IBM finds silver lining in resource sector
A haul truck is loaded by a digger with material from the pit at Rio Tinto Group's West Angelas iron ore mine in Pilbara, Australia. Photo: Ian Waldie
IBM is beefing up its natural resources capability as tougher conditions force miners to use modelling systems, supply change optimisation tools and get communication technology to work smarter instead of harder.
IBM's natural resources director, Murray Bruce, said rising prices and booming demand meant mining companies had focused on acquiring more equipment and expanding processing and transport infrastructure to get minerals out of the ground and onto ships as fast as possible.
While storm clouds in the form of falling prices and stalled projects may be gathering across the sector, they have a silver lining for IBM, as miners seek out ICT solutions to maximise efficiencies and boost the health of their bottom lines.
Commentators have begun questioning whether Australia's once-in-a-generation boom is over, on the back of fears that a high dollar, falling demand from China and increasing costs have slammed the brakes on growth.
BHP Billiton cancelled its $20 billion Olympic Dam expansion last month, while the mining services company Macmahon Holdings has taken a bath after warning its profit would fall 64 per cent this year, following uncertainty about the outlook for major projects.
Bruce said focus this year had shifted away from physical expansion towards improving the efficiency of existing facilities, reducing bottlenecks in the supply chain and maximising prices for spot cargos, which comprise a growing percentage of iron ore sales.
“We're seeing [companies] saying, 'how do we make sure our capital expansion is low?'” Bruce said.
Demand for ICT services was coming from miners' research, operations and sales and marketing divisions, with some clients seeking quick gains from simple solutions such as "telepresences" – high-quality video conferencing facilities which reduce the time and costs spent on travel to remote sites.
More complex projects include building a customised model for Crosslands Resources to simulate the shovel-to-ship supply chain at its Jack Hills site in the mid-west, slated to commence operations in 2015. The 3.89 billion-tonne iron ore deposit is seven kilometres long and 500 metres deep and the mine is expected to have a minimum life span of 40 years.
The Crosslands geology vice-president, Roland Bartsch, said the simulation had been used to demonstrate to shareholders that production and profitability forecasts could be met and to identify and pre-empt costly hold-ups in the extraction, processing and transportation process.
IBM has pumped up its resources expertise in a bid to position itself as the go-to provider of complex computing solutions to major mine operators in Western Australia and Queensland. Headcount at the firm's Perth office has risen from 120 two years ago to 400, about 80 per cent of whom work with resources clients.
WA shares some staff with Queensland, where further expansion is slated for the next year, as IBM makes a play for the supply chain optimisation work associated with that state's rapidly growing network of coal seam gas wells. Bruce said the firm was seeking additional staff for its natural resources research centre and via the IBM graduate program.
Other high tech players have piled into the west on the back of the boom, including Fujitsu, which last month announced plans to upgrade its Perth data centre in response to demand from the resources sector and its supporting industries.
According to the old adage, no one ever got fired for buying IBM. In cautious times, miners were looking for the comfort factor of dealing large vendors rather than managing a grab-bag of smaller players, Bruce said.
The firm played the role of technology interpreter and concierge to some clients which, despite their size, were not sophisticated users of information systems, he added.
Sylvia Pennington travelled to WA as a guest of IBM.