Third Party Services
Adding value so mining companies can focus on their core business
Outsourcing has become part and parcel of successful heavy industry for many years, but third party service providers faced a unique challenge in 2020, as companies were forced to reduce workforces to the bare minimum and minimize the number of contractors on site. Labor-intensive jobs such as fleet maintenance are vital to the day-to-day activities of an active mining operation, but rely on a high level of activity at the mine site.
For Confipetrol Andina, a large player in the industrial third party services space, the pandemic resulted in a temporary reduction to its 4,500-person workforce, as many of the operations it supplied personnel to were not deemed essential. Its’ services to the petroleum industry continued through lockdown, but despite Peru’s economic dependence on metal production, the mining sector was not as fortunate.
Wilson Miranda, Confipetrol’s general manager, related that the situation had improved by the end of 2020: “Fortunately today (January 2021), we are back to a higher percentage of working capacity, but social distancing measures make it difficult to achieve pre-Covid levels. While sales and profit were down between 5 to 10% in 2020, we expect to grow between 10 and 20% in 2021.”
Having worked for the likes of Nexa Resources, Minsur, Chinalco, Hudbay, Antapaccay and Las Bambas, rising metals prices offer increasing opportunity for Confipetrol to provide its services, so that mining companies can focus on production optimization.
Miranda elaborated: “Our third party services include the operation and maintenance of concentrator plants, open-pit equipment, fleet maintenance and underground mine equipment, and taking care of these concerns for mining companies means they can focus on their core business.”
“We know the importance of catering and facility management services in mining operation. Throughout delivering our services to the highest standards, we are willing to support our client in increasing operation productivity, maintaining health & safety incidents at lower level and keeping peaceful social climate.”
Lionel Moreira, Country Managing Director – Peru, Newrest
Leading French catering company, Newrest, has a large experience in catering, base camp and facilities management and is seeing great growth potential in the mining industry as the result of continuous development of the sector. One of its core area of business is in-flight catering, a sector that has been heavily affected by the pandemic, however its the company plans to develop its mining portfolio even further, and offer additionally alternative services through its Inflight plant, according to Lionel Moreira, Newrest’s country managing director for Peru. “We own a production plant and can offer different ways to produce meals and build strong relationships to fulfill the requests of our clients.” explained Moreira. Newrest signed a contract with Mina Justa in March 2021 for the provision of food, hospitality, and facility management services for over 1,200 workers and started operations during national lockdown. “The first challenge in providing catering services to remote locations is the logistics.” said Moreira
“’Be Rental’ is part of our digitalization process. Its goal is to capture the clients’ needs and through that, provide them with a solution, locating the correct equipment and products, reaching them in a more modern and effective way.”
Edmund Egg Noche, General Manager, SK Rental
Sodexo is another important French player in the provision of third-party services in Peru, with a wide portfolio of services including food, laundry, cleaning, hospitality and facilities management. Despite the complex circumstances, the company started several new operations in 2020 with Hoschshild, Minsur, and Anglo American. These projects have reflected the sector’s ability to adapt and to maintain supply chain continuity during an unprecedented situation. The pandemic accelerated the inauguration of a command center the company had been working on for several years, according to Alfonso de los Heros, president of Sodexo Peru: “This command center constitutes a neuralgic center from which we can serve clients remotely with digital solutions, supervising their operations and carrying out safety walks”.
Providing shelter and camp solutions for the mining industry is WHC del Peru, born from the association between the Canadian Weatherhaven Global and the Peruvian Cidelsa. WHC has vast expertise in the provision of shelter solutions to remote areas. Housing solutions are customized for each client taking into account geographical location, the duration and capacity of each project. “Our aim is to make shelters comfortable for the mine’s workers, as their well-being is closely linked with the success of the project”, highlighted Hugo Cueva, WHC’s general manager for Peru.
While the pandemic posed some challenges for the company, it also brought substantial opportunities, as their temporary camps became highly requested by mining companies to keep their workers isolated before or during the execution of projects.
One of the areas of outsourcing with potential for growth in Peru is the rental market, which has not yet garnered the same level of penetration as in Europe or North America. American car rental company Avis focused on controlling costs in 2020 to mitigate the impact of the pandemic, according to Fernando Martínez, general manager of Avis’ Peru, however, he expects to see 20% growth in 2021 on the back of vehicle rentals. Although spot rentals, oriented towards mining pick-ups, have suffered, Martínez revealed that there has been an uptick in interest for long-term rental contracts with mining clients: “Mining companies are seeing the benefits of outsourcing non-strategic assets such as vehicles in order to focus on their core business.”
Martínez elaborated on the evolution of the rental market, with digital services now a pre-requisite for clients: “Several years ago, the rental business simply involved delivering vehicles to our clients, but today, we make all the information related with the vehicles available to our clients through platforms and apps. If we do not offer customized information, our vehicles turn into a commodity where we can only compete by price.”
Part of the Sigdo Koppers Commercial (SKC) Group, SK Rental specializes in the rental of machinery and the sale of semi-new or used equipment, and has worked on many of the major mining projects in Peru, including Las Bambas, Cerro Verde, Mina Justa and Antamina. Edmund Egg Noche, the company’s general manager, related how SK Rental has undergone a shift in its commercial discourse: “Instead of being known for a specific portfolio of products and services, we aim to be seen as solutions providers”.
This shift includes investment into digital solutions, such as “Be Rental”, a digital platform that, explains Egg Noche: “Captures the clients’ needs and through that, provides them with a solution, locating the correct equipment and products, reaching them in a more modern and effective way.”
Image courtesy of Gold Fields
Rejuvenated exploration activities have escalated demand for lab services
The recovery of the mining sector and high metals prices in 2021 have encouraged exploration activities from both producers and juniors, significantly increasing demand for laboratory services and metallurgical analysis. This presents tremendous opportunity for geochemical specialists, but has also resulted in long delays for assay turnaround due to a lack of lab capacity.
Although the challenge of keeping up with demand has delayed exploration results in a number of countries, Miguel Caillaux, director of Certimin, commented how the company has managed to reduce the response time of the geochemical tests from 20 to seven days for Buenaventura. In this respect, he described Certimin as a boutique lab as it can adapt to the requirements of each client.
Expanding on the current trends Certimin is observing for laboratory and metallurgical services, Caillaux said: “We are in the process of technifying our labs, making investments in more efficient equipment and new services. Our services in the geochemical and environmental areas have also been growing, where we are implementing automated equipment.” Luz Blancas, Certimin’s business development manager, spoke about some of the company’s latest projects, including setting up a laboratory for Nexa Resources’ Cerro Lindo, and working with juniors such as Panoro Minerals, Pucara Gold and Palamina (at Certimin’s Juliaca base). She added: “We have had a long-term relationship with Macusani Yellocake, and expect to initiate new operations with them after the American Lithium acquisition is complete, working with over 40,000 m of drilling core.”
On the R&D side of the business, Certimin has developed an alliance with ECOMETRIC in Chile, to develop environmental solutions that currently do not exist in Peru, revealed Jonathan Campbell, Certimin’s deputy general manager. Explaining how the collaboration with ECOMETRIC has helped Certimin learn from their experience in the Chilean market, he elaborated: “It allows us to offer online services of continuous measurements for mining operations that are particularly important and need constant measurement.”
Image courtesy of CERTIMIN
Costs have risen due to the pandemic, but logistics services remain fundamental
Logistics was one of the few activities deemed essential by the Peruvian government, as well as governments abroad, so it did not stop domestically or internationally during the pandemic. However, the enforced halting of mining activities during 2020 impacted logistics providers in a country whose mineral production makes up 60% of its exports.
Although we did not stop working, the mines were operating with no inbound or outbound logistics, and we saw very low occupation of our transport units,” related Aurelio Palacios, general manager of Acoinsa, speaking about the disruptions in Q2 and Q3 2020. On the other hand, Palacios revealed that the Peruvian logistics market has been far better in 2021, and the transport company with over 30 years of operations in Peru is expecting to achieve similar revenue to 2019.
Acoinsa transports heavy cargo for both mining companies and mining providers (such as Ferreyros and Komatsu), including electrical components, components for production, shells for mills, and components for mining process. “In 2020, we bought a freightliner fleet from Divemotor and a heavy load transportation fleet from Kenworth. The freightliner fleet was bought to move sulphuric acid for Mina Justa, as part of Acoinsa’s contract with Marcobre. The fleet we bought from Kenworth was a renewal of part of our heavy load fleet,” detailed Palacios.
“The cost of logistics has increased significantly because of the new protocols implemented due to the pandemic, the rise in fuel prices, and the US$ exchange rate. The increase in operating costs over the last year means we need to be creative to find ways to save on expenses, including working on tender processes with the supplier market to find the best quality products at the best prices.”
Aurelio Palacios, General Manager, Acoinsa
Observing that the cost of logistics has increased significantly in the past 12 months, due to new protocols implemented during the pandemic, the rise in fuel prices, and the US$ exchange rate, Palacios underlined the importance of creative collaboration between suppliers to find lower cost solutions. Another company specialized in the transport of heavy cargo is Stierlift, which has formed part of the Ultramar Group for almost 10 years, a multinational logistics services company headquartered in Chile.
Aldo Macassi, commercial manager at Stierlift, listed the company’s mining-focused services as the transportation of equipment for processing and concertation plants, mills, crushers, conveyor belts and large electrical goods. Stierlift also transports large earth-moving vehicles, drills and trucks for the likes of Caterpillar and Komatsu. “Any equipment with particularly large dimension and weight is our core business,” he clarified.
Discussing the company’s objectives in Peru’s mining industry, Macassi mentioned that Stierlift is currently involved in large capex projects, but intends to grow in the opex side of operations. Summarizing, he said: “In this respect we are amplifying the company’s range of services so we can provide different options to mining companies, in addition to our traditional heavy cargo transportation. We are also working on warehouse management and docking systems which will help improve logistics times.”
Image courtesy of Minsur