Contract Mining Services

Global Market Outlook on Contract Mining Services

MARKET OVERVIEW

Value of Contract Signed: $5.03 billion (2022)

Global Demand CAGR: 3–4 percent (2022–2024)

Key Market Drivers : Depleting ore grades in mines has increased the demand for contract mining.

• Surge in the pricing of base metals, due to macroeconomic factors, had driven the demand of contract mining services during H1 2022. Technology and workforce from mining-focused regions will provide the impetus to the contract mining market, in terms of growth prospects

• Increase in demand for metals and minerals, coupled with declining high-grade ore heads, is the key driver for contract mining

Contract Mining Market Overview: Global

Globally, the contract mining industry is expected to witness growth in 2022, owing to high commodity prices prevailing during H1 2022. Push toward sustainability, coupled with a volatile pricing environment, is expected to drive the demand for automation services in the long term

• The demand for the global contract mining services market is increased during H1 2022, owing to high metal prices prevailing in the market

• In earlier years, the COVID-19 pandemic discouraged major mining companies from investing in exploration, owing to the weak commodity market. However, the market is improved in recent times, but uncertainty still persists, due to the spread of COVID-19 in China

• Demand for automation services is expected to increase until 2024, owing to volatile market conditions and commodity cycles

• On the other hand, weak macroeconomic indicators and an anticipated drop in base metal prices could slow down the demand for contract mining services during H2 2022

• Globally, mining operations, along with mine development and drilling services, constitute around 70 percent of the services in contract mining, followed by engineering services, mine auxiliary services, and dump management contributing to the rest

• Drilling services (15 percent) are mostly outsourced across the globe, as major mining companies are reluctant to buy capital-intensive drill rigs, which are used in exploration, as they are capital-intensive, due to volatile commodity prices

• Coal and gold mining companies during H1 2022 actively signed new contracts/extended their contracts in Australia and Indonesia

• Major scope of services included under the contract was mine development, drilling services, production support, and equipment maintenance services

• However, an anticipated drop in the commodity prices during H2 2022, coupled with weak macroeconomic indicators, could slow down the growth in H2 2022

Global Contract Mining Services –Drivers and Constraints

Drivers

Lower, defined mining costs

• Reduced capital expense for the mine owner, which allows them to better utilize their cash and also focus on the company's other core capabilities, which may be exploration, sales, and marketing.

Depleting ore grades in mines

• Depleting ore grades in surface mines have influenced miners to perform deeper mineral extraction, which has increased the demand for contract mining

Large pool of machinery and skilled employees

• The contractor has flexibility in equipment and always deploy modern machinery to compete with other contractors

• Deploying employees from the contractor means that the mine owner has smaller workforce and brings effective performance management systems

Constraints

Slump in demand for commodities

• Fall in commodity prices, as a result of a decrease in demand, would deter mining investments, thereby leading to mine expansion stoppages.

• This would affect the demand for contractors in the mining market.

High dependence on labor

• Mines are characterized by a low degree of mechanization. Labor spend constitutes around 35 to 40 percent of the direct mining cost.

• Mine mechanization has been increasing steadily, there still remains a large number of mines, where drilling and clearing are performed manually.

• The primary reason for this is narrow shafts in mines, which make mechanization unprofitable.

Degree of mine mechanization

• Underground mining is experiencing a shift toward mechanization, which is decreasing the need for contract workers.

Cost Structure Breakup: Contract Mining

The major cost factors involved are equipment purchase expenditure and labor costs, which account for ~75–80 percent of the total cost.

• Pricing is done mostly on per ton or per meter basis, together by mine owners and contractors, also based upon the region, the ore to be mined and type of mining involved (underground rates are typically 30–40 percent higher than surface)

• Alternatively, mine owners can float tenders inviting multiple contractors to quote based on the scope of work assigned

• The profit margin, mostly in the range of 10–15 percent is decided based on the maturity of the contractor, the demand from the customers in that region as well as the competition among the suppliers

Why You Should Buy This Report

With this mining services industry report, you get:

• Insights on the global contract mining industry outlook, maturity, industry trends, drivers and constraints.

• Regional contract mining market trends of North America, Europe, LATAM, MEA, and APAC.

• Porter’s five force analysis of matured and emerging contract mining industry.

• Supply trends and insights, supplier profile and SWOT analysis of major players in the contract mining market.

• Best sourcing models, cost drivers, cost structure, and pricing models.