DRA AIMS TO ENGINEER GLOBAL GROWTH

A 200%-plus profit growth for 2023 shows DRA Global is putting its challenges behind it

DRA played a major role in getting Bravus' Carmichael coal project up and running. Photo courtesy DRA Global

Global growth is very much the plan for DRA Global managing director chief executive officer James Smith as the engineering house comes out of a challenging loss-making period in which it was referred to the Takeovers Panel amid what appeared from the outside to be a leadership coup.

The pressures of that period took their toll too with the company posting a net loss of $21.4 million on revenue of $894.7 million in 2022.

Those difficulties seem to be in the company's rear vision mirror with it posting a 200%-plus profit growth for 2023. Being a company that grew out of South Africa, DRA's financial year matches the calendar year. 

Along with global growth, Smith also has his eyes on technology advancements that could make DRA's businesses more efficient.

The engineering house has created a model for its way forward in Africa where it has been a major player in developing platinum concentrators and copper processing plants, along with an operations and maintenance business.

With the unpleasantness of 2022 behind it, the road to global growth lies before it.

Takeover Panel challenge

Sadly, one of the biggest challenges DRA faced in the past couple of years was largely of its own making.

Senior staff, many of them major shareholders after the company listed on the Australian Stock Exchange in 2021 - with a secondary listing on the Johannesburg Stock Exchange - were disgruntled with the way the company was travelling. 

COVID-19, or rather the measures Australia brought in to prevent its spread, exacerbated the problems.

That and an acquisition made before DRA listed on the Australian Securities Exchange.

DRA made its name getting projects out of the ground in Africa. To pursue its ASX listing it moved its management to Australia even though the bulk of its workforce was on a completely different continent.

Smith had joined DRA in 2018, starting with its operations management and maintenance arm Minopex.

The idea was DRA would build a processing plant for a client and then Minopex would operate that plant for the client.

Smith said that way DRA could "put its money where its mouth was" to operate the plant and show it could deliver to nameplate.

He ran Minopex for four years before being asked to run DRA itself.

His call to become CEO came on March 11 2022.

On March 17 2022 the complaint from Haydn Maltitz was lodged with the Takeovers Panel over alleged Corporations Act breaches.

As is often the case with such businesses, the founders and other senior stakeholders had been looking for ways to crystallise their investment in the business and exit it. DRA turns 40 this year.

A listing also brought capital to fund growth and DRA has global ambitions.

However, with a listing comes increased governance requirements and increased corporatisation.

Put in the tyranny of distance and COVID-19 travel restrictions caused and communications challenges mounted.

James Smith Photo courtesy DRA Global

"We had some senior management and shareholders in Africa looking at the global strategy and not knowing what was happening but knowing we were heaving headwinds in the Australian business," Smith, who was front and centre of the Takeover Panels action, told Australia's Mining Monthly.

"They did not know what was happening in Australia but the numbers were not looking good."

Then there was the problem of the acquisition of G&S Engineering Services that DRA made before its listing.

Smith admitted the G&S business had not been not a good fit for DRA.

Yes, it is in the maintenance space like Minopex, however, it is a completely different type of maintenance.

While Minopex is in the O&M space for mineral processing plants, G&S maintained large mining tools such as draglines.

Then DRA tried to use it to move into the construction space.

Smith said DRA's natural business was in the engineering, procurement and construction management arena, not in engineering, procurement and construction.

"On paper that sounds attractive but trying to get that going in a new jurisdiction made it much harder," he said.

"Had we done it in Africa we might have been able to make it work."

DRA took the decision in mid-2022 to offload G&S to Kaefer for $8 million.

"G&S was not close to our business," Smith said.

"We were successful in winning work but it was low margin work. G&S was big revenue but loss making contracts.

"When I took over as interim CEO it was doing work in coal and iron ore and construction that we didn't do well.

"We got out of those fixed price contracts, sold that business and went back to EPCM and O&M contracts."

Addressing the Takeovers Panel turmoil, Smith said with senior management being based in Perth, it was common knowledge there had been a disconnect.

"There was also a new board appointed and then we went through COVID," he said.

"Nobody travelled for two years.

"There was no interaction between the board and management, shareholders, staff and Africa.

"Alongside that we had rapid corporatisation. The corporatisation was a good thing but it had happened rapidly without a lot of interaction. It then created a bit of a divide and culminated in that shareholder action in 2022."

All of this pressure was being built by the issues with G&S.

The turnaround

"Refocusing on our core, selling G&S and doing engineering and project delivery well turned our business around," Smith said.

"Here on the west coast we have big jobs in the lithium space with Pilbara Minerals, in rare earths with Lynas [Rare Earths] and on the east coast we have a range of work in gold and copper and sometimes in the wider region in Indonesia and Papua New Guinea.

"We also do some coal work. Sedgman is probably our major competitor in coal. There are few EPCM contractors that will do coal work."

While DRA's Australian business is going well, Smith believes its business in Africa is the blueprint for what the company is truly capable of.

That African business has built major platinum and copper processing plants. In copper it was involved with Ivanhoe's Kamoa Kakula copper project. It remains the core engine of DRA's earnings.

"This year [2023] we delivered four big platinum concentrators," Smith said.

"It was a very busy year for the Africa business.

"We work all through Africa and, more recently, North Africa and Middle East are becoming a target for us. We're doing some work there for [Middle East mining giant] Maaden. We have a job in Morocco."

DRA is also enjoying incremental growth in North America and starting to expand into South America.

"The other part of our international business that has been successful is Canada," Smith said.

"We've become big players in the study space, doing two EPCM projects in North America.

"South America has also been good to us. We have two small offices in Peru and Chile and now have a strong client base in South America. We set this up organically."

The next five years

Continuing the globalisation journey is a core focus for DRA over the coming half decade.

"What we've built in Africa can cover the whole value chain through all the study phases to building the mine for you," Smith said.

"Then if you want to outsource some of your operations we can do that for you."

DRA also bought an underground mining contractor so it could offer mechanised mining.

Smith said he wanted to see that Africa offering taken consistently to all other mining jurisdictions.

"Even markets in Europe," he said. 

"We're starting to see projects coming there.

"North America has been a growth area for us, albeit coming off a low base.

"There is a lot of government-funded mining investment there.

"South America, with their big copper mines, is a perfect space for us with our copper knowledge."

Australia offers growth opportunities too.

However, there are challenges to overcome.

Like its mining customers, DRA's fortunes are largely tied to the commodities markets.

Smith admitted geopolitical instability was making things look choppy in the commodity markets over the next few years.

The hammering lithium and nickel prices have taken and the shockwaves from that ripple through engineering firms too.

Then there is the other geopolitical shock that might come in November.

Remember how Smith was talking about the government-funded mining investment in North America?

That could change if Donald Trump wins office. 

Trump has made little secret of the fact that he would like to get rid of the US Inflation Reduction Act.

Another big challenge facing DRA is staffing. 

"Our ultimate limitation is skilled people," Smith said.

"We can't grow without people.

"There's always a bit of a war for talent going on."

Becoming an employer of choice is high on the list, although the company's recent history might make that a little harder.

Technology push

Smith believes technologies such as artificial intelligence will play an increasing role in engineering and O&M and the firms that can harness them will steal a march on their competitors.

He is interested to see what parts of the engineering process can be automated.

After all, there are some very manual processes, such as drawings.

"We're putting a lot of energy into the AI space," Smith said.

"Those tools such as GPT and Copilot are emerging.

"You can apply a lot of these tools to the engineering business and can automate rapidly.

"We're doing early stage investment into how we automate a lot of our processes. How do we bring AI and other technologies into the engineering world?

"I don't think AI and digital technologies will fully replace engineers but they will need to learn how to use them. It will speed up how we can develop a mine and how we operate a mine.

"We're trying to think about how we can overcome our manpower constraints."

DRA's Johannesburg office sits 1200 people and it has been at that level for a while, even though the company has enough business in hand to add to that.

Then there are technological changes in the mineral processing space that will need to be understood.

As the world demand for metals such as copper grows, one of the key step changes will come through better leaching techniques.

With DRA's O&M side of the business there are a number of technologies coming into that too.

"In our Minopex operations we've invested in Neuromine," Smith said.

That takes data from all our projects - we have about 15."

Neuromine applies some techniques and machine learning to that data to find out the best way of running the plants.

"I think in three to five years time we'll be in a very different world in how we design and engineer a plant and in how we operate a plant," Smith said.

"If we don't do this, somebody else will.

"If we don't train our people how to use the technologies we won't get the most out of it. We have to take our people on the journey. We had to do that with our Minopex business. We had to upskill those people hugely."

Published in MiningNew.net on 5 March 2024, written by Noel Dyson