Miners enhancing innovation focus amid COVID-19, ESG pressures – tech provider

Workers deploy one of Imdex's drilling optimization technologies at a test site. Source: Imdex Ltd.

COVID-19 has cemented the structural shift in both the world's drive for green technologies and the way miners engage with innovation to deliver the minerals to meet that demand, according to mining technology group Imdex Ltd.

The Australian company flagged the "structural industry changes" in a Feb. 8 announcement on its results for the first half of fiscal 2021, reporting a 6% yearly rise in adjusted EBITDA to A$33.1 million despite a 3.4% fall in revenue to A$124.3 million.

Imdex said it has a record number of gyro-related technologies on rent and reached a milestone with a record number of instruments on rent for December and January amid a "positive outlook" for mining technology. Gyros help companies understand the geological structure prior to mining

Imdex said investment in "decarbonization metals" such as aluminum, cobalt, copper, nickel, and lithium — used in renewable energy and electric vehicles and batteries — was driving its optimism about the future, along with mining's "essential role in global economic recovery," while the industry itself embraces new technologies more readily.

Though the mining industry tends to have a relatively flat bell curve for adopting new technologies compared to other industries, Imdex CEO Paul House told S&P Global Market Intelligence that restrictions on mine site access due to COVID-19 have prompted companies to find innovative ways of operating.

House said companies are seeking new solutions around how technology is deployed, how data is captured and analyzed, and the training to facilitate these processes, so that miners can "keep the wheels rolling" when COVID restrictions prevent them from moving people on and off project sites.

A number of initiatives that have been in Imdex's pipeline for some time have been brought forward by between two and four years in terms of their market penetration and adoption, because mining companies are now "pulling them into the market, rather than us trying to push them into the market," House said.

This also represents a "massive structural shift in the way mining companies are engaging with innovation and technology," he said, which means Imdex has a "much more willing ear" when putting ideas forward.

Exacerbating factors

This shift comes at a time when the supply shortage either existing or looming in many commodities is being exacerbated by reserves being depleted faster rate than they can be replaced, and by various stimulus packages across the U.S. and Europe aimed at facilitating green technologies, he said.

This same positive sentiment saw a year-on-year surge in the number of ASX metals and mining IPOs in 2020 despite COVID-19.

Oaktree Capital Management LP's drilling business DDH1 Drilling Pty Ltd. will list on the ASX on March 8, targeting A$150 million for the IPO at A$1.10 per share, which would imply a A$376.5 million enterprise value and market capitalization, The Australian Financial Review reported, citing terms sent to funds.

"Big mining companies will become much smaller mining companies unless they put their hands on more reserves," House said, and to do that miners can either carry out more deals, or continuously improve drilling efficiency.

While the decarbonization drive existed well before the coronavirus pandemic, House said the health crisis was the "true test" of whether companies would let go of initiatives previously thought of as "discretionary."

Instead, COVID-19 proved the "tipping point" for global environmental drivers, and House believes it is inevitable given various government policy announcements around internal combustion engines, and major downstream customers like Tesla Inc. striking deals direct with mining companies.

House noted that while the average internal combustion engine car has 10 kilograms of copper, the average electric vehicle has about 80 kilograms, indicative of potential for demand to soar as electric vehicles catch on more broadly. Thus all companies in the mining ecosystem, be they explorers, producers, drillers, mining services or technology companies are vital for meeting that demand, he said.