By Laura Superneau

As the mining and metals industry boom has led to the formation of mega mining companies and projects of a once undreamt-of scale, Canada's SNC-Lavalin has ridden the tide quite smoothly.

The engineering and construction firm recently expanded into Brazil with the acquisition of Brazilian engineering firm Minerconsult Engenharia and has numerous mining projects worth over US$1bn in its portfolio.

SNC-Lavalin executive VP Pierre Duhaime, the man in charge of the company's worldwide mining and metallurgy activities, reveals in this interview with BNamericas the logic behind the Minerconsult deal and his take on what the industry's growth means for service providers.

Duhaime: First of all they are a mining and metals engineering company. Their primary product is iron ore and their primary customer is CVRD, now called Vale.

They are about 20 years old and have 1,100 people. I would say some 50% of the staff work in iron ore and the other 50% work in nickel, copper, even gold, bauxite, but there is always a link between all that. In mining you always have crushers and conveyers and that sort of thing. The engineering side of projects, that's what they are really good at. But over the years they have also developed the processing side and we are doing a processing plant with them.

BNamericas: What is the processing plant for?

Duhaime: In this case it's a large project - large material handling, large infrastructure. They are very well recognized in the industry for that. The project is Anglo American's Barro Alto nickel project. It's pyronickel, which means we will produce ferronickel using furnaces. That's quite a large project, it's US$1.2bn, and it's under construction right now.

BNamericas: What other projects came along with the Minerconsult acquisition?

Duhaime: Suddenly we are key engineers in that region. Vale is one of the clients, and they have many projects. But before that we had joint ventures between ourselves and Minerconsult on an EPCM job where we do the PCM and they do the E. Now we are doing the EPCM.

BNamericas: When is the Barro Alto project targeted for completion?

Duhaime: There are about 20 months to go.

BNamericas: What are the production parameters of the project?

Duhaime: It's about the equivalent of 40,000t/y nickel, which is quite large. It's a huge furnace.

BNamericas: Will the Minerconsult acquisition give you more opportunity to expand in Brazil?

Duhaime: Oh yes. Before we were very small in Brazil. We were quite large in the rest of South America, but we resisted Brazil. One, language was an issue, but also for years Brazil has been seen as very nationalistic. And I said to the people at Vale, 'You came to Canada and bought Inco; I need to follow my customers.' Now the decision makers at Inco are in Brazil. And I asked them, 'What do I do to do business with you guys?' They said, 'You need to be close to us.' So I need to move to Brazil! So we went to Brazil, and then arriving there we decided we'd buy a company. We had the choice: open an office, try to grow organically or to buy a company.

The other thing is that SNC-Lavalin was not a strong player in iron ore, which is now becoming the big push for investment around the world. So Brazil is a good place to be, and also Australia. There is some in Canada, and now we are seeing iron ore development in Africa. So for me gaining that expertise in iron ore was important.

BNamericas: You mentioned gold projects in Brazil?

Duhaime: We are working with Kinross in Brazil on the expansion of their Paracatu mine. That was Minerconsult, and now is under SNC-Lavalin. That's going well, we are almost done. There is less than a year to go there.

BNamericas: Moving to a different country, you're working on Gold Reserve's Brisas gold-copper project in Venezuela. How is that advancing?

Duhaime: We have mostly finished the engineering. We have ordered most of the equipment. We have started some work at the site, but we have not really started the big construction as we are still waiting for the full go-ahead and that depends on some permits to be received from the government of Venezuela. We are on slow mode right now, waiting. But everything is ready to go.

It's a nice project. And when you put the two together, Las Brisas and [Crystallex International's neighboring] Las Cristinas... We have done exactly the same work on both. They are two separate projects, but nearby, only a fence between them.

BNamericas: SNC-Lavalin has a big office in Chile. What are the priority projects there now?

Duhaime: We are working in Peru, out of Chile on [Rio Tinto's] La Granja. We are doing also out of Chile Las Cruces for Inmet Mining in Spain. Also [BHP Billiton's] Olympic Dam in Australia. We are doing another study in Peru that we are just starting, a copper project, [Peru Copper's] Toromocho.

BNamericas: Can you tell me a little more about how work is advancing on your side at La Granja?

Duhaime: We are still at the prefeasibility study level. In our case we are more involved in the demonstration plant, so we are doing the engineering for the demonstration plant, there is a need to develop that. Then there would be another study to develop the process. It's a huge project and will need a lot of infrastructure, but they don't know yet exactly what it's going to look like, or how much it is going to cost, where the plant will be located. It's a complicated project. The metallurgical process itself is not complicated but the layout of the overall installations - there is no flat land and water is an issue - so we are looking at that.

BNamericas: That will be an open pit, correct?

Duhaime: Yes. Low grade but a huge open pit.

BNamericas: And you are also working with Rio Tinto at their Río Colorado potassium project in Argentina...

Duhaime: We have done the feasibility study. We are also in partnership with Skanska on that project. So we are waiting for them to give us the full go-ahead.

BNamericas: That project is targeted to enter construction this year.

Duhaime: Hopefully!

BNamericas: What is the effect on a company like SNC-Lavalin when a project is delayed?

Duhaime: Your money is in your resources. You have a team there, the customers want to keep the team but at the same time I need to [delegate people to] other projects.

BNamericas: Does SNC-Lavalin win most of its contracts by participating in bidding processes held by companies?

Duhaime: We do participate in bidding processes. But in some cases work is outsourced. Sometimes it's only a qualification. In today's market, more and more people are looking for relationships. They want to maintain a relationship with you and say, 'Here's the list of projects I have for the next five years.' We are now more and more talking about alliance. So if you go into that type of alliance, the bidding process is not exactly the same anymore.

BNamericas: As a major provider of services to the mining industry, what are your thoughts on the consolidation that has been going on in the mining industry? Does this make your work easier or more difficult?

Duhaime: I would say it's more difficult to a point. What is changing now is that you cannot make mistakes anymore. If you make mistakes with big customers, well, that customer could represent 25% of your business. It used to be that you would have 50 customers, not one representing such a big chunk. So you must be even more careful about the quality of your services.

On the other hand I would say the projects are getting much bigger. When I started in this business, US$100mn was a big job. And I'm not so old!

Now projects could start at US$1bn, you even see projects costing US$10bn, Olympic Dam is over US$10bn. Take Vale in Brazil, they have one project there [that will cost more than US$10bn], Valesul, and we are working with them on that one. It's a different game. So now, how do you manage US$10bn? How do you organize yourself? Bigger is better in that case. They all want tier 1 companies - Xstrata, BHP Billiton, they all say, 'If you are not a tier 1 company, do not come to see us.'

BNamericas: And that leads to smaller providers being bought up by larger providers. There is consolidation going on in your industry as well.

Duhaime: Exactly. There is no other way. The people at Minerconsult could also see that and that is why they were interested. If you want to be there in 10 years, or even five years, maybe [for Minerconsult] it would be better to find a big brother. My interest was to be in Brazil, so I had to find myself a little brother.

BNamericas: So it could be considered a win-win situation?

Duhaime: Yes. And we have done others, and we are still looking at others. It's not finished.

BNamericas: Might you be looking at any other Latin American firms?

Duhaime: Always. But elsewhere too... We are right now operating in Chile and Brazil, and we are looking to develop more in Peru. A lot of development has happened in Chile, and we believe Peru now is ripe for big projects. In fact there is more potential in Peru these days than Chile. So we need to find out how to tap Peru, and that is something we are looking for.By Laura Superneau