Mining is the new roads sector for UK consultants eyeing up a £200bn global pot of cash.
Consultants traditionally focused on the spluttering UK roads sector – the likes of Aecom, WYG and URS – are all refocusing on the booming mining sector and its soaring demand for civil engineering.
Accounting giant PWC’s annual review of the mining industry sums it up. “The mining industry has entered a new era,” it says.
“Demand continues to be stoked by strong growth in emerging markets. The scale of mining projects has been increasing as mineral grades are challenged and projects have to look to new, often more remote locations requiring infrastructure, to expand.”
This infrastructure is not only the obvious rail, port and power networks but also human infrastructure, such as schools and hospitals to support the mining community.
“To keep up with demand, the top 40 [mining firms] have announced more than $300bn (£200bn) of capital programs with over $120bn (£80bn) planned for 2011, more than double the total 2010 spend,” says PWC’s report. “While not all will be completed, the sheer size and volume of the announced capital projects demonstrates an industry where fulfilling seemingly insatiable demand is the top priority.”
And it’s not even all overseas. Here in the UK, Sirius Minerals is investing an initial spend of £1.74bn on infrastructure to enable production on its new Potash mine in Yorkshire to start in 2017.
Finding funds for upfront infrastructure really isn’t a problem for these cash-rich clients. Revenues for the world’s 40 largest miners leapt 32% to a record $435bn (£277bn) in 2010, driven by surging commodity prices and a 5% increase in production output.
The message is – find a top 40 mining company, do a good job, get paid well. And that’s because they really aren’t into either squeezing margins, pressing for more for less, or any of the other sneaky tricks being employed by UK clients today.
Turner and Townsend (T&T) knows this. Its focus on the mining sector has just helped the cost consultant achieve double digit growth last year. Results for the year ended 30 April show revenue up 20% to £244M and pre-tax profits up 46% to £23M, with the huge increase largely driven by a surge in demand from its clients in the mining sector.
Revenues in mining were up 97% from £11.6M to £22.8M, with one third of the consultant’s revenue now coming from the natural resources sector. Last year it has picked up work with many of the top 40 mining firms including Anglo American, BHP Billiton, Chevron, Inpex and Rio Tinto.
“The natural resources sector has seen large growth,” says T&T chief executive Vince Clancy, adding that this growth is being driven by increasingly complex projects that are demanding better project management.
“The projects are larger in value than ever before,” he says. “The sheer scale of the projects means managing the supply chain, managing the logistics and managing the programme is more complex and there is more risk to manage.”
In recent months many other UK consultants have identified the mining sector as a major growth area. After all, the skills needed are wide, varied, and generally things UK firms have an international reputation for doing well: tunnel engineering, rail and port infrastructure, water infrastructure planning and resource management, dam design, pumping and piping for liquids and slurries, power generation, transmission, distribution and management, airstrip planning, approvals and design, environmental solutions, community development and social planning and more.
WYG has identified the sector as one of its seven core market sectors and Aecom has gone one further and signed up former prime minister John Major to chair an advisory board focused on high growth markets including mining.
“The advisory board will be especially valuable in offering guidance as Aecom increases its participation in geographic areas of focus such as Africa, Asia, Eastern Europe, India and Latin America as well as high-growth businesses such as oil and gas, energy and mining,” says Aecom chief John Dionisio.
Australian based consultant SKM is well known for its mining activities and is reporting a 25% growth in geotechnical work this year driven by the booming market.“The energy and mining sectors are doing very well across the world and UK trained geotechnical engineers are in high demand because they are considered to have a very wide knowledge base, with the ability to think broadly,” says SKM geotechnics global services leader Mark Thorn.
So whether it is cost consultancy, transport planning, road and rail design, water management or geotechnics, UK consultants are in demand and poised to do very well.