Why one small engineering firm sees dollar signs in mining slowdown
As a result of the commodities rout, Chile's portfolio of major investment projects in the mining sector has shrunk considerably. And engineering firms have not been left unscathed.
But the drying up of major projects has opened the door for the entrance of new players, among them TNA Engineering, a Chile-based firm which in 2015 was in charge of several projects at the Sierra Gorda mine, controlled by Polish multinational KGHM International.
To learn more about the firm BNamericas interviewed its CEO, Tomás Núñez (pictured, right), and head of engineering Raúl Lobos.
BNamericas: What is TNA?
Núñez: TNA is a multidisciplinary engineering firm formed by a group with vast mining experience. From that experience, we realized that the current business model for engineering projects was not the result of a specific requirement associated with a single specialty, but rather one in which a number of specialties interact to address the requirements of the client, from conception to implementation, understood as an engineering service that comes as a single, technically robust product. We have expanded that same service to the areas of non-conventional renewable energies and infrastructure, with very good results.
Today's mining industry demands multidisciplinary projects, so what we did was group together specialists from different disciplines, who Raúl is in charge of, and to offer those services, focused on what the industry is asking for: on-demand fast-track projects, meaning providing solutions based on the client's requirements, with a strong emphasis on the 'constructability' [of projects], cost optimization and technically efficient projects.
In addition, our services have the advantage for the client that we have very low general expenses, as we've cleaned up some of the bureaucracy that's behind the major engineering houses. This goes in line with the requirements of the client: lower costs, better productivity and innovation.
BNamericas: And regarding that change to an on-demand fast-track model with lower costs, when did the mining industry start to demand it?
Lobos: The crisis started in 2013, with the slowdown in the sector. That's when the industry realized that the large engineering firms, even though they do a good job, are very expensive, and that they can obtain the same, or better, results with smaller engineering firms.
Additionally, during the boom years, these large firms took on several inexperienced people, as there was much market demand for its products, which resulted in that some of its results were not the best.
Núñez: You have to understand that the main business of the large engineering firms is not to do engineering per se, but rather to sell man-hours. I know this as I worked for a multinational [engineering firm], in teams with people with very little experience at high costs, above market levels.
The service they provided was not bad, but rather it became inefficient, increasing the capex or opex of projects, as well as causing delays in terms of deadlines. On top of that, much of the engineering was incomplete when it came time for construction, forcing companies to establish on-site engineering teams to correct or address some of the issues during construction, increasing costs further.
In the end, what the industry is looking for is to do things better. We have the capacity to do the work of 50 people with a team of 10. It's not about quantity, but rather the efficiency and quality of it. Last year we made 30,000 man-hours, developed over 70 projects, all with a small team.
BNamericas: How has the mining sector slowdown affected you?
Núñez: It has been said that [Chilean state copper giant] Codelco will act counter-cyclically when it comes to its structural projects. I believe that the same philosophy should be used by smaller engineering firms like ours, as in this time of crisis, as it is a good opportunity to present ourselves and grow.
Lobos: Clients no longer have the budget they had, and if they do, it is very limited, with very tight deadlines, so there's little room for error.
The projects that we're currently working on are not really a business for the large engineering firms, but there's a market for smaller firms. From that experience, our goal is to lower our clients' costs, and to then extrapolate it to larger projects.
BNamericas: Regarding mining companies, how fast have they adapted to this new model, in terms of choosing firms like yours instead of the larger firms?
Núñez: I think the relation is direct; they are the ones demanding it. In the end, they see how much it costs to create a project or to keep projects operating, and they have responded by betting on these smaller, local firms, giving them the opportunity with smaller projects, which then we can use to show what we can do.
BNamericas: Do you see any market trends as to where the engineering sector is heading?
Núñez: Probably in the case of a large project, what will happen is that a section of it will be in our hands; company X will handle a different section, another section will be with company Y, and so on and so forth, working in sync, as the local market is small and most of the professionals know each other. There will no longer be a large firm in charge of everything, because this generates larger operational costs, more bureaucracy and overstretched management, all of which is paid for by the client. We're looking for a win-win situation, especially at a time in which the mining sector is experiencing a downturn.
BNamericas: What are the prospects for the rest of the year?
Núñez: We have a lot of expectations, working on different projects and wrapping up our experience of working with a client like Sierra Gorda. We're also looking for projects with other mining and contractor firms. We're also in the process of getting our ISO9001:2015 certification, and innovating in other areas like performance-based design for mining structures, seismic project review and the training of our professionals in specific areas. We believe we're on the right track to help the mining industry from a multidisciplinary approach.
Tomás Núñez is a structural civil engineer with an MA in seismic engineering from Universidad de Chile. He has over nine years of experience in the mining and industrial sector. Raúl Lobos is a civil engineer who studied at Universidad de Concepción, Chile. He has over 25 years of experience in mining and multidisciplinary projects.
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