French drilling services contractor Foraco International’s new North Bay-based Canadian subsidiary is suffering like everyone else from the precipitous downturn in the mining industry, but has nevertheless carved out a respectable position in the market.
Foraco management made a strategic decision to enter the North American market in August 2006 as the exploration industry soared to dizzying heights. Foraco Canada, led by industry veteran Tim Bremner, started from scratch in North Bay, but grew quickly through acquisitions across the country.
In February 2007, the company purchased Connors Drilling, a privately owned diamond drilling company based in Kamloops, British Columbia, and in September 2008, it acquired Alberta-based Northwest Sequoia Drilling Ltd., which specializes in rotary drilling services for exploration, bulk sampling and coring services in the mining and oil sands industries.
The decision to base Foraco’s North American operations in North Bay was no accident.
"North Bay is a particularly good spot for a company like ours," said Bremner. "Our main suppliers like Boart Longyear, Atlas Copco and Sandvik are all here, plus the infrastructure is excellent and it’s a relatively low cost place to operate."
Proximity to major mining camps like Sudbury and Timmins also makes it convenient, he noted.
Challenge
Entering the North American market at the height of the commodity boom proved to be more challenging than Bremner anticipated.
"It was a lot harder than I thought," he admitted. "I was full of energy and enthusiasm when we decided to do a startup in 2006 and later found out that I was going to need all of it. The parts that I thought would be more difficult were not and the parts that I thought would be easy were more difficult."
Buying equipment was easy and the demand was there. The big problem was finding the qualified people to deliver the service.
According to Bremner, the company’s determination to differentiate itself through high standards, especially relating to health and safety, made the recruitment challenge that much tougher and resulted in higher than anticipated turnover initially, "but we persevered and now we have a very, very strong team of experienced people."
Commitment to the highest health and safety standards by drill crews leaves the client with one less thing to worry about and allows geologists to concentrate on their own work, said Bremner.
"If we do it properly, they don’t have to worry about getting beaten over the head because in a company like Vale Inco or Xstrata, the contractor is seen as part of the exploration team, so any accident or incident we would have would be treated as if it was an accident within the company."
118 drills
The French parent company, established in 1961, provides a full range of contract drilling services throughout Europe and Africa. It performs core drilling for the mining industry as well as rotary and reverse circulation drilling services to access water for drinking, irrigation and industrial use. It also serves the uranium, coal and tar sands industries. The company boasts a fleet of 118 drills, 35 of which are based in North America.
The affiliation with Foraco International provides the Canadian operation with a definite advantage, said Bremner. "For example, we do a considerable amount of work for Areva in Africa and that relationship helped build our business in North America. We also do a lot of work for Rio Tinto in Africa and that relationship helps us do business with Rio Tinto affiliates here.
"The reverse has also happened," added Bremner. "We have developed relationships with senior mining companies here that has helped win business for the group elsewhere in the world."
However, like most drilling service contractors, Foraco Canada has "quite a few drills sitting idle" since mining companies began cancelling or postponing exploration projects in the third quarter of 2008.
"I’ve been in this business for quite a while and I’m not surprised to see this cycle come to an end," said Bremner, who held senior management positions with Boart Longyear from 1990 to 2006. "What’s different this time is how quickly it ended."
The fact that it affected so many sectors of the mining industry also stands out. "It touched absolutely all markets, including oil and gas in the energy sector. It has hit everyone in exactly the same way. Iron has been affected, coal has been affected, base metals have been clobbered and even some of the gold exploration companies have taken a much more cautious approach, even through the price of gold is still up."
Having been through numerous ups and downs in the industry, Bremner is confident that the market will return, but not as quickly as it tanked.
.jpg;w=120;h=80;mode=crop)