their operations. For the smaller companies developing mines, technology is not a major concern. Smaller companies are reliant on finance, and a significant number of financiers are less willing to fund things where there is a potential risk around the technology. The approach of smaller companies is to develop the mine in a standard way, after which they may start to look at implementing new technologies. The adoption of technologies starts at the top, but filters down eventually. This approach might not be the best, but is certainly more pragmatic in terms of de-risking the project.

What is your overall outlook for Australia’s mining industry?

BDO is generally positive, and we believe that there is more upside than downside. There is still significant opportunity for consolidation in the market. We will be seeing a lot of mergers in the near future as well as junior exploration companies going public in H2 2019. The area we are most bullish about is mining services, and there is a lot of consolidation as well as strategic buyers looking to acquire within this space.         


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