Inside the ‘growing dependence’ that’s redefining Australian mining
Mining operators are increasingly outsourcing critical infrastructure components to specialised third-party providers, writes BDO’s Mark Harrington.
As global demand for critical minerals and sustainability surges, the mining industry is experiencing a new period of transformation with a growing number of mining companies shifting away from traditional, in-house infrastructure models to third-party providers.
This evolution reflects a broader industry trend toward enhanced operational efficiency, sustainability, and digital innovation.
Growing dependence on external infrastructure partners
Mining operators are increasingly outsourcing critical infrastructure components to specialised third-party providers, including:
- Energy and water supply: Renewable power-as-a-service and multi-mine network models
- Transport and logistics: Rail, port, and haulage services
- IT and digital platforms: Cloud-based ERP systems and AI-powered exploration tools.
This strategic shift enables miners to reduce capital expenditures, concentrate on core competencies, and scale operations more quickly.
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What’s driving the change?
Several key factors are accelerating the move toward third-party infrastructure:
- Surging demand: The global appetite for copper, iron ore, and rare earth elements continues to grow, driven by economic growth and the transition to a less carbon intensive industry
- Environmental sustainability: Companies are prioritising renewable energy sources and desalinated water rather than less sustainable river or underground water, to reduce their environmental footprint
- Government incentives: Such as low-cost financing (e.g., rewiring the nation and clean energy finance) and grants (e.g. net zero and ARENA)
- Operational focus: By outsourcing non-core infrastructure, mining companies can sharpen their focus on their core business
- Lower financing costs: Infrastructure funds and project finance vehicles offer significantly lower capital costs compared to traditional resource industry corporate financing.
Insights from the field
As mining companies expand and adopt greener technologies, many are discovering that these new systems, while environmentally beneficial, are less aligned with their traditional operational expertise. For example, managing networks with integrated renewable energy assets differs from operating single mine site gas or diesel generators.
Market impact: A surge in transactions
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This shift has led to a notable increase in infrastructure-related transactions and capital injections within the mining sector. Recent examples include:
- Sale of a stake in Zenith Energy
- Divestment of Alinta Energy’s Pilbara assets
- QIC’s growth capital investment in Pacific Energy
- Woodside’s 49 per cent stake sale in Pluto Train 2 LNG
- Sale of Queensland Curtis LNG assets.
These energy and LNG train deals signal a new era in resources infrastructure, one in which delivery and ownership are increasingly shared with or transferred to infrastructure specialists.
Looking ahead
The challenges for this type of approach to third-party infrastructure provision in the resources industry for project financing include:
- The financing of combined technology energy supply (e.g. wind, solar, battery, and diesel) with the balance of plant delivered supply outside of lump sum turnkey contracts, resulting in sponsor support for project financing and debt sizing limitations
- The security of long-term user payments for resources industry infrastructure services, depending upon mine site specific risks (e.g. reserves and commodity prices), resulting in support from corporate listed and publicly rated entities, more complex due diligence, structuring and debt tenor limitations.
It is critical that resource companies with their core business at risk can rely on any third-party provision of critical infrastructure. This will result in a greater focus on warranties, maintenance, operational reliability, liquidated damages, and the use of a complex step-in rights hierarchy.
How BDO can support
BDO offers deep expertise in infrastructure delivery, project finance and resources industry knowledge in this space, based on recent experience with pathfinder transactions. BDO knows what is required to ‘thread the needle’ between meeting the critical requirements of the resources industry whilst efficiently delivering sustainable supporting infrastructure. Contact us.
