A flurry of acquisitions in the North European mining services market over the past six months saw players snap up specialised technology providers covering everything from mine productivity to electrification, CAD software and beyond.

For instance, in August Sandvik signed an agreement to acquire US-based CNC Software, a leading provider of CAD/CAM software solutions for manufacturing industries and the company behind Mastercam.

This deal came just weeks after Epiroc completed the acquisition of Meglab, a Canadian company with expertise in providing electrification infrastructure solutions to mines -  solutions that support mining customers in their transition to battery-electric vehicles.

That deal came after Epiroc also snapped up 3D-P, a Canada-based company that provides wireless connectivity solutions for surface mining, and purchased MineRP, a software company specializing in increasing productivity for mines through integrated planning, execution and analytics.

Mining Magazine took time out to discuss the acquisition trends in the METs sector with Rebecca Campbell, partner of the law firm White & Case, who also leads its Global Mining and Metals Industry Group.

MM: Mining services and technology firms have stepped up acquisitions in the past year - are these companies striving to build a bigger digitalisation portfolio or just positioning for more business?

RC: As a general observation, the overall trend towards digitalisation and automation has clearly been accelerated by COVID-19. There was a crashing realisation 18 months ago when it first happened about just how vulnerable some of the supply chains are. Some of the mine sites in particularly were also vulnerable to worker availability, and ill health.

Because of that, and although the bigger mining equipment and technology players have their own in-house development teams, is has accelerated a real technological step change in the sector. This can sometimes highlight gaps in internal R&D development, or perhaps how another firm can come up with a great idea and it's folded into one of the existing players - this means these companies ‘bolt it on' rather than trying to develop it themselves.

It's very similar to how the other tech giants of this world operate when they bolt on smaller products or companies into their offering by acquiring them. This trend is certainly one that we see continuing, and these seem to be favoured at the moment as opposed to mega-mergers of a couple of years ago.

MM: Looking at the Mining Equipment, Technology and Services (METS) players in Northern Europe, do you expect competition to intensify between the Epirocs, Sandviks, and MO Groups of the world?

RC: I'm not an operational person, but I'll answer it from the perspective of seeing what my clients are doing with their operations. I don't expect this would lead to an intensification of competition - rather more of a differentiation between some of these providers as they develop different products and solutions for the automation and digitalisation of the sector.

So initially, I'm not sure if it will lead to companies competing toe-to-toe on marketing very similar products. One player may focus on developing electric underground trucks and the other might focus on open-pit heavy haul electric trucks or automated trucks.

The digitalisation step change is more leading to a race to deliver what the client needs, and it is occurring across all kinds of mining equipment and technology of the moment. 

 

MM: Our magazine's focus is generally on operations - not finance. So from an operational perspective, what is your take on mining's M&A market as a whole at the moment, do you expect investment trends such as ESG (or anything else) to have an impact on it?

RC: In the broader M&A market beyond equipment and technology, the trends are generally three-fold Firstly, it is either ESG driven, such as players needing to exit coal, and secondly it is energy transition driven; that's players adding minerals to their portfolio that are related to the energy transition. The third trend, which is slightly related to the second, is driven by the fact that we are at the top of the commodity cycle at the moment and there are concerns over the ability to secure upstream supply.

So there is trend towards what I would call this vertical re-integration in the sector.  I'm also seeing an interesting trend of your various players across a range of commodities coming and saying, ‘I need to invest in order to secure long-term supply for my more downstream businesses', which is something we haven't seen for a while.

Those are the three areas we see as driving M&A and growth investment.

MM: There are so many battery materials miners and technology process developers out there - do you also expect consolidation in that space as the electrification of the world's fleet accelerates?

It really depends on the commodity.  Copper yes - and even before the energy transition agenda it really rose to the fore - almost all of the major miners were looking to bolster their copper reserves.

Lithium less so, and you see lithium assets being held at the moment in very large companies, but mostly outside of the global majors. Cobalt is a little bit more specialised. And there is a long-term debate around whether it will be largely engineered out of batteries.

Nickel, I would say potentially, in the portfolio of a number of the majors. And whereas maybe they would have previously been less keen on building their nickel portfolios, we're seeing a slight reversal of that trend at the moment.So you can see that it's a very nuanced analysis and quite different for different commodities.

MM: Do you think there will be a post-COVID boom in newer working methods such as remote operations?

COVID has been a supercharging event for that trend that was already well on its way. Remote working is really establishing itself across the sector, and of course there is an interesting debate about the impact of effectively having less people around mine sites on social license to operate.

This is because, especially in more emerging jurisdictions, there's been a longstanding conversation about if there are fewer people at a mine site, then the benefits to the local economy are lessened as well. There are fewer people spending money, generating other jobs and so on.

That's one of the countervailing points, although it is unlikely to overcome the main trends. Another factor is supply chain transparency - it is coming more into the ESG agenda and this feeds into the strong desire of end users and OEMs to be able to demonstrate where their product came from - all the way through the supply chain, to the end user.

And there's all sorts of regulations coming in Europe and other regions around supply chain transparency in the near term. These regulations are having an accelerating impact on supply chain transparency and related digitalisation efforts.