Changing Landscapes

How would you describe the evolution of the mining sector in Peru over the last few years, and how has it impacted your operations?

As commodity prices have fallen, smaller mines have had to shut down or limit their production. There have also been fewer large-scale investments in the sector. Copper prices were the last to slow down. The smaller mines have generally opted to cut costs by choosing cheaper products, which are also the less reliable, while the larger mining houses like Southern, Freeport, Barrick, Glencore, BHP, and Newmont all stay with traditional suppliers like us, because they do bulk mining and are large operations; the cost for them to stop is tremendous so they stay close to the OEMs. The landscape has changed. When Atlas Copco Peruana started, we were selling pneumatic handheld equipment and some basic compressors. Now we are partners with our clients, and we do not just sell them equipment; we sell them services and solutions.

How has the competition in this market evolved over the years?

In surface mining we compete with Caterpillar, and in underground mining we compete with Caterpillar and Sandvik. Over the last 15 to 20 years, there has also been an increase in Korean and Chinese companies entering the market, and these companies have been able to replicate existing technologies at a much lower cost but not at the same quality. Besides that, there are also some local producers whom we compete with in Peru, since Peru is a very mature mining market.

What role does innovation and technology transfer play in Atlas Copco’s operations in Peru?

We have always looked at how we can use technology to make mining more efficient. We work to introduce new technologies and showcase what technology and innovation can mean to our client’s operations. This is more than just about providing equipment. We have to work together with our partners to figure out how best to integrate technologies, and help them make adjustments in their operations to be able to incorporate these innovations and new technologies when and where the need arises. We are helping shape a framework in which the technologies can be implemented and applied into their operations. Looking at Peru overall, the country utilizes traditional mining methods, and technological advances were slow to catch on during the last mining boom. The majority of advances have been mostly in surface mining, where the multinationals are the most active as they have operations of scale. This is also where a lot of the technology transfer happens. We can now talk to our customers about automated drilling and having repeatability in their processes, because typically in countries where labor costs are nominal, companies tend to not pay too much attention to automation. But we can show that it is not just a matter of the cost of implementing and operating it, and also training the people to use it, it is a matter of achieving consistency and repeatability in your own production.

Is human capital a challenge in Peru in general, and for Atlas Copco’s operations here?

In 2016, we will be investing heavily in new training programs for our technicians because there is a constant turnover and our people are in high demand since we have a very good training package as it is. We also have a retention plan that we have been working on for a couple of years. We have raised wage plans, although we realize that other soft benefits are needed as well, such as better living conditions, better schedules, easier ways to work your way up in the organization, things to make the job more appealing, and to show that there are more opportunities to grow. We also send people to other countries in Latin America to help train them.

How does Atlas Copco find a synergy between economic growth and environmental stewardship?

In terms of sustainability, we do remanufacturing, where we take components from old products and overhaul them to a like-new state equivalent to new components. We can both save on scrapping and also sell our products at a lower cost to our customers. That also means we produce less waste, there are fewer wasted resources, and fewer emissions.

What are your targets and expectations for 2016?

In 2016 we do not expect any uptakes in investment capital. In the medium term, we expect growth. As commodities have been depressed and supplies have gone down, the demand will eventually outstrip it, so it is just a matter of when it will happen. Over 10 years we expect 7-10% growth. To this end, we are making the necessary investment, investing in training, in our consumable business, and in service support. Consumables and service support will be the two bookends for us in 2016. We will continue to focus on technology, bringing in machines that are brand new to this market. Before they are sold, they will be trialed with some of our big customers because this is the best way to show that we’re the market leader. We have the financial wherewithal to do that as a large multinational corporation.