Mastermyne’s contract mining growth ambitions became very clear in September when it proposed a buyout of contractor PYBAR Mining Services in a deal valuing PYBAR equity at A$47 million ($35 million).
The deal, which has just completed, sees Mastermyne, up until this point a company focused on the Australian coal sector, expand into the domestic hard-rock space through exposure to PYBAR’s gold, copper, zinc and lead-related revenues. In the process, it has been restructured under Metarock Group Limited.
The transaction is expected to create a leading Australia-based diversified mining services business with material scale, Mastermyne said, adding that the combined group will have a A$1.7 billion-plus order book and an active tender pipeline of A$2.7 billion-plus after completion. PYBAR will continue to operate as an independent business unit within the group with the existing management team.
Tony Caruso, Managing Director of Metarock (pictured), said the company had identified some time ago the need to diversify into “adjacent markets” to ensure its business retained “resilient and sustained earnings”.
“To be clear, we are very supportive of the coal industry, and we will continue to grow our coal business,” he told IM. “What we do know from 30 years of experience of operating in this market is it is very cyclic.”
When coal prices are strong, it is a great market to be a contractor, Caruso explained. Yet, when prices come down, contractor workforces or scope reductions often follow as mine owners look to cut their “flex costs”.
A diversified Metarock would be able to better cope with such a market dip.
“The theory (behind the PYBAR acquisition) is that when coal is down, other commodities will be up,” Caruso said.
In addition to increased commodity diversity, there are also a huge number of synergies that could be realised with the combination of the two companies.
PYBAR offers raiseboring services that can be used in coal, while Mastermyne offers ground support services (through its recently acquired Wilson Mining business) that can be used in the hard-rock space.
Both have registered training organisations that could share industry best practice across sectors, too.
What Mastermyne learned in the coal boom when it developed the “clean skin” training program, using a simulated underground coal mine with a bespoke program to train people for working in an underground coal mine, may have relevance in the hard-rock sector given the recent ‘boom’ perceptions, according to Caruso.
There are also more specific technology synergies that could benefit both hard-rock and soft-rock customers.
PYBAR has embraced automation and digitalisation with, for example, teleremote loading operations at the Dargues gold mine in Western Australia (pictured below, credit: PYBAR) and the use of Digital Terrain’s Simbio data entry and processing solution on its mining fleet.
Mastermyne has been running a similar project where real-time data is “taken off” machinery and, through proprietary software, converted into real-time dashboards for the operators to track performance against operational targets. Mastermyne used such a system with great success at the Narrabri underground operation, owned by Whitehaven Coal.
Caruso said on the latter: “We were looking at building out that software into other areas of our business – we used that in our production machines when we were cutting coal, but we were starting to look at bringing that across to a lot of the other support services we provide to customers as well.”
Should PYBAR come on board, Simbio could end up being used on its coal development machines, according to Caruso.
It works the other way round, too, with Mastermyne’s proximity detection expertise in coal having applications in the hard-rock space.
“Not only are these solutions OEM-agnostic; they are sector-agnostic,” Caruso said. “The same technology is applicable for coal and metalliferous markets.”
The benefits of the business combination do not stop here.
Growth in the coal space has mostly been tied to sustaining capital projects – the overall production levels have remained flat, if slightly increased – whereas, in the hard-rock sector, brownfield and greenfield projects have been the order of the day, catalysed by higher prices and projections of increased demand.
This means the pressure dynamics around skilled labour are slightly different between the two.
Mastermyne has, to this point, benefitted from the ongoing trend of majors exiting their thermal coal businesses to deliver on ambitious ESG targets, with smaller companies taking on these assets and outsourcing work to contractors. Mining contracts at Crinum (Sojitz Blue Pty Ltd) and Cook (QCoal) in Queensland are two examples of the company taking advantage of this trend.
This type of sustaining growth capital expenditure in the coal sector is very different to the greenfield growth witnessed in 2010-2012, Caruso said. “The significant volume increase in greenfield expansion, which drove real pressure on labour, is not there,” he said.
In the hard-rock space, the dynamic is much more reminiscent of that boom a decade ago.
“There are a lot of new projects in Western Australia opening up so there is a lot more pressure on resources because the demand is far outstripping the supply in the hard-rock labour pool,” he said.
While there has not, typically, been a transfer of labour between the coal and hard-rock contracting sectors, if Metarock is able to facilitate such a shift, it could gain a competitive advantage over peers scrabbling for talent that are focused wholly on the hard-rock mining space.
“We have a workforce of 2,000-2,500 people at the moment, and we want to have a fluid workforce that can move across sectors,” Caruso said. “This will enable us to send our best people to projects to make sure we replicate good performance at these operations, regardless of where they are, geographically, or what type of work they are doing.”
Not only could this provide Metarock with the ability to shift employees between sectors, but it could also allow them to offer employees long-term security beyond the current Australian coal demand horizon.