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Minneapolis-based Interstate Cos. digs into the mining industry

Whether it's surface or shaft mining, the industry has a variety of potential product demands—if a distributor knows what to do

By Joe Nowlan, Associate Editor -- Industrial Distribution, 9/1/2007

If the mining industry conjures up images of grime-covered workers emerging from darkened shafts carrying picks, shovels and old lanterns, your image is very outdated.

Digging tools are still used, of course. And these days, the lanterns might contain top-of-the-line halogen bulbs. But many lines of mining equipment have become technologically sophisticated. For distributors selling to the mining industries, the product lines have become more diverse than ever.

Interstate Power Systems Inc., based in Minneapolis, does a great deal of work with mining companies in its PowerSystems and BearingSystems divisions, explains company president Travis Penrod.

Many of the mining customers that Interstate deals with work in strip mining, where most of the materials are near the surface—as opposed to shaft mining, where digging deep into the ground is required.

In some of Interstate's territories, including Wyoming, Montana and North Dakota, coal is a surface mining operation, Penrod explains, and many mining sites are on a virtual 24-7 schedule.

“We provide in-the-field service,” he says. “We go right out to the mine sites, places like Gillette, Wyo. and Bismarck, N.D. It's quite a bit of our business.”

Surface mining requires a number of pieces of large equipment, he says. Some trucks are equipped to transport as much as 350 tons of coal at a time away from the mines. The reliability and durability of these vehicles can mean the difference between success and failure for these mining operations, Penrod explains.

Interstate field technicians help customers maintain the truck engines and, more importantly, determine when a breakdown might occur and take steps to prevent it.

A number of the Interstate field service technicians have fully equipped mobile service units.

“Those are basically heavy pickup trucks. Most are diesel equipped with full service bodies in the back and even boom cranes,” Penrod explains. “We drive those right out to the sites.”

Along with whatever repairs or equipment fine tuning is needed, Interstate also provides predictive maintenance, which can frequently stop an equipment breakdown before it causes delays.

“From a predictive maintenance perspective, we will even schedule things like an oil change, common maintenance like that. We'll get on their calendar and bring that big truck out of production and bring it in,” Penrod says. “So we have to be prepared with parts, fluids and the things necessary to perform that maintenance and get the truck back in operation. We like for everything to be planned but when the unplanned [breakdowns] happen, we're happy to help those customers out of those fixes as well.”

Interstate represents MTU Detroit Diesel, which produces large diesel engines used in mining applications. Many of these engines have computer chips. Interstate techs can go out into the mining areas and, using information downloaded from those chips, gather data that will help the mining companies see how much wear and tear they are accumulating. The information can also help the customer understand what the actual cost-per-hour is to run those engines.

“That's one way we can help the mines understand what their true cost of operations is,” Penrod says. “There are a number of things we can glean just from hooking a notebook computer up to the engine; everything that can help the mines run more efficiently.”

The technical sophistication of the engines and transmissions is considerable and, in fact, is one reason MTU Detroit Diesel likes having Interstate as a distributor partner, explains Doug Schwedland, the company's senior manager for marketing and distribution development. MTU Detroit Diesel is the former off-highway division of Detroit Diesel Corp.

Since Interstate technicians do the necessary upkeep and repair work on the engines, MTU doesn't have to provide extensive training to the mining site employees. It's one of the attributes Schwedland appreciates about his distributor.

“That's one reason we choose to have a distribution network. The mining companies don't have to become that familiar with the engines,” Schwedland says, citing the training costs that Interstate can save his company.

Schwedland calls the Interstate technicians “the heart surgeons that come in and do the diagnosis on the engine.”

Time = money

No workplace illustrates the “time is money” axiom like a mining site. An engine that goes down is more than just an inconvenience. It can mean huge financial losses for all concerned.

“The mining company's money is all made in terms of volume,” Schwedland says. “They can't afford to have these [engines] down at all.”

“The economic impact on the customer when that vehicle is unavailable is pretty extreme,” Penrod explains. “Think about how much coal a 350 ton capacity truck can haul. To have that unavailable for a day or two means a lot of production that can't be sold on the open market.”

Interstate also sells and services off-highway transmissions that are used in power transmission applications on mining sites, he adds.

“A number of mine sites need portable power generation and we can help them with that as well,” Penrod adds.

Diverse product lines mean large inventories, of course—an appealing thought for a distributor. But many of the mining sites Interstate services are located in remote regions and are hardly convenient to their warehouses. Inventory problems are addressed by having consignment inventory at the mining site itself.

“We try to have branch offices geographically close to the customers,” he says. “But often times those mine sites are pretty remote and it's impossible to have a site that close. In cases like that, we'll do consignment inventory for customers, where the customer can have the parts on site and grab them when needed. We'll then go out and do replenishment on a regular basis.”

One of those customers is Mark Moberg, manager of purchasing and maintenance for BNI Coal Ltd. BNI runs the Center Mine, located outside of Bismarck, N.D. Much of the mine's coal production provides electricity for areas of Minnesota and North Dakota, Moberg says. He's worked with Interstate and its Bismarck branch manager, Dave Polsfuss, for many years, he explains.

“They treat our trucks and coal haulers like they were their own,” Moberg says. “They have a keen interest in our running them economically and reliably. Look, if those trucks can't deliver coal, the till doesn't get rung here.”

While the Center Mine is a one-mine operation, its needs are comparable to the larger mining sites Interstate works with. BNI has a predictive maintenance agreement with Interstate, which has paid off as far as the mine's hauling trucks staying on the road with few breakdowns, Moberg says.

“The need here is for technicians being available and responsive. And that's what Interstate brings to us: very competent and dedicated technicians,” he says.

Costly but necessary training

Improvements in equipment technology mean that training—both for Interstate technicians as well as mining site employees—is constant.

“Keeping our technicians current on the latest technology represents one of the single largest expenditures that we have as a company,” Penrod says.

There are also safety and environmental regulations to stay on top of, such as changes in emissions regulations by the federal Environmental Protection Agency.

“The EPA has put out a number of aggressive steps for compliance in terms of engine emissions,” Penrod points out. “And that has driven a lot of technological changes in the equipment.”

Interstate service technicians train their customers' staffs, too, especially where predictive maintenance is concerned. Mining companies are eager participants, Penrod says.

“The mines are responsible for much of that preventative maintenance,” he explains. “But it's a cooperative program. With the more expensive, heavier equipment, there are agreements in place that specifically cover the areas the mines are responsible for and the things we as a distributor are responsible for.”

While challenging at all times, mining has always been a large part of Interstate's core business, Penrod says. While he does not estimate total mining revenue for his company, he says that nearly half of Interstate's income as a company comes from mining and related industries—something he anticipates won't be changing soon.

“There are opportunities … in all of our territory. There's a lot of variety out there,” Penrod sums up.

 

Canada, West Virginia distributors see challenges, benefits

Other distributors have found the mining industries to be profitable. But like most profitable businesses, it has its cyclical nature, says Steve DeHart, regional manager of 10 Applied Industrial Technologies branches in West Virginia.

These days in that region, DeHart explains, mining is down a little. When the energy crunch hit a year ago and demand for coal went up, many people saw it as an opportunity to jump back into the coal industry.

“But the mining industry is a little flat right now,” he says of West Virginia. “Now coal isn't in demand like it was. In the last three weeks, one mining company here has laid off about 55 people. I've been doing this for 36 years and it swings about every two or three years, in one direction or another.”

Unlike the Interstate Companies, Applied doesn't focus on heavy equipment or transmissions, DeHart explains. Applied carries a lot of rubber products, he says, referring to items like industrial hose and belts, in addition to chains. The company also carries chains and other items used in coal mines.

“These are coal mines, but they'll operate like most of our industrial accounts,” DeHart explains. “The only thing is, in the coal industry, it's limited to a handful of products that are being used over and over, while industrial accounts use a larger variety of products.”

As a result, he explains, many other distributors and Applied's competitors will stock the same items. So profit margins can be low and competition high when it comes to prices.

“So it makes it very competitive most of the time,” DeHart says. “When it's the same item or product being bought repeatedly, it can drive the price down,” he says.

Most of the mining done in West Virginia is underground, DeHart says, as opposed to the surface mining more common in the Midwest.

“About 80 percent of that we surface is underground,” he says.

In Western Canada, mining is a large industry and has been a core market for the BC Bearing Group since its founding over 60 years ago, explains Brent Pope, director of sales and marketing.

“Mining is one of our core markets. It's one we've always excelled at and done well with,” says Pope.

The “bearing” part of the company's name can be misleading as the company has “hundreds of product lines,” Pope says. To mining customers, they'll sell power transmission items in addition to bearings, he says. PT items include roller chains, gear reducers and belt drives.

“What our reps try to do is add value and provide solutions to the mining industry,” he says.

Among the value adds that BC Bearings' reps bring to mining sites is “a lot of retro fit,” Pope says. “Mining is a long-term business, so there sometimes is older equipment and the replacements aren't even available anymore. So we'll go in and help put in the new pieces and bring them up to date.”

In West Virginia as well as Western Canada, a sales rep can easily have a two hour or more drive to start the day before arriving at a customer's mining site.

“Those sites can get pretty remote,” Pope says.

BC Bearing will have some contingency inventory on many sites, he says. They also try to have branch warehouses located within a reasonable distance of the sites—although a “reasonable distance” could still mean one of those two hour-plus drives, Pope adds.

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