THE scale of the mining sector is readily apparent to many Western Australians, but the size of the mining services industry may not be so clear.
Independent economist Ed Shann set about filling this knowledge gap after he was commissioned by the Minerals Council of Australia to write a paper on the resources boom.
Dr Shann estimated the mining services sector has doubled in size, from 4 per cent of output in the decade to 2002-03 to an expected 8.4 per cent in 2011-12.
His paper said mining services output was growing at 15 to 20 per cent a year, meaning it is set to become an even larger part of the economy.
Adding in actual mining activity, Dr Shann estimated the sector as a whole was equivalent to about 20 per cent of the economy.
Despite these figures, some commentators continue to think of the mining sector as relatively small.
Dr Shann said the rapid growth in mining services reflected three trends: the surge in mining investment; increased contracting out to specialist providers; and the growth of sizeable Australian mining service firms that were diversifying internationally.
He added that the growth of the mining services industry had been customer driven, and that government policy had not played an important role.
Dr Shann’s estimate of the size of the mining services sector drew heavily from the accounts published by listed companies.
He said there were 122 firms listed on the ASX with combined mining services revenue of $86 billion in 2010-11.
Twenty of the top 150 ASX firms by market capitalisation have substantial mining service revenue.
National examples include construction, engineering and mining contractor Leighton Holdings, engineering specialist Worley Parsons, explosives manufacturer Orica, testing company Campbell Bros, drilling contractor Boart Longyear, mining contractor Downer EDI and manufacturer Bradken.
Engineering and construction contractors Monadelphous, and contractor Mineral Resources, which is also a miner in its own right, led the Perth-based examples.
Both companies are among the 10 largest WA stocks ranked by market value, according to the Deloitte WA index.
Other examples are engineering and construction contractors Macmahon, Decmil and Forge Group; drilling contractors Ausdrill and Swick; engineering firms Clough and Lycopodium; drilling equipment supplier Imdex; and mining contractors NRW and Maca.
Another listed company that can be added to the list is Seven Group Holdings, a curious beast that has media and banking investments alongside its core WesTrac business.
WesTrac is the dealer for Caterpillar equipment in WA, NSW and part of China, and is therefore at the forefront of the mining boom.
Seven recently deepened its exposure to the sector by agreeing to buying part of the business of equipment dealer Bucyrus.
That was designed to make it a more effective competitor against competing equipment suppliers such as Joy Global, Komatsu, Hitachi and Liebherr.
Global conglomerate GE showed its keen interest in the mining services sector earlier this year, when it announced an agreed $700 million takeover of ASX-listed company Industrea.
As well as the ASX-listed companies, there are numerous unlisted businesses that make a large contribution to the mining services sector.
Two of the most prominent are profiled in the accompanying article – Perth-based mining contractors Barminco and Byrnecut each turn over more than $700 million, and have taken their expertise to the international market.
On a smaller scale are Perth businesses that are global leaders in mining technology, such as simulator manufacturer Immersive Technologies and mining software developer Micromine, also profiled in this feature.
Dr Shann said that, because neither the Australian Bureau of Statistics nor the ASX identified mining services firms as a ‘sector’, their importance and rapid growth is often overlooked.
“They represent a cluster of internationally competitive Australian firms in construction, engineering, drilling, manufacturing, logistics and services that produce often high technology products and high value added services,” he said in the Minerals Council report.
