Representatives from BDO and senior executives from West Australian mining services companies recently held a round-table discussion on the opportunities and challenges in the current market, the future of the industry and the advent of alternative sources of funding.
Due to the growing complexities around traditional growth capital and a significant uplift in the mining services industry in Western Australia recently, this was a timely and valuable discussion for all involved.
Discussions at the round-table were centred around businesses in the industry adopting alternative capital solutions for growth. Considering the big four banks are still not lending to mining contractors, businesses have turned to alternative debt products such as private lenders, family offices, and innovative debt product solutions including supply chain finance and debtor finance.
Attendees unanimously agreed that activity is on the rise in the WA mining industry, particularly in the Pilbara region, with rental prices spiking and houses beginning to sell again. The industry appears to be in the midst of another upturn, with demand at the highest level since the boom-time peak in 2013.
Discussions also covered the increased M&A activity in WA occurring off the back of the upswing in mining. Recent deals have been heavily focused in the mid-market with mining services giants, BGC Contracting and Downer Mining, both on the market.
We also explored how the move away from fossil fuels will see a surge in demand for raw minerals like lithium, cobalt and nickel. There is also an expectation that international investment from North America will increase as investors are seeking stability in the Asia Pacific, outside of China and Hong Kong, due to the ongoing trade dispute and volatility in these regions.
An area of concern amongst the group was the demand for mining engineers exceeding the supply, due to the multi-year infrastructure boom on the east coast of Australia, enticing those with the requisite skills to a more balanced lifestyle compared to FIFO.
Investment by State and Federal Governments in infrastructure is the main driving force behind the boom on the east coast, with tens of billions being spent on transport and other public works.
Wage inflation caused by this will see workers enjoy an extended period of premium remuneration, although the cost to the industry could challenge the smaller mining and mining services companies as they try to fulfil their contracts. Contributing to the pressure for miners is low university enrolments in mining industry degrees over the previous few years and the increasingly restrictive laws around foreign labour.
BDO’s transaction advisory services help evaluate, plan and manage transactions such as acquisitions, mergers, divestments and strategic alliances. An independent opinion is a crucial component of successful transactions.
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