Many of the sales people in our companies come back from operational site visits with similar feedback. “Don’t mention the ‘I’ word.” That being innovation. Mining companies are wary of introducing new things into their complex operational systems.

Unlike Australian prime minister, Malcolm ‘Disruption is our friend’ Turnbull, mine and mill managers are loathe to disrupt any part of their process unless it has been tried and tested and proven many times before, and at someone else’s operation. The reasons behind this are understandable. Mining companies invest a huge amount into pre-feasibility, and then feasibility studies followed by the tendering and procurement decisions followed by commissioning and testing and getting the bugs ironed out and finally operations with never ending bugs to iron out.

This takes place over many years and building up a reservoir of expensive knowledge and scar tissue through painful and costly mistakes. The last thing mine managers want is for someone to push and prod at the scars, a feeling that many have when presented with an ‘innovative’ technology product.

Another likely reason is that mining is inherently risky courtesy of the amorphous mass of mineral and waste with hazy boundaries called an orebody. It could be argued that the sole task of operational management is to continually try to balance the risk ledger by de-risking their operations. New technology is seen as risk additive, not diminishing.

To overcome this, an approach our companies take, is to position their products as just that – products. This can be done through showing them in catalogues, both online and hard copy, and with printed specification sheets that position them alongside the engines and pumps and gear that they buy all the time. The more it looks like it will fit into the warehouse and maintenance workshops the better.

Another technique is to give away stickers and caps and key rings. This is old-fashioned salesmanship, but that’s a good thing. Old fashioned things are generally lower risk. But the best way to overcome the dreaded ‘I’ and ‘D’ words is through testimonials from satisfied customers. The more the better. In this day of video on smartphones, the best testimonials are video talking heads that can be viewed by operational management on their smartphones anywhere and can be forwarded to their peers. The videos need to be as professional and watchable as TV commercials with professional voice actors, 3D animations, etc.

If done correctly, not only will the product be seen as having passed the tried and trusted test, but the METS company will be perceived as being as professional as the quality of its video.

Technology is not services

In the investment community there is a common misunderstanding that ‘mining technology’ is the same as ‘mining services’. In the downturn since the end of the mining boom, with the share prices of quality companies such as Ausenco and Monadelphous having dropped 91% and 71%, respectively, since Feb 2013, that’s not a good thing.

In the same period, the S&P/ASX 200 Information Technology index has increased by 20%. Our view is that mining technology companies are more closely related to IT companies than their services cousins. Comparable valuation metrics (multiples of revenue and EBITDA) are significantly higher for technology companies when compared to services businesses.

But does it matter what investors think? It matters a lot.

When investors back a sector as being a good place to invest, it becomes self-fulfilling. Investment is more likely to find its way to those companies, even the private ones, and they in turn have the additional working capital they need to grow more quickly. As they grow, their share prices increase, the investors are happy and they want to invest more. The converse is not a good place to be as Ausenco and Monadelphous can testify. 

To overcome this is not easy, and will require concerted marketing campaigns by industry bodies in Australia such as Austmine and the newly-formed METS Ignited, and Canada’s CAMESE and CEMI. Unfortunately, many of these have large services companies as members too, making it difficult to focus on the technology and not the services.

For individual, capital ‘T’ METS companies one approach is to market to investors as having a suite of technology products that have wider markets than just the mining sector. Along the lines of, “we might have many large mining clients but our products are also used by government defence agencies, transport companies, etc”. Having an office in a tech centre such as Silicon Valley also helps, even if its just a serviced office. The more the company can mimic the look and feel, and best-practice websites of Silicon Valley tech companies, the better.

Making marketing a priority

Mining technology companies generally do a poor job with marketing and branding. The norm, and not the exception, is to find highly-technical information proliferating company websites, aimed at a narrow technical buyer audience. Ironically, websites and other marketing collateral can act as a deterrent if the broader audience, and particularly managerial decision-makers, are left to feel inadequate in their knowledge. A remedy for the scenario where the technology is highly complex requiring reams of words to describe, is the use of infographics and animations and videos to break it down for a non-expert.

Presentations of products at conferences are often lacklustre as well. These should be Steve Jobs-like in the way they engage and enthral the audience. Powerpoint slides with endless words and technical acronyms are the norm, just as they probably were before Apple showed how marketing of a technical product – a computer – could make it a sexy, must-have thing.

Mining technology companies have an endless array of leading-edge, cool things to show off – from UAV’s to laser rock guns, to robotic core-tray analysers. The complaint, “it doesn’t live up to its hype”, is never levelled at the mining tech sector due to the subterranean level of the hype. It’s time METS companies started amping up the hype.

Just as biotech companies are seen as high growth and highly investable in contrast with the slow growth, bureaucratic-bound health industry it services, mining tech companies should wear the ‘tech’ label as a badge of honour and be seen as a separate, standout growth sector with far more upside than the mining industry it services. 

*Lex McArthur is a director of Jolimont Global Mining Systems, a specialised investment vehicle (backed by Jolimont Capital and Resource Capital Funds) that invests in high-growth mining equipment, technology and services (METS) companies. http://jolimontgms.com/