Beyond the backyard: Northern Ontario mining suppliers outgrow their traditional customers – by Eavan Moore (CIM Magazine – March/April 2015)

For every one person employed in an Ontario mine, there are two employed in the sectors that supply them. The expertise accumulated in the province has long overflowed its borders, but local developments and global forces have challenged mine suppliers who might otherwise have stayed content with local business.

“We’re running about 15,000 people working just in Sudbury alone on service functions and products and services,” says Dick DeStefano, executive director of the Sudbury Area Mining Supply and Service Association (SAMSSA). “Vale and Glencore have maybe 5,000 people or 6,000 people total working. Mining suppliers get to the point where they need to maintain their workforces, so they go look for other markets.”

DeStefano believes that more northern Ontario suppliers have turned their attention outwards. Part of that is simply due to the universal downturn; in Ontario as everywhere else, mining has slowed in recent years. But Vale and Glencore (then Xstrata) also changed the local landscape when they acquired major customers Inco and Falconbridge in 2008 and 2009.

“When the global mining companies purchased the Canadian assets, among all the other effects two actions occurred regarding the acquisitions,” explains Spencer Ramshaw, director, information and communications at the Canadian Association of Mining Equipment and Services for Export (CAMESE). “One, global suppliers became more aware of the Canadian assets as an opportunity via existing relationships with Vale and Xstrata. Two, the procurement strategies and policies from these global companies were integrated into the Canadian operations. These two activities together made it more important for Canadian companies to explore their export potential as a result of the increased out-of-Canada competition into their local markets.”

Meanwhile, the risk involved in depending on a couple of companies hit home in 2010, when a prolonged strike at Vale’s operations hurt the mining suppliers that counted on them for business. “It really caused a lot of financial stress on those suppliers that were significantly relying on Vale revenues,” says Andrea Gaunt, mining sector advisor at Export Development Canada (EDC). “And it really had them rethinking international opportunities and globalization a little bit more seriously than they would have otherwise.”

The need to expand

Dave Rector knows well the risks of depending on a few customers. His machining business in Sault St. Marie relied on the steel and forestry industries, diversifying into mining only in 2006 when Weyerhaeuser’s local operations closed. “Back in the ‘90s, we had three businesses that were 65 per cent of our income,” he says. “To me, that’s scary, when you have three big players and you don’t have much to back it up. If you’re not moving forward and expanding, you’re going to go stagnant, and the market’s going to walk away from you.”

Now with a healthy mining customer base north of the Sault, Rector is considering going further afield. He thinks he could sell truck parts in South America, but he wants to wait a year or two before investing too much in an export campaign. “Right now, we want to take care of the customers that we currently have,” he says. “We don’t want to grow too fast, and we want to see where the markets are going to go.”

Michael Gribbons, vice-president of Sudbury-based Maestro Mine Ventilation, started manufacturing Ethernet-based monitoring and control equipment with partner David Ballantyne four years ago. For Gribbons, avoiding reliance on the local market means keeping employment steady. He has seen northern Ontario suppliers load up on labour in a local upturn and lay people off in a downturn. But Gribbons says he thinks valuable employees need to feel their job will survive during hard times.

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