What does FLSmidth’s recent high profile acquisition of Sandvik Mining Systems mean for the ambitious global mining and minerals solution firm and its growing customer base? ABE spoke to one senior FLSmidth executive to find out more about the deal’s significance.
At the beginning of July 2017, FLSmidth and Sandvik reached an agreement for the former to acquire the project business portfolio of Sandvik Mining Systems. This agreement includes Sandvik’s continuous surface mining and minerals handling technologies and competences which will strengthen FLSmidth’s core minerals business offering. Through the acquisition, the company will obtain direct access to all of Sandvik’s key processes and equipment, enabling FLSmidth to improve the full value chain thereby providing better utilisation of its existing competencies.
Headquartered in Copenhagen, Denmark, and with offices in more than 50 countries, FLSmidth may not be a well-known name to some, but now delivers engineering, equipment and service solutions to customers worldwide. Productivity, sustainability, and quality are the main focus areas for FLSmidth, which now has over 12,000 employees, and a turnover of approximately DKK 18 billion (around €2.5 billion) in 2016. The company has certainly produced strong results under its ex Sandvik CEO, Dr Thomas Schulz. In fact, the company now perceives itself as the market leading supplier delivering productivity specifically to the global mining and cement industries.
Now the pending acquisition of the Sandvik surface mining and process offering will enable FLSmidth to improve the productivity of its customers by closing an ‘offering gap’; this covering a wide range of equipment and services in the full mining value chain. It is thus envisaged that this will now enable FLSmidth to supports its customers from the primary crushing point in the mining pit, the transport from mine to plant, all the way through the minerals processing plant to the tailings handling; in effect a full ‘pit to plant’ solution.
Although the acquisition does not affect any Sandvik manufacturing plants, the intellectual knowledge and expertise acquired is undoubtedly a boon to the Danish company. Michael Duricko, vice president strategy & business development mining for FLSmidth, explains: “The acquisition will, when it becomes effective, strengthen our systems offering to the mining industry. By better integrating upstream mining with downstream processing, FLSmidth will be able to increase the productivity of the complete ‘pit to plant’ operation.”
The agreement between FLSmidth and Sandvik essentially covers the part of Sandvik Mining Systems (SMS) that is closest to the mine. This includes all products for continuous surface mining, in-pit crushing and conveying, waste/dry tailings handling and so forth. As well as products and services, this will also affect a significant number of Sandvik employees.
FLSmidth has stated that all Sandvik employees who are part of the acquired operation with strong experience, resources and customer insights of continuous surface mining and minerals handling technologies and related intellectual property will be valued. “We are looking to take all people needed to execute the current backlog, plus be able to maintain it as a sustainable business area in the future, and to support our existing mining and minerals systems business. We will utilise the time between signing and completion to finalise these numbers,” said Duricko.
There is little doubt that the acquiring of the Sandvik business will further improve FLSmidth's ability to offer mining customers increased productivity when merged with its existing offering and capabilities.
Duricko explains: “Deeper mines, lower ore grades and environmental constraints etc. requires mines to haul more material over longer distances and higher elevations. Cost pressure (increases) will require new continuous technologies to transport the ore from the mine to the processing plant. Therefore, particularly in-pit conveying, is expected to be a big driver for increased productivity in mining.”
It is by adding a number of new technologies and intellectual property, including an extensive reference list, to the FLSmidth portfolio, that the company aims to emerge as a major player within surface mining specifically, and undoubtedly increase its offering in aggregates. This can specifically be seen in as well as delivering cost advantages to its customers, acquired technologies will offer other advantages such as lower energy costs, lower work force requirements for operation and maintenance, lower environmental impact, ease of automation and so forth.
A further provision of the acquisition will be that FLSmidth will provide project management and aftermarket services to Sandvik on most of its ongoing projects to be delivered between 2017 and 2019. What this essentially means is that all Sandvik employees currently executing Sandvik Mining Systems projects that are not transferring to FLSmidth, will become FLSmidth employees for a certain agreed time period. “We have agreed under certain pre-negotiated terms and conditions to provide the services necessary for them (Sandvik) to fulfil their contractual obligations to their customers,” explains Duricko.
