Silicon Dale

Whither mining software ?

More specifically, whither the mining software companies ? I am writing here about the small group of companies that produce internationally marketed mining software systems - i.e. 'complete' systems from geological deposit modelling through mine design and production scheduling (more about what constitutes 'mining software' in a future column). It really is a small group. In alphabetical order, there are Datamine, Gemcom, Maptek (Vulcan), Mincom (Minescape), Mintec (Medsystem), Surpac, and Techbase. Most of these companies were started in the late 1970s to mid 1980s. Their relative market positions were well established before 1990 and have changed little since then. There were originally two other members of this group. The first of these was CAI (Computer Associates Inc), a subsidiary of the computer manufacturer Control Data Corporation. This company, with Mintec, was one of only two of any significance operating in this field during the 1970s. It was spun off from Control Data in the early 1980s, becoming Geosolutions Inc., but the obsolescent software progressively lost market share, and Geosolutions for a while were actually marketing Datamine in the USA. The second was Lynx - formed from the merger of Geomin, Geosystems International, and the Wright Engineers' Cadmin group. Lynx progressively lost its market share and ceased trading in the mid-1990s.

There are, of course, other companies operating in the mining software field, but they have different market profiles - either their products are different (such as Whittle Programming, still virtually monopolising the open-pit optimisation sector) or they have a loyal but local market (such as Micromine, which has not made any real impact beyond Western Australia and south-east Asia)

For many years now, it has been forecast that there will be a 'shake-out' and that several of the mining software companies would disappear, either through insolvency or takeover. This hasn't happened. However, the market for mining software has, for some years, been close to saturation, and it is likely that many of the software companies are surviving principally on income from maintenance contracts, training courses, and consultancy, with new sales being made mostly by poaching each others' clients. This clearly restricts the finance available for new product development. What is emerging now is that the companies which remain most vigorous are those which have a successful strategy for maintaining and increasing their cash flow. This could be diversification - perhaps most strongly shown by Mincom, which has made an impact with MIMS well beyond its traditional mining market. Or it could be stock-exchange listing, as was done by Gemcom (and is soon to be attempted by Whittle Programming).

There is a bigger question mark over many of the mining software companies. That is over their future ownership. Most of these companies are in private ownership with just one or a small group of individuals holding the majority of shares. These tend to be the same individuals who founded the companies, maybe twenty years ago, and who are now close to retirement age. Because their companies are private, they have no objective valuation. All we have is a few clues which give a wide range of possible valuations. The flotation of Gemcom and subsequent fluctuations in its share price would put a value of several million Canadian dollars on that company. For the private companies no-one outside those companies has any information beyond the trading accounts which must be filed in their respective countries of registration. However, for Datamine, the value placed on that company for internal share transactions in the late 1980s was in the region of 400,000 while at the time of my departure in 1993, the price actually paid for my own shares valued the company at 60,000. In any case, the owners of all of these companies would probably wish now to place a high - and perhaps unrealistic - value on the risks they took and the efforts they put into founding and building their businesses, in order to secure a comfortable retirement.

This makes the problem of succession particularly difficult. The ownership could remain in the hands of people who progressively are less involved in management of their business - but who wish to continue to draw income as directors fees or dividends. It could be transferred (at a possibly inflated price) to employees through direct sale or share option schemes, though the rules attached to employee share ownership can become quite complex, especially in an international company - and there is little incentive for employees to buy a minority interest unless there is a clear and generous policy for payment of dividends. The company could go for stock exchange listing. However, this is expensive, and most of the mining software companies are really too small, and without sufficiently attractive growth prospects, for this to be a practical alternative. There is always the possibility of consolidation in the industry. There have been many rumours of takeover bids for one mining software company by another - and probably at some time every company has been suggested as a bidder or a biddee for every other. But there haven't yet been any successful takeovers of this type. The merger which led to the formation of Lynx was probably the closest. The big problem with such mergers or takeovers is the incompatibility of different product lines, combined with the need to integrate different subsidiary and dealer networks. For small companies the problems, both technical and organisational, could easily threaten the viability of the merged business.

Is there any answer to this problem ? In the short term probably not. In my view the mining industry as a whole is harmed by the financial weakness of most of the mining software companies. Each has a hard-core loyal user base, but these users are all well aware of the limitations of the resources available to their mining software suppliers for new development or even for maintenance of existing products. The glossy brochures hide a great deal of obsolete and poorly maintained software.

In the longer term, the best hope is for standardisation - imposed from outside if necessary - which will enable (well, force) interoperability among systems either at the data interchange level or at a level of true systems integration. A small step in this direction has been taken by a number of mining software suppliers adopting the ODBC standards for their underlying databases. A very promising approach has been made by an informal international group, centred in Australia, towards developing XML standards for mining data interchange, and it seems quite likely that this will have enough momentum - and backing - to become widely adopted. What will be the effect of such standardisation on the mining software companies. In one sense it doesn't really matter. A positive result should be that the field is opened up to new entrants, and that no-one any longer would need to supply a complete integrated solution. Each company would supply modules in their own fields of excellence. Already this has started: for example, Whittle Programming supply open-pit optimisation software and don't attempt to do deposit modelling. Snowden Associates are offering the VISOR variogram modelling package. Both Runge Mining and Combinatorics offer stand-alone production scheduling systems (Xpac and MineMax) at different scales and for different purposes. All that is needed is the standardised glue to link such niche products together.

So maybe the general mining software companies have had their day. Perhaps they will become little more than system builders, putting third-party modules together in mix-n-match products. Perhaps the more intelligent mining company users will put together their own systems by selecting the best of each niche product. Then the mining software sector will become more fragmented but at the same time stronger, with real competition among many niche suppliers replacing the fossilised oligarchy of the present mining software vendors.

Stephen Henley
Matlock, England

Copyright © 2000 Stephen Henley
Whither Mining Software ?: Earth Science Computer Applications, v.15, no.9, p.3-4