INTERVIEW
FLSmidth looks for sustainable gains
Heavy-duty overland conveyors are just one of the solutions thyssenkrupp mining will bring to the FLSmidth business
Global mining OEM looks to arm itself to compete in brave new sustainable world
The subtleties behind FLSmidth ’ s acquisition of thyssenkrupp ’ s mining business appear to have got lost within the financial community .
The company ’ s Denmark-listed shares , since announcing the transaction in late July , lost 16 % of their value to August 20 .
This downward move is hardly surprising when focusing on pure financials : FLSmidth is looking to acquire a company for an enterprise value of $ 325 million that is only expected to return to profitability two years after financial close .
Yet , this narrow train of thought discounts the well-timed strategy behind the move .
A combination of the two companies will undoubtedly create a leading global mining technology provider with operations from pit to plant . It will also see FLSmidth re-geared towards a mining sector on the up at a time when the cement business it serves is exhibiting flattish demand .
While this won ’ t be lost on analysts , most of them will only be able to factor in short-term profitability projections into their financial models , meaning , as far as they ’ re concerned , FLSmidth will be weighed down by the transaction until 2024 .
Yet , for FLSmidth and mining , 2024 is practically ‘ just around the corner ’.
In FLSmidth ’ s recently released June quarter results it registered an order backlog of DKK16.7 billion ($ 2.6 billion ), the majority of which was associated with mining orders . Of the backlog amount attributable to the mining sector , 16 % would not be realised until 2023 and beyond .
This could mean many of the orders FLSmidth registered in the most recent June quarter will only be realised ( read : delivered ) in 2024 , the year thyssenkrupp ’ s mining business is expected to be back in the black .
This is just one of the subtleties that may have got lost by shareholders fixated on the short term .
The second is how the transaction sets the company up as a mining sustainability leader at a time when the industry is calling out for one .
At the top end of the mining industry , the ability to decarbonise operations is becoming as – if not more – important as returning cash to shareholders . Every tonne of copper extracted and processed , and every ounce of gold mined and refined is likely to come with an associated carbon content / price in future years . The battery materials supply chain tied to the likes of lithium , cobalt and nickel will come under even more scrutiny .
Blockchain-type traceability platforms will mean investors and any interested party can interrogate where the raw materials came from and how they were produced .
These same miners will also be judged on how they use water , with freshwater use being rationalised in many regions where such resources are scarce .
FLSmidth , should the acquisition complete next year , is arming itself to compete in this brave new sustainable world .
The company started this journey all the way back in November 2019 when it announced its
MissionZero program at its Capital Markets Day in Copenhagen .
Central to MissionZero is FLSmidth ’ s focus on enabling its customers in cement and mining to move towards zero emissions operations in 2030 .
The OEM planned to do this by leveraging the development of digital and innovative solutions tied to sustainable productivity , offering its customers in the mining sector the technological solutions to manage zero emissions mining processes by 2030 – with a specific focus on water management .
For the latter , dry-stack tailings was the order of the day , with FLSmidth ’ s EcoTails ® solution expected to reduce water costs , tailings dam risks and minimise environmental footprint . The development of the largest filter press plate ever built , the 5 m x 3 m AFP , was a signal of just how confident FLSmidth was on this emerging market trend becoming fully embedded across the globe .
Digital products such as SAGwise™ , SmartCyclone™ , BulkExpert™ and Advanced Process Control would , in the meantime , allow miners to become that more efficient with every resource ( water , energy , etc ) they used , again , improving their sustainability credentials .
Close to two years after making the MissionZero declaration , Thomas Schulz , CEO of FLSmidth , says the company has been seeing the program ’ s effects come through in its order book .
“ Actually , this has been translated in orders for a few years already ,” he told IM .
“ When we look into sustainability , we define it as making productivity improvements . If you don ’ t adopt these sustainability solutions , you effectively have to pay more to keep operating at the same levels , or you have to stop operating – there is a productivity element to it , and quite a big one .
“ For us , as a lifecycle provider , it is important that we offer to our customers at any point in time and any point of our offering , the right solution to make more money . That can be with dry-stacked tailings , tailings management , IPCC ( in-pit crushing and conveying ) systems , electrification of the pit , reducing emissions or dust , etc .”
Many of these solutions will enable companies to produce the same amount of product , or more , with the same input costs and energy draw , according to Schulz .
Coping with further restrictions on the industry ’ s access to freshwater will require more than step-change initiatives , and that is why the company is working on how its equipment can use “ different types of water ” and technologies that use less freshwater to ensure operations can abide by incoming legislation .
The company has been working on providing these zero-emission and resource-efficient
118 International Mining | SEPTEMBER 2021