Advanced Engineering

YOUR AWARD-WINNING SUPPLEMENT

SPOTLIGHT ON MINING Drax chief executive Dorothy Thompson on a bright future for the Yorkshire power station

Plus…

October 2015

EXCLUSIVE INTERVIEW Astronaut Chris Hadfield on how going into space helps engineers back on Earth

INSIDE

How the aviation industry is reacting to increased passenger demand – and the need to be green

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October 2015

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Opening shots René Carayol

T

HE HE AV Y ha nd of U K regulation, controversially introduced to fix the testosterone fuelled race to be the biggest and the best in global investment banking, has had severe unintended consequences. It has had the serious effect of killing essential productivity gains right across financial services, especially here in London.

Huge numbers of people who have been recruited in “control” areas like compliance and risk have added hundreds of millions to the costs of the financial services industry.

The new requirements of oversight and intervention have added a huge financial burden that has led to the surprise collapse of productivity figures for the whole of UK industry. This has made it so much easier for lean and agile new entrants to make a mark, leaving yesterday’s banking giants looking overweight and leaden-footed. They are now paying a crunching penalty for their growthat-all-costs culture. It looks like recent history is in danger of repeating itself with the automotive industry. At the heart of this problem are not self-centred investment bankers but too-competitive smart engineers.

In some respects the circumstances are strikingly similar – another battle for global

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THE ESSENTIALS

Publisher Bradley Scheffer | Editor Daniel Evans | Production editor Dan Geary

Circumstances change – values don’t. Brands don’t die – people kill them leadership. This dangerously became the fixation of the leading investment banks, and has been mirrored by the three-horse race between the members of the “10 million vehicles a year club”.

Volkswagen has been in the heat of battle for dominance, having unseated General Motors by volume, and is now in touching distance of the global leader, Toyota. GM was caught out tolerating faulty ignition switches and Toyota were found to have “unintended accelerator” problems.

Competition is meant to be healthy. The wholesale concentrated push on emissions reduction has added cost and complexity while manufacturers are striving to remain cost-competitive and importantly, especially in VW’s case, take market share.

The discovery that the path they had chosen for managing the emissions of their

small diesel cars was deeply flawed led to the wholly inappropriate direction they chose – the solution should have been to “fail fast” and admit that they had got it wrong. The late leadership guru, Stephen Covey, had a definition of the leader as the one who climbs the tallest tree with his people around him, surveys the entire situation and yells: “Sorry, wrong jungle”. The leader prepared to talk openly about failure will encourage their people to try harder without fear.

A particular and relevant definition of culture is to consider “what happens when the CEO leaves the room”. VW has now lost its CEO, and there have been many other executive casualties, with more to come.

Similar to the banks, that’s just the start of the huge cost of unethical behaviour. Some 30 per cent has been wiped off the value of VW, not mentioning the absolute cost and the opportunity cost of recalling 11 million cars worldwide.

Five days after the scandal broke, it forced the resignation of CEO Martin Winterkorn in September. He had said that he was not aware of any wrongdoing on his part.

Standard and Poor soon downgraded VW’s stock rating with the withering legacy of his tenure (“VW’s internal controls have been shown to be inadequate”) and, while being the first credit agency to do so, they will not be the last. All competitive industries must be performance driven, but they must also be values led.

Circumstances change – values don’t.

Brands don’t die – people kill them.

October 2015

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Business Reporter

Project manager Grant Scheffer | Contact us at info@lyonsdown.co.uk

Osborne backs Adonis to lead commission

Most firms struggling to land skilled staff WHILE DEMAND for engineers is rising, more than half of firms are struggling to find suitably skilled staff, according to a new industry report.

Research by the Institution of Engineering and Technology (IET) found that 53 per cent of employers are finding it difficult to recruit workers with the right skills.

Two thirds of the companies surveyed said they are concerned that the education system will struggle to keep up with the skills required for technological change.

While more than half said they plan to recruit engineering staff in the next year, 64 per cent said a shortage of engineers is a threat to their businesses.

IET chief executive Nigel Fine said: “Demand for engineers in the UK remains high, with employers continuing to highlight skills shortages as a major concern.

“Stronger collaboration between employers and academic institutions is needed to ensure young people are prepared both academically and practically before they start work.”

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By Matt Smith

Former Labour peer Lord Adonis (right) has been recruited by George Osborne to promote infrastructure redevelopment

ENGINEERING bodies have welcomed George Osborne’s creation of a new National Infrastructure Commission headed by former Labour policy chief Lord Andrew Adonis.

Speaking at this month’s Conservative Party conference, the chancellor unveiled plans for the new organisation, which began work immediately to provide unbiased analysis of the UK’s long-term infrastructure requirements.

“The Commission will calmly and dispassionately assess the future infrastructure needs of the country, and it will hold any government’s feet to the fire if it fails to deliver,” Osborne said.

“I am delighted that the former cabinet minister and transport secretary Andrew Adonis has agreed to be the Commission’s first chair and help us create Britain’s plan for the future.”

Lord Adonis said the creation of the group will help current and future governments to provide the large-scale engineering projects Britain needs, including Crossrail and the design and construction of new power stations in the UK. “Without big improvements to its transport and energy systems, Britain will grind to a

halt,” he said. “I look forward to establishing the National Infrastructure Commission as an independent body to advise government and parliament on priorities.

“Major projects like Crossrail and new power stations span governments and parliaments.

I hope it will be possible to forge a wide measure of agreement, across society and politics, on key infrastructure requirements for the next 20 to 30 years and the assessments which have underpinned them.”

Engineering industry groups welcomed the move, which they said could help to garner public support for developments and push forward with projects that benefit British firms. “Industry has been calling on government

to ensure we have some way of planning for our f uture infrastructure needs,” said Terry Scuoler, EEF chief executive.

“Today’s announcement is a positive step in that direction.

The Commission will ultimately be judged not on the number of infrastructure projects it recommends.

“It will be judged on how far it engages with the public and parliament to ensure wider public support for critical investments and, ultimately, whether or not government acts on decisions such as the recent Airports Commission recommendation to expand Heathrow Airport.

“It is also essential the Commission delivers on iconic national projects, such as HS2, that contain a substantial amount of British-built and sourced content.”

Dr Nelson Ogunshakin OBE, chief executive of the Association for Consultancy and Engineering (ACE), said the Commission could benefit both engineering firms and the economy.

“The National Infrastructure Commission has long been needed within the UK to hold government accountable on vital infrastructure projects,” he said.

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Battening down the hatches no longer cuts it in mining and metals

The distress continuum Sale/spin-off/JVing of assets Barrick Gold, Anglo American, BHP Billiton/South32, Alcoa 2015

BUT

Pay down debt

E

ighteen months ago, as commodity prices crashed amid emerging oversupply and depressed demand, many companies that had borrowed significant sums of money during the boom succumbed during the first wave of stress.

Now, with prices plummeting – sometimes steadily, sometimes sharply – across the commodities spectrum for a fourth consecutive year, other companies are finding themselves in distress.

As pressures persist, mining companies will try to renegotiate, restructure and/or reorganise.

But, in more than a few instances, the usual remedies won’t be enough and companies will have to resort to drastic measures: they’ll cut costs; curtail capex; sell or spin off assets; freeze other investments; file for bankruptcy; solicit buyers; entertain suitors; reduce or withhold dividends; issue new shares; and otherwise prepare themselves for the worst.

Battening down the hatches in “survival mode” no longer cuts it in these markets: decisive and comprehensive action is necessary to survive.

Takeover (friendly or hostile) Iluka Resources—Kenmare Resources 2014/2015 Hybrid structures Mubadala—EBX Group 2014/2015

BUSINESS AS USUAL

BUT

“Mining and metals businesses simply cannot sustain themselves when prices are significantly below their costs of staying in business for such a prolonged period of time,” says Rebecca Campbell, a mining and metals partner at White & Case.

“Having made it through the first wave the worse for wear, but more or less intact, mid-size and large companies – including those with prudent management, well-run operations, and successful cost-cutting programmes – are now struggling to survive the sustained stress brought on by the downturn.”

Is the worst yet to come? John Tivey, global head of mining and metals at White & Case, warns that “while some companies have been hanging on, China’s collapse has compounded concerns about where commodity markets are going – particularly in iron ore and coal.”

Some of these companies are so vulnerable that a sudden liquidity shock could force them from a stressed situation to deep distress. “In August 2015,” explains Ms Campbell, “Alpha Natural Resources lost its qualification to self-bond rehabilitation obligations, and that triggered an immediate $400million liquidity shock, which

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Rights issue First Quantum Minerals 2015

Creditors’ scheme of arrangement New World Resources, Petropavlovsk 2014

STRESS Pay down debt Unplanned rights issue and balance sheet package Glencore 2015

DISTRESS

AND

Refinance debt to push out maturities Fortescue Metals Group 2015

was a key factor in its filing for US Chapter 11 bankruptcy.”

Despite the general doom and gloom in the mining and metals markets, White & Case believes that some companies will be able to identify and pounce on opportunities brought on by ongoing realignment and reactions to the commodities crisis.

“The distressed scenario,” Mr Tivey explains, “will continue to create opportunities to buy assets more cheaply. Discerning buyers will end up dealing with less resistant vendors or even administrators in control of companies and assets.”

Providers of new money can potentially make big returns in such situations. These participants – hybrid funds, activist investors, or established mining companies – may put themselves on a path to control the equity of a restructured group.

Many have had to take relatively drastic steps just to survive. New World Resources,

Pre-packaged administration Mirabela Nickel 2014

Exchange offer/ consent solicitation MetInvest 2015

Administration London Mining 2014 Proposed comprehensive debt restructuring MetInvest 2015-2016

a company doing big business in the Czech Republic, underwent a successful and wellregarded balance sheet restructuring during the first wave, only to see the mining and metals markets continue to struggle.

“Having already acted decisively and comprehensively,” says Ms Campbell, “NWR’s management has had to remain vigilant amid the sustained stress that has battered the industry since prices plummeted in 2013.”

“Many miners will have to do just that for now and the foreseeable future”, adds Mr Tivey.

“Miners are back on the grind: they’ll have to scrape for a living in what has again become a low-margin, high-risk business.

“Only those with good assets, sound management, and prudent advice will survive – and maybe someday thrive.” www.whitecase.com

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Matt Smith

“

F

or me, the electric car is really the future of motoring in the cities,” Jean Todt, president of the Fédération Internationale de l’Automobile (FIA), said in September 2014 ahead of Formula E’s first race in Beijing. “And that’s why we begin with hosting races in world cities. It’s a new approach. It’s a new product.”

It was also a new car. Without Formula 1’s decades of history, Formula E needed somewhere to start. Its ten teams were supplied with a Spark Racing Technology electric car with a chassis from Dallara, an electric motor from McLaren, a Hewland gearbox – and a battery designed and built by Williams Advanced Engineering.

Williams was nominated for the project in June 2013. In six months the first prototype was doing test laps, and by early 2014 it was being tested on cars at Donington Park. The final Formula E batteries were being manufactured

by April 2014.

“In 12 months we had designed, developed and integrated a full system,” says Gary Ekerold, programme lead for Formula E at Williams. “It took three months to manufacture the 45 batteries.” Williams arrived on the scene months later than the other providers, and t herefore faced a heightened challenge.

For safety, it had been decided that the battery would be built into the car, so drivers would have to switch vehicles halfway through each race when the power ran out.

“When we came to design the battery we were told that the car had been designed,” Ekerold says. “So the box in which the battery had to fit had been designed.” But even once the space constraints had been overcome and the design, which incorporates a special lightweight cooling system and can withstand stringent crash tests, was in action on the track, there were more obstacles – not least a last-minute change in requirements from the FIA. “After the first tests, they decided to increase it from a 133kW race power to 150kW,” Ekerold says. “We had run 4,500km at the spec we had designed for.”

Running such great distances generates a lot of data, and – aside from the obvious leap in power – is one of the key differences between the Formula E battery and the equivalent in a standard electric car. “The amount of data and sensor monitoring on that car is significantly higher than a road car,” says Okan Tur, technical lead for Formula E at Williams Advanced Engineering.

5

Formula E: pioneering the tech for a greener, leaner auto industry

The innovations behind Formula E’s electric cars should soon be making their way to road vehicles; inset: FIA president Jean Todt; Above: Gary Ekerold and Okan Tur of Williams Advanced Engineering

As well as enabling the team to monitor performance and learn more about the design, the data generated by the battery helps to ensure it operates safely. “One of the reasons for such a high level of monitoring is safety,” Ekerold explains. “Some of the safety mentality from Formula 1 has come across into Formula E. All the safety around the FIA standards has found its way into the design for that battery.”

The work paid off when the championship sped into action in September 2014 and Formula E’s electric cars raced in 11 ePrixs in cities around the world. The series finished in June at London’s Battersea Park, where Nextev’s Nelson Piquet Jr snatched the drivers’ title by a single point. Ekerold was pleased with how the season went.

“We had a few issues, but nothing you would not expect in the first season of a new technology,” he explains.

Overall, the battery’s first year was very smooth, with 440 starts and 439 finishes – an “impressive start in terms of reliability,” Ekerold says.

Always looking to improve, he admits there are “areas that need our focus”, including the battery’s cooling system.

But the evolving championship also offers a chance to “push these batteries harder and see where the limits are”.

The maximum power of the battery has increased again to 170kW for season two. From the motorsport’s third season, Formula E teams will be allowed to add their own innovations to the battery technology. While Williams will still be involved, Ekerold is looking forward to seeing what others come up with. “It will be interesting to see what kind of changes other companies have and what that will lead to,” he says But as Tur explains,

the technology has already come a long way. Findings from Formula 1’s Kinetic Energy Recovery System (KERS) were used in the Jaguar C-X75 road car. Since then, they have found their way back into racing in the Formula E battery.

Formula E is full of technology that could be useful in road cars, and manufacturers are taking notice. Battery design and manufacturing techniques, software and thermal management systems are all elements that could make the leap. “This championship is about powertrain development,” Ekerold says.

“Manufacturers see how this can be taken to road cars. The whole purpose of a championship like Formula E is to push the boundaries of technology.”

The cars and their batteries were transported to this weekend’s opening ePrix in Beijing in “a

highly efficient manner”, minimising the event’s carbon footprint. It is a move that matches the green message of the motorsport, which aims to prove that electric cars are just as exciting as their fuel-powered counterparts. Ekerold says it is “not a coincidence” that the series began in Beijing – one of the most polluted cities in the world. “It is quite an intelligent concept, the technology being demonstrated in the confines of the city centre,” he says.

As well as differentiating the motorsport from its sister series, he explains that the change of venue attracts “the smartphone, iPod-type” that may not travel miles to watch F1 at more distant circuits. A wider audience means more opportunity to spread Formula E’s message and raise awareness of the technology behind the cars. “In the city centre that audience is always there,” Ekerold says. “It is automatic.”

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Flights of the fantastic...

Matt Smith talks to Airbus SVP Axel Flaig about the challenges facing the aviation industry – from increasing passenger demand to reducing its impact on the environment

I

FLEW TO the Czech Republic shortly after I spoke to Axel Flaig, senior vice president for research and technology at Airbus. My journey, typical of modern air travel, involved a bus journey across north London and a coach to the airport before I boarded my plane. But according to Flaig, all this could be about to change.

The aviation industry is continually growing.

Since tracking began in 1971, demand for air travel has doubled every 15 years, and there will be a market for another 30,600 aircraft over the next 20 years. This presents some interesting challenges to manufacturers and airlines catering to an increasing number of passengers while meeting other demands.

“What we have to do is not only make our aircraft more competitive for the airlines, but also to ensure that this enormous demand in air travel can be sustained,” Flaig explains. “For example, we are reducing the impact on the environment because we know that everywhere in the world people are getting more and more concerned about pollution.”

Strides have already been made towards reducing fuel burn and emissions by improving

Airlines could soon be sent 3D printer files by aerospace firms so they can print their own spares

aircraft propulsion systems, fine-tuning aerodynamics and reducing the weight on board.

Flaig tells me that in the last 15 years aircraft fuel burn has been cut by 70 per cent and noise has been reduced by 90 per cent. But Airbus wants to go even further.

The firm has been experimenting with electrically-driven aircraft, and its E-Fan prototype made history this year when it completed a cross-Channel flight. Flaig says similar technologies could power small passenger aircraft in the distant future.

“We are continuing to develop bigger engines, more efficient electrical engines and, of course, efficient electrical batteries to support such evolution of aircraft,” he explains. “So in maybe the next ten years is we might be capable of building aircraft for maybe 50 to 100 passengers driven by electrical engines supported by batteries.”

This is where the average plane journey from a major city could become very different. As the number of “mega cities” in the world grows – there are expected to be 92 by 2032 – Flaig says the small planes could be used to transport passengers from the outskirts to large hub airports, easing road congestion. As they generate little noise, they could even fly at night.

But not everything is about the technology in the air. Improved equipment on the ground could allow aircraft to take different trajectories on take-off and landing to bring them closer together and increase airport capacity, as well as allowing them to fly more directly to their destinations.

Combined with another technique, inspired by the way birds fly south for the winter, this could improve efficiency.

Formation flying, already used by the military, mimics the V-pattern birds u s e a nd c ou ld r e duc e f ue l consumption.

“We have learned from this that when one bird is f lying separately from the others, Airbus SVP a certain distance behind, Axel Flaig

The aviation industry is studying the ways birds fly in formation in an effort to become more energy efficient

it is using less energy,” Flaig says. “The same principle is true for aircraft… So in future, for example if an A380 is flying from Heathrow over the Atlantic to the US then another aircraft could follow this aircraft very closely, using up to 10 per cent less fuel.

“Today it is technically feasible, but several procedures have to be developed further and the air traffic control has to be adapted to it. But it is something I believe we could see in the next ten years coming up.”

When it comes to the way the aircraft themselves are manufactured, one technology set to make a big impact is 3D printing, which Flaig says is a “revolution” for the industry.

It allows aircraft manufacturers to make components with less material and from fewer parts, increasing their strength. In the current drilling and milling process, between 80 and 90 per cent of the starting material does not make it into the final product. With a 3D printer, only the material for the finished part would be needed.

The process is also opening up new freedoms.

Flaig says 3D printing allows manufacturers to “realise geometries which you cannot realise with today’s drilling and milling tools” and take inspiration from more complex designs drawn from nature. “We call this bionic design, because we are looking, for example, at how our bones are structured or how a tree is built, because these solutions have been evolved over millions of years to be the most effective balance between weight and load,” he says.

It could also simplify the logistics of maintenance. Flaig says that in future airlines will have their own 3D printers, allowing Airbus to send them a digital file of a required component so that they can print it themselves and have it installed.

But even with this array of new technology and the power of 3D printing, he admits that the next steps in efficiency will be challenging as engineers and designers compare the different potential configurations for future aircraft and wait to see which one will be “the winner”.

“It becomes more and more difficult now,” Flaig says. “We have to bring more new technologies and innovation to further problems on bringing down the weight of the aircraft, bringing down the fuel burn and improving the aerodynamics.”

As far as current aircraft configurations go, it is a matter of small improvements and finetuning to improve efficiency. But all of these small innovations add up.

“Putting this type of technology on the aircraft is quite an effort,” he says, speak ing enthusiastically about a new texture that could reduce drag by just a couple of per cent. “But it is what we have to do. We have to invest to get these gains.”

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8 · Business Reporter · October 2015

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Want to unleash innovation in engineering? Start by promoting diversity

Protecting innovative engineering at all stages in a company’s lifecycle

I

t is commonly the case that engineering businesses are based around commercially successful innovative ideas. As a consequence, the intellectual property (IP) rights protecting those ideas, such as patents and registered designs, can be some of the most valuable assets of those businesses.

Indeed, they can be more valuable than the physical assets of the company. Therefore, from the genesis of a start-up to an exit, and through to life as a multinational, businesses need to think about allocating appropriate resources to IP protection and strategy.

Before starting to promote a business idea, an entrepreneur first needs to ensure that the innovative idea is protected. It is commonly forgotten that as soon as the idea is in the public domain, it is much harder to protect it – patents might no longer be available. Due thought and consideration should thus be given to when, how and what to protect.

An idea can also develop and change as the market grows. Therefore, businesses should continue to allocate appropriate resources for allowing their IP portfolio to grow and adapt with the company. Only then will the portfolio best match the commercial directions being taken by the business. As an example, protecting the results of ongoing research and development is important, even though the newer generations of product may have a similar underlying concept to the original products, as unprotected developments can be useful for competitors.

Remembering that patents are not the only route for protection can also be important. Whereas a patent typically protects a product’s function, a registered design can instead protect its appearance. This can be particularly beneficial for engineering companies that sell new incarnations of old products.

Cost considerations The costs of securing IP protection can be discouraging. However, they can be manageable. For example, it is impractical to protect an invention everywhere. Instead, a company should think about which territories actually matter. Seeking protection only in countries where its (or its competitors’) products are manufactured or sold, and in the countries that provide the major transport hubs, may provide effective global cover.

Whenever a company is considering entering into a financial or corporate transaction with another party, it should check that its IP portfolio is in good shape.

Likewise, third-party IP may also need to be considered. These preparatory actions can allow a company to anticipate or avoid potential embarrassment. After all, investors themselves are likely to perform preliminary due diligence, and this normally includes an IP assessment to see whether the deal presents foreseeable difficulties.

Marks & Clerk is the UK’s largest firm of patent and trademark attorneys, and is well practised in handling all aspects of IP management. The firm has more than 125 years of experience in protecting client IP, including securing and enforcing IP rights and assisting investors with due diligence.

Marks & Clerk’s experience extends across all forms of engineering – mechanical, electrical, chemical, civil, bio and medical.

With 17 offices worldwide, the firm is able to service clients big and small at a global level.

Robert Carpmael (left) is patent attorney and partner, Marks & Clerk +44 (0)20 7420 0000 rcarpmael@marks-clerk.com

E

ngineering is all about innovation – we constantly need to find new and improved ways of dealing with the challenges faced by society. We know through our ongoing work on major infrastructure schemes such as Crossrail and HS2 that it’s the talent and new ideas that really make it work.

And while we may be more comfortable with consensus, it is constructive conflict – through debate, and exploring opposing opinions – that allows new ideas to crystallise.

One of the best ways to generate new ideas is to support a diverse and inclusive workforce. When colleagues share similar educational backgrounds and life experiences, it is no surprise that they also share similar ideas of how best to tackle the engineering dilemmas we face. A diverse blend of employees with different abilities and life experiences can bring something new to the mix – an overlooked detail, new ways of working, understanding of client customs or unique solutions which may – or may not – have been tried and tested in other industries.

Our current understanding of diversity falls into two camps. There is “inherent diversity”, such as ethnicity, gender and sexual orientation – the characteristics people are born with, which can give them a unique view of the world and help them understand people who come from a similar background. There is also what is described as “acquired diversity”, formed by the different personal and professional experiences of employees. People coming into engineering from other industries, or who have experiences of working globally, can all bring new ideas to the profession.

At Mott MacDonald we have responded by setting up the Advance Network, an internal structure led by employees to promote equality, diversity and inclusion (EDI). Crucially, the network has management-level involvement and representatives across the UK who are

provided with time and budget to make a real impact. We have created an EDI strategy which includes a host of employee engagement activities – which are essential to stimulate real progress on inclusion.

Innovations can only make a difference if leaders get behind them. As well as having diversity among employees, it is crucial that this diversity is reflected in a firm’s leadership.

Research by the US-based Centre for Talent Innovation shows that without diverse leadership, women, ethnic minorities and members of the lesbian, gay, bisexual and transgender (LGBT) community are at least 20 per cent less likely than heterosexual white men to win endorsement for their ideas. Inclusive leadership is another driver which can help to equip leaders with the skills to understand difference and embrace innovation from all their employees.

The study also showed the commercial benefits of diversity in the workplace.

Employees at companies with “twodimensional diversity” (bringing together people with both inherent and acquired diversity) were 45 per cent more likely to report that their firm’s market share had grown over the previous year, and 70 per cent more likely to report that their firm had moved into a new market.

The business case is clear, and if UK engineering firms want to keep up in an increasingly competitive global marketplace, we have to take diversity seriously. At Mott MacDonald our aim is to take our contribution to society and the economy beyond engineering alone and our commitment to diversity will help to foster that ambition.

Richard Chapman Harris is equality, diversity and inclusion manager at Mott MacDonald Twitter: @MottMacDonald www.mottmac.com

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From innovative idea to commercial success stories

T

he UK is an innovative nation, which has not excelled, however, at maximising the real economic value from its great inventions.

Battling a large trade deficit and competing in a turbulent global environment, the UK needs a balanced economy that makes and exports more effectively, and that successfully turns its world-class inventions and ideas into tangible commercial success. The High Value Manufacturing (HVM) Catapult helps address these issues. Its seven technology and innovation centres across the country are funded by private sector, BIS and Innovate UK and work with businesses of all sizes, to bridge the gap in, and accelerate the activity between, technological concept and commercialisation.

Businesses with a functioning process, material or product face the difficult journey to scale up their innovation to full industrial exploitation. This is very risky, often involving large investments in capital infrastructure and in human resource, without any guarantee of success. Working with the HVM

Catapult enables companies to gain access to world-class expertise and the latest industrial scale equipment significantly reducing the development risk. This allows them to defer their own investment decisions until it’s been established that the innovation can be exploited on a commercial scale.

Recent figures speak for themselves: after merely four years of operations, the HVM Catapult has already helped thousands of companies, and has generated £15 of net benefits to the UK economy with every £1 of government core funding it received.

Dick Elsy, CEO of the HVM Catapult, said: “This is a great example of government showing how it backs high-end manufacturing in this country, and working with industry to build long-term value for the UK.” One HVM Catapult facility, the National Composites Centre (NCC) in Bristol, works with businesses to exploit innovation in the use of advanced materials in composites manufacture and product design. Its team works with companies to explore new

Time running out to make the most of Patent Box regime

T

he Patent Box is a UK government scheme introduced in April 2013 that enables companies to reduce their corporation tax on profits earned from patented inventions. While the benefits of patenting are essential to some industries, the scheme made it much easier for both small and large companies, where the benefits weren’t as clear, to perform a cost-benefit analysis when making decisions on patenting (which can typically cost £10,000 to obtain grant of a UK patent, so needs to be

considered carefully in times requiring careful cost control) as the reduction in corporation tax was quantifiable and the scheme rules were straightforward and generous.

An objection was raised by Germany in 2014 to the generosity of the Patent Box scheme, and the UK government is planning to revise the scheme to tighten up the rules. The precise changes are not yet confirmed, but it is clear that the scheme rules will be more complex and that the benefits will be less generous.

Companies that are already taking advantage of Patent Box, or ones which do so before June 2016, will be able to continue to do so until June 2021.

If your company may benefit from a reduction in corporation tax based on current patents or patent application, or has new technology that can be patented, time is running out to take advantage of an excellent scheme that currently exists for another six years. info@mathys-squire.com www.mathys-squire.com

fabrication techniques, especially automation of composites manufacturing processes, materials manufacturing process simulation, process optimisation, and productivity improvement. The NCC has links to worldclass composites universities, software developers and material and tooling suppliers, enabling provision of holistic solutions to complex challenges.

Effective use of composites materials can reduce weight while maintaining structural integrity and providing optimisation of design. Using carbon, glass and other polymer reinforced fibre materials can significantly reduce maintenance costs by improving corrosion and fatigue resistance.

The NCC is collaborating in the development of composites manufacturing processes to deliver faster cycle times and improved product quality at lower processing costs, initially for the automotive supply chain but with opportunities in multiple sectors.

A key target is to achieve a product every two to four minutes for mass volume applications.

The NCC will work with companies to develop and optimise composites manufacturing technologies including high-pressure resin transfer moulding and rapid processing of carbon-fibre reinforced thermoplastics. info@hvm.catapult.org.uk hvm.catapult.org.uk

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Ground control to Colonel Chris EXCLUSIVE: Matt Smith talks to Canadian astronaut Chris Hadfield on how going into space helps engineers back on Earth

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OLONEL CHRIS Hadfield, the first Canadian commander of the International Space Station (ISS), became a YouTube sensation in 2013 when he recorded a video of himself performing a rendition of David Bowie’s Space Oddity in zero gravity.

The clip has since amassed more than 26 million views from around the world, but while the video shows the lighter side of life on the station, Hadfield hopes the publicity will continue to generate increased interest in space programmes and progress in space exploration.

Before he entered orbit, Hadfield trained and flew with the Royal Canadian Air Force, and later with the US Air Force, flying more than 70 types of aircraft as a fighter pilot and experimental test pilot. He says it helped him to develop the skills that eventually took him to space.

“There is more similarity than there is difference,” Hadfield says. Both test pilots and astronauts work in life-and-death situations making incredibly quick decisions, and this means there is “a huge parallel” between the two in terms of the skills required, he explains.

When the Canadian Space Agency sent him to join NASA in Houston, Hadfield moved through a variety of roles and flew on space missions in

1995, 2001 and 2012, spending some 166 days in space along the way. Unsurprisingly, he says he learned a lot from the experience that would be useful to engineers back on Earth.

“One of the most important lessons I have learned over the last 30 years is that all simulators are wrong,” Hadfield says. “They might get some things right, they might get some things close, but by definition no simulator is exactly the same as reality.

“Believing simulations is always at your own peril. You have to decide what you can trust and what you cannot – especially when the stakes are high.”

Your chance to win Chris Hadfield’s brilliant book Chris Hadfield was inspired to become an astronaut after watching Apollo 11 land on the Moon on July 20 1969. For your chance to win a signed copy of his book, An Astronaut’s Guide To Life, go to our website at www.business-reporter.co.uk and answer a question about those Moon landings…

Space poses unique challenges to astronauts and engineers alike, and Hadfield says that even after decades of space exploration experience the lack of gravity frequently surprises them.

“Weightlessness constantly fools everyone,” Hadfield says. “It is not so much the maths of it but the psychology of it… Even after having flown in space for years we still occasionally get surprised just because we have grown up with gravity.”

In one such instance, Hadfield and his colleagues needed to secure a part of the robotic system Canadarm2 with specially designed screws called Expandable Diameter Fasteners.

They turned the screws until they thought they were sufficiently tight, but when they let go they drifted out.

I n a dd it i on to t h e tec h nolog y behind t he missions themselves, the ISS i s home to a rou nd 20 0 experiments covering everything from the effects of weightlessness on human biology to flame ignition and extinguishing.

It is also used to safely test new technologies for future journeys into space – a huge challenge for engineers who carry out the majority of their design work under extremely different conditions to the ones that their products will need to function in.

“We do a lot of testing of equipment that we need to go further into the universe,” Hadfield explains, adding that it is especially

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Why going back to the future highlights how far we have come EXPERT INSIGHT

Simon Ashby

“ One of the most important lessons I have learned over the last 30 years is that all simulators are wrong” – Chris Hadfield

difficult for engineers to gauge how successful their projects will be when “the majority of people thinking are on Earth”.

“You will never know if it works until you put it on a spaceship and use it for the first time.

The beauty of the space station is that it allows us to fail early and fail safe.”

And Hadfield, who himself was inspired to become an astronaut after watching the Apollo 11 Moon landing on July 20 1969 – just nine days after David Bowie released his interstellar hit – says it is these challenges that inspire the engineers of the future to achieve more.

US educational institutions saw a leap in applications for related subjects following the landing, and innovations including liquid cooling systems, mechanical arms and lightweight breathing technologies have all been achieved using technology developed by NASA. “Often our greatest leaps in knowledge and invention come from challenging people to do something they never thought possible,” Hadfield says.

“If you give people a quest or challenge like, ‘Hey, let’s go fly to the Moon,’ it inspires people to take themselves to another level. That type of challenge is worth giving people because it accelerates the pace of innovation.”

IN THE 1985 FILM Back To The Future Part II, Marty McFly travels to Wednesday October 21, 2015, a day that was almost certainly much less eventful for us than for Marty.

Watching it from a 21st century perspective, as opposed to when I was a teenager in the 1980s, is a fascinating exercise. Some of the technology predicted then, such as flying cars and floating skateboards, remains far-fetched, but they got many things right, from smart clothing and video conferencing to tablet computers and hands-free videogames. I wonder how much further technology will develop over the next 30 years. Personally I still like the idea of flying cars – that way I would find it much easier travelling from my Cornish home, especially when the A30 is jammed with holidaymakers.

The interesting thing about technological development is that the really big engineering advances we thought likely during the 1980s, and also throughout the earlier parts of the 20th century (think Dan Dare or Buck Rogers), have not come to pass.

True, anti-gravity technology is the stuff of science fiction (though we can do wonderful things with lightweight drones and magnets), while space travel remains primitive and slow. We do not even have Concorde any more, and more personalised air transport solutions like the jet pack never took off, if you will pardon the pun.

However in other areas like computers, communications, materials engineering, engine efficiency, green energy and robotics we have come much further than predicted. Indeed, with the growth of the internet, virtual reality environments and 3D printing, flying cars and jet packs may actually be redundant. It has even been proposed

by NASA that the construction of Martian colonies could be based around 3D-printed habitats to cut down on actual space travel – with NASA already providing funding for

the design of such habitats via its Centennial Challenge.

British businesses have done much to help develop a wide range of advanced engineering fields.

Were it not for our expertise in this area our manufacturing base would be in an even poorer state than it is.

What is also good about the growth in UK advanced engineering is that businesses are not confined to the traditional manufacturing heartlands of the Midlands and the north west. Even Devon and Cornwall, areas not usually associated with large-scale manufacturing, are getting in on the act (check out the West of England Aerospace Forum, for example, along with the Plymouth Science Park).

For those of us interested in advanced engineering and its business applications it is worth checking out the upcoming Advanced Engineering UK next month in Birmingham. This conference covers most of the main areas of advanced engineering development in the UK, including aerospace, composite materials, motorsport, green technology (eg hybrid engines), driverless cars and robotics. Some of the potential highlights for me are a talk on how composite technology is going to help the Bloodhound SSC break the 1,000mph barrier – a vehicle that will shortly be tested in on a Newquay beach, but only up to 200mph. Also interesting is a Manchester-based company that produces the Libralato Hybrid Engine, which can help to increase engine efficiencies and reduce CO2 emissions – with potentially even greater benefits for diesel engines.

We can be quick to write off British industry, especially large-scale manufacturing, which has declined since the 1970s (at least in terms of GDP), so it is reassuring to see the success of advanced engineering, as well as the potential for it to bring high-paid jobs to all parts of the UK. Let’s hope this success continues.

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Matt Smith visits the Drax power station in Yorkshire and finds a bright future for the biomass industry

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T’S A DRIZZLY morning in Yorkshire and I’m gazing up at a series of huge overhead cables. The electricity passing through them, my guide tells me, is enough to power any major UK city outside of London. But this does not even represent Drax power station’s full output.

The entire plant, which operates within a 16-kilometre working perimeter, produces between 7 and 8 per cent of the country’s power.

While all of this used to be generated by burning coal, the facility is undergoing a transformation to integrate sustainable biomass, which consists of materials including sawmill residues, pulpwood and low-value parts of harvested trees that cannot be used for other commercial purposes.

“We believe there is a very strong case for biomass,” says Drax Group chief executive Dorothy Thompson, and the statistics certainly seem to back her up. Two of Drax’s six generating units have been converted so far, with a third currently being modified to burn “a high percentage of biomass with some coal”. When all three units are converted the station will save 12 million tonnes of carbon per year.

Although more carbon dioxide is released during the production and transportation of biomass, overall it generates 86 per cent less carbon emissions than coal because the carbon released during combustion is that which the trees absorbed during their growth.

The transformation could also save the UK money as it seeks to move to renewable energy.

By converting existing infrastructure, Drax’s project avoids some of the costs of other projects like the construction of offshore wind farms. It is also a constant energy source, not requiring a backup plan for when there is no sun or wind.

Another reason for a move away from coal is the decline of the UK’s coal industry. While the percentage of coal Drax sourced from the UK was in decline, the amount of biomass it

sourced from UK firms increased from 36,000 tonnes in 2013 to 113,000 tonnes in 2014.

“Half of our coal used to come from UK coal producers,” Thompson explains. “Slowly but surely the UK industry has been closing down.

One of the reasons is that on the international market coal has become very, very cheap.”

Drax anticipated this decline and saw the situation as an opportunity to move to renewable energy through biomass. It committed to the project and secured the support of the government for the conversion of the three units.

“Coal will be dead by 2020,” says Drax Group operations director Peter Emery. “We could see that coming, so biomass gave us a chance to play a part in that process [by moving to renewable energy]. We converted the unit without any loss of output. We have done a lot of work on the supply chain to make it reliable. We are very pleased.”

Part of that supply chain is Enviva Biomass, a US-based business that expects to produce 2.2 million tonnes of the material in 2015, the majority of which will go to Drax. Projects like

Above: Drax power station; below: the station’s group CEO Dorothy Thompson

the one in Yorkshire are helping to fuel a burgeoning industry.

“I think what has driven the growth of the industry over the last few years has been the replacement of coal in power generation, primarily because of the greenhouse gas benefits of doing that,” says Enviva’s vice president of communications Kent Jenkins, who explains that the market looked very different when it previously primarily produced biomass for home heating. “Before the industrial biomass market what we have seen was a much smaller and more fragmented marketplace. Until four or five years ago the primary application for wood biomass was home heating. It tended to be here in the States and elsewhere.

“The producers tended to be fairly small and they tended to be regional. The arrival of the market to supply electric power generation in effect created an industrial market for wood pellets that is very different from the home heating market.”

According to figures from independent forest products and bioenergy consultancy Hawkins

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London Metal Exchange concerned over stifling commodities regulation

Wright, wood pellets have a global market value of more than $4billion a year, with production having doubled to more than 20 million tonnes between 2007 and 2013.

Meanwhile, European Union import volumes increased from 6.03 million tonnes of pellets in 2013 to 6.48 million tonnes in 2014. Imports grew by a further 7 per cent year-on-year in the first half of 2015 and, although there are uncertainties surrounding policy in the UK and EU, it is anticipated that demand could double before 2020.

With more forest area available in the US than in the UK and Europe, the established forestry industry is able to produce enough biomass to meet demand while maintaining sustainability.

There are twice as many trees in the south of the country now than there were in 1953, Jenkins says. He is also very positive about the future in terms of biomass demand.

“The next one that we will see is the use of wood pellets for large-scale industrial and commercial heating,” he explains, acknowledging the energy industry’s role in the sector’s growth.

“It is a premium market and it exists at the scale it exists at in significant part because of the electric utility market and the market to replace coal fuel for electric power generation.”

This is a sentiment echoed by Emery, who says that the biomass industry and its supply chain are still in their “very early stages”. This renewable source of energy could have a lot more to offer in future, he explains, not just in terms of expansion into new areas, but with the development of more efficient processes at facilities like Drax.

“This is in its infancy,” he says. “In 20 more years we will be far more efficient at this. We will be able to use a lot of trimmings and filings that we cannot use today. This is the first stage of how we will use biomass as energy.”

With Drax expecting to produce 4 per cent of the UK’s power from biomass in 2016, the government, keen for people to convert their home boilers to run on the material and industrial and commercial heating set to join the movement, the future could be very bright for the biomass industry.

THE LONDON METAL Exchange voiced its concern over controversial new European financial regulation at its 2015 Metals Seminar in London this month.

Although the exchange said regulators are working with the industry and willing to listen to its suggestions, it highlighted a number of potential issues for the sector.

Among other changes, the Markets in Financial Instruments Directive II (MiFID II) will broaden the reach of existing rules to include many firms in the metals industry. The legislation is designed to reduce risk in financial markets, but some worry that regulations not specifically designed for the metals sector could stifle firms’ activities and even drive businesses and trade outside of the European Union.

Along with other new rules, the London Metal Exchange believes this is cause for concern.

“Where we are now is a direct consequence of what happened in 2008,” Kirstina Combe, the exchange’s head of regulation, said at the event.

“We as commodities traders felt like we were swept up in the tide, almost as innocent bystanders.”

But in the following session, the European Commission said that “action needed to be taken” after the financial crisis of 2008 to pave the way for “a well-functioning single market”.

“Commodities markets have long been intertwined with financial markets,” explained Martin Merlin, head of unit for the directorategeneral for financial stability, financial services and capital markets union. “However, over the last decades we have seen a massive financialisation of commodities markets, which has positive and negative effects.

A well-governed commodities market has the benefit of providing huge benefits to the economy.”

MiFID II and the other regulations, he said, will ensure that all firms – financial and non-financial – are covered if they conduct “a significant amount of speculative business”.

Overall, Merlin said, this will help to create a “stable, solid and transparent financial system”.

Panelist David Bailey (inset, below), director of financial markets infrastructure supervision at the Bank of England, said the benefits of the changes will be worth the challenges of reform.

“It does represent a major period of reform, but there are clear drivers for us to go through this process of reform to make markets work with a good deal of transparency,” he said. “It is about how we adjust and provide flexibility for commodities markets, rather than how we exempt commodities markets.”

He said new rules undergo “a hugely intensive process of consultation and negotiation” and encouraged firms to come forward with suggestions and data in evidence. “We can only fix issues when we have heard about them, so do reach out to us,” he said.

But even with these review processes in place, it is clear that metals companies will need to familiarise themselves with the new regulations and adapt.

“Get preparing,” Bailey said. “We have highlighted a number of things that are coming down the track so prepare for them. Be prepared.”

“They say in life there are two things you cannot avoid: death and taxes,” Combe said as she concluded her talk. “Now we can add a third: regulation.”

The Race Engineer buddyfey.blogspot.co.uk

By Ciara Long, online reporter

Republic of Mining www.republicofmining.com Run by Toronto-based mining analyst and Huffington Post columnist Stan Sudol, this blog aims to raise awareness of the social and economic benefits of sustainable mining, as well as providing updates on the oil and gas industries. Praised by industry specialists as “hitting the nail on the head with an enlightened approach”.

Covering technology, the engineer’s role, life in racing, and inside news and views, The Race Engineer is written by experienced engineer Buddy Fey, who has worked in racing leagues such as IRL and the NASCAR Cup. Fey has also published a book on racing data acquisition.

The Engineer www.theengineer.co.uk/home/blog A long-running resource for engineers across a range of sectors, The Engineer’s blog covers topics from aerospace and automotive fields to energy, civil and manufacturing engineering. It also has specialist white papers and a jobs board.

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How ERP integrates the value chain for Industry 4.0 V

ery few industries have grown quite as rapidly as the manufacturing industry over the last number of years. While many sectors have struggled in difficult economic times, the manufacturing sector has found new ways to survive by integrating operations from end to end, embracing new technologies and managing supply chains more efficiently.

Today’s manufacturer can maximise yield, operate with fewer line stoppages, and successfully communicate different systems throughout the business. The factory of the future is already taking shape as we enter Industry 4.0 and businesses implement efficient, scalable, and cost-effective performance strategies which integrate their entire value chain. But how is this possible, and what is the driving force behind this new breed of manufacturing enterprise?

Just as the manufacturing industry has evolved, so too has the Enterprise Resource Planning (ERP) market, and today’s solutions are enabling creation of the fourth industrial revolution. Today, customers expect goods and services to be tailored, and the speed at which they want to receive them is constantly accelerating. As a result, ERP solutions have had to grow to help manufacturers become more flexible, more responsive, and drive greater efficiencies across the supply chain.

In the days of Industry 3.0, an ERP system was the overarching application for production control, and drove linear operations within a factory. ERP would process sales orders and dictate quantities of product that needed to be manufactured, before transferring this data to its production control module. Production control would then initiate production and return progress reports to senior management. This linear process was successful in automating processes to boost efficiency and productivity, but left a manufacturing organisation vulnerable to unexpected or sudden changes in the supply chain. In addition, the costs required to standardise communication interfaces were as high as the labour-intensive hours required to manage the ERP solution itself.

Fast forward to the advent of Industry 4.0 and applications such as SYSPRO have evolved to create smart factories of the future.

Previously, production managers would have to guess how their machines were performing, or use separate manufacturing execution systems. Operatives would have to input quality and yield information from machines into ERP systems. Now, with Cyber Physical Systems connected through the internet of things, it means that machines can do the updating for themselves. They are able to input directly into SYSPRO the number of items produced and items scrapped, or even

take themselves offline for maintenance or updating the production plan. This means the production manager and operatives can focus on running the shop floor in the most efficient way, and leave the administration to systems.

The result? No longer are businesses spending too much time in meetings quantifying their data, and the days of having to manually extract business information and pass it through multiple departments are gone. Today, communication throughout the supply chain is more consistent.

Simulations and forecasts are available anywhere, at any time, through mobile apps such as SYSPRO Espresso, to facilitate decision enablement. But how are vendors adding value to the manufacturers themselves when they seek out such an application?

The manufacturing sector did not survive the recession by just cutting costs. Yes, businesses adopted lean strategies, shaving costs, time, and waste wherever possible, and

that culture has remained even as the sector has left the recession behind. But they also invested those cost savings: taking a risk on a big new contract; buying competitors who were struggling; increasing capacity; buying new machines; or automating the shop floor.

Today, manufacturing businesses understand they need ERP, but want to make sure this is a long-term investment that will deliver clear return on investment. K3 Syspro recently launched its unique Business Case Analysis Tool, which identifies the cost and time savings that a potential ERP buyer can experience from implementing SYSPRO ERP. It generates a report that examines efficiency improvements, labour savings, reductions in stock holding, and cost and time savings per transaction, as well as showing projected reductions in IT spend as a result of implementing SYSPRO ERP. It means that an enterprise can calculate the impact SYSPRO will have and then measure this as it progresses through its ERP journey, showing

true value to all project stakeholders. For more than 25 years, K3 Syspro has helped manufacturing enterprises such as Metaltech save £200,000 a year with SYSPRO. ERP should cut costs, improve efficiency, productivity, and communication throughout a business. That’s why K3 Syspro is also a software engineering house. The company creates its own software that integrates seamlessly with SYSPRO to better communicate data between different systems, whether that be CAD applications or CRM systems. Successful ERP projects should facilitate the connectivity of Industry 4.0, not hamper or obstruct it. What’s the point in having a fully connected enterprise if it falters because of your main business critical application?

There’s no doubt that the manufacturing industry will continue to evolve as it looks towards new ways of remaining competitive.

The rise of wearable devices, big data analytics, and the growing relevance of the internet of things will continue to shape Industry 4.0 and facilitate improved decision enablement. But one thing you cannot dispute is that it will be the evolution of ERP that drives these changes. And K3 Syspro won’t just be providing the solutions that will drive the change, but will be driving the change in the way these solutions are delivered; with greater flexibility, transparency and functionality.

How? Because the company’s roots firmly lie in the UK manufacturing sector.

K3 Syspro has helped UK manufacturing businesses remain competitive through globalisation, reshoring and offshoring, the advent of mobile, the recession and its rebirth, and will continue to support the industry as it continues to evolve.

Don’t just take our word for it, though – speak to one of the manufacturing businesses embracing Industry 4.0 and continuing to be competitive during difficult times, specialist component manufacturer Titan: “It’s not until implementation that you are able to really see something as large as ERP in minute detail, understand how it will work for your business and how it will solve existing and future problems,” says Mark Martin, financial controller at Titan.

“K3 has really helped us to imagine the future of the business with SYSPRO, and foresee some of the many benefits it will bring to our company. Rather than change our business processes to build them around SYSPRO, K3 has built SYSPRO around our existing business processes, which is ensuring minimum downtime and disruption.”

For further information, please contact Sarah Winterbottom, marketing manager, K3 Syspro on 0161 876 4498, or email info@k3syspro.com

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By Matt Smith WHEN BOUDEWIJN Wentink, executive director and finance and legal director at New World Resources (NWR), joined the firm in 2013, he expected to focus on mergers and acquisitions.

But NWR had €825million of debt on its balance sheet, and when this proved an issue he set about putting together a restructuring plan to reduce the “huge burden” of the interest.

It took six months to convince the board to take steps towards debt restructuring, he says, and then he faced the challenge of selling the idea to creditors with different interests. “Nearly everything that is legally possible has been used in this deal,” Wentink says.

“We concluded it exactly a year ago. The whole process, including preparation, took 18 months.”

Wentink joined the firm from delivery company TNT Express in the Netherlands and needed to adapt quickly to the fast-paced mining industry. “It is a volatile market,” he says. “In terms of production it is a sturdy industry, but in terms of prices… Over the last four years prices have come down 70 per cent.

“You need to be able to be flexible in your organisation but also in your thinking. What was possible a couple of months ago might not be possible at a certain point in time, and the other way around. Prices can go up very quickly,

Restructuring from the ground up: how the man from TNT turned around New World Resources in 18 months but what goes up has to come down, but the key question is: ‘When does it come down?’ That’s extremely important but very difficult to predict.”

With the industry at a difficult point, other companies are undergoing similar changes. In the US, for example, Wentink says many of the industry’s household names are carrying out similar restructuring. He says NWR gained an advantage by being the first to do so.

“It was painful, but I think we have created a situation where we are more able to ride out the bottom than any other company,” he says.

Wentink says convincing the board to take on such a scheme is all about using figures and their potential consequences to get the message across, as well as offering options.

“The most important thing is that you exactly know what your future will

15

Boudewijn Wentink: the most important thing in a restructure is to manage the expectations of your stakeholders at all times

look like,” he explains. “You have to have a very good handle on your numbers.”

But once the board is convinced, firms also have to consider managing their stakeholders. “Keep them close and keep in regular contact with them so they are not surprised by what is happening,” says Wentink. “Be very transparent if you can within the legal framework.”

However, despite recent bad news, Wentink says there are opportunities in

the industry. “It is a classic shakeout,” he says. “It means that certain companies are not able to survive or in order to survive need to sell their assets.

“Usually under those circumstances assets could come on the market at a price you would not be able to pay a couple of years ago in the upturn. So strategically, if you have the money available, there are definitely opportunities.”

First gold pour to underpin exploration success

E

xciting times lie ahead for explorer and developer Stratex International, which is now on the cusp of its first gold pour. Listed on AIM in 2006, the company has positioned itself as a diversified and successful player, with operations in Turkey and Senegal and strategic interests in East Africa and Ghana. Stratex also has a strong reputation for forming joint-venture partnerships with mining majors, a number of whom have become cornerstone investors.

In Turkey, local joint-venture partner Bahar has funded mine construction at the Altintepe heap leach project to vest at 55 per cent. Stage one mining will recover around 110,000 ounces of oxide gold from two zones over 34 months before further nearby zones are brought into production for a potential total mine life of eight to nine years. Bahar will recoup its approximately $40million outlay from 80 per cent of first cash flow,

after which Stratex will receive 45 per cent of net cash.

Stratex also retains 30 per cent of the 51 million tonne Muratdere copper-gold project in Turkey, where joint-venture partner Lodos has recently funded drilling and a feasibility study to acquire 70 per cent, and is currently focused on moving to production on an initial 16 million tonne optimised resource. Elsewhere in Turkey, a third party is funding $1.5million of exploration and resource drilling at the Karaağac gold project and will pay Stratex $0.5million on resource confirmation, plus a 1.5 per cent net smelter returns (NSR) royalty on future production. The firm also has strategic alliances with mining majors Centerra and Antofagasta for gold and copper exploration in Turkey respectively, and is undertaking early-stage exploration at its 85 per cent-owned Dalafin gold project in Senegal.

Making money and weathering difficult market conditions is nothing new for this feisty junior.

After an initial investment of just $1million on its Öksüt gold discovery, and subsequent earn-in to 70 per cent by former jointventure partner Centerra, the company sold its remaining 30 per cent to Centerra in 2013 for $20million cash and a 1 per cent NSR royalty capped at $20million.

Production at the project is anticipated to start in Q2 2017.

Stratex has the option to sell the royalty to release funds in the near term for investment in other advanced projects.

Investments to date include: a

33.45 per cent interest in Goldstone Resources (AIM:GRL), which owns the 602,000 ounce Homase/ Akrokerri gold resource in Ghana; a 40 per cent interest in Thani Stratex Resources, a private exploration and development company focused on East and North Africa, with a 0.52 million ounce gold deposit in Egypt and an exciting portfolio of lowsulphidation gold projects in Ethiopia and Djibouti; and a c.13 per cent interest in Tembo Gold Corporation (TSX.V: TEM), whose extensively mineralised

tenements are adjacent to Acacia Mining’s Bulyanhulu Mine in Tanzania. Looking forward, the company is focused on developing new business in West Africa.

With a market cap of just under £10million, imminent cash flow and zero debt, Stratex provides investors with excellent exposure to a range of low-cost exploration and production initiatives driven by an experienced and respected management team. info@stratexplc.com www.stratexinternational.com

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INSIDE TRACK D

uring Chinese President Xi Jinping’s state visit to Britain the two governments signed the £24.5billion Hinkley Point project, heralding a new age of nuclear development for the UK as it strives to meet its EU carbon targets.

It has been estimated that the UK will need to install another 35,000 wind turbines to meet its 2020 targets. However, these developments need to be set against the headwind of Energy Secretary Amber Rudd’s recently announced cuts in subsidies to renewables, and George Osborne and the Treasury’s lobbying for a 25 per cent cut in subsidies to onshore wind. Public opinion appears to be on the government’s side, with growing opposition to onshore wind farms and a recent Opinium survey revealing that 44 per cent agree that the UK needs to build more nuclear power plants.

With more than 160 nuclear reactors currently in operation across Europe – but only one small uranium mine currently in operation in the Czech Republic – Europe has by far the lowest security of supply of any of the major economies. Both the US and China consider uranium supply as strategic, whereas the EU imports most of its requirements from a disparate array of African and Eurasian countries including troubled Niger and Kazakhstan.

AIM-listed Berkeley Energy Limited is a high-impact clean energy company that has recently announced a world-class uranium resource in western Spain, which respected mining analyst Dave Talbot of Dundee Capital Markets has estimated could supply the whole of the UK’s electricity generation needs for the next five and a half years.

The Salamanca project is being developed in an historic uranium mining district about three hours west of Madrid. Following the gazetting of the approval from the Ministry of Industry, Energy and Tourism, the company has now received all the European Union and national, regional and provincial-level approvals required for the initial infrastructure development of Berkeley’s project in mid-2016.

Berkeley’s managing director Paul Atherley said: “Following the grant of the various approvals, we have now received more than 18,000 applications for the first 200 jobs the Salamanca project will be creating in a rural community which has been hit hard by inter-generational unemployment.

“The project will generate over 450 direct jobs and the University of Salamanca has estimated a further 2,300 indirect jobs will be created, making Berkeley one of the largest employers in a community which has suffered badly from the effects of rural desertification.

“The response to our skills training programmes for locals who have previously

Spain’s strategic secret How the Salamanca project can help secure Europe’s clean energy future worked in the local uranium operations has been overwhelming, and has given us an intimate insight into the benefits that the employment will bring while encouraging us to expand our training programs into other areas.”

Berkeley’s board recently made the decision to push ahead with the overall development of the project and, with the recent positive announcements on permitting and test work programmes, the company has received a number of approaches from financiers, which are now being actively advanced with a view to drawing down finance early next year.

A pre-feasibility study reporting the overall economics of the project for the first time is scheduled to be published towards the end of next month and the numbers are expected to be transformational.

What makes respected analyst Dr Brock Salier of GMP really excited about the project is the modest capital cost of $95million and a production cost among the lowest in the world at $17 per pound against the currently

depressed uranium price of around $40 per pound (GMP estimates). While locally the project will be welcomed as a major investment, generating significant jobs in an extremely depressed rural Spanish economy, there is no question that the Salamanca project could be one of the most strategic energy developments in Europe next year.

Many people are starting to question Europe’s security of supply, with domestic coal-fired electricity generation being phased out across Europe, subsidies being reduced and opposition growing towards renewables, especially onshore wind, the Chinese increasing ownership in power generation and Russian president Vladimir Putin knocking on the door in eastern Europe.

Indeed, in 2010, well before the recent announcement of a resource upgrade, albeit at higher uranium prices, Berkeley was subject to a takeover bid by Russian mining giant Severstal at A$1.70 (£1.23) per share compared with recent share price of 21p per share.

In the face of relentlessly bad headlines

many investors will have chosen to look away from the natural resources sector, and will not have noticed that Berkeley is building a big following with the share price doubling since the appointment in July of the experienced MD Paul Atherley, backed by some of the savviest institutional shareholders, including Resource Capital Funds, First State, Hadron, and Commonwealth Bank of Australia.

Berkeley sees itself as a high-impact clean energy company that, by developing the Salamanca project, will generate measurable social and environmental benefits in the form jobs and skills training in a depressed rural community and making a significant contribution to the security of supply of Europe’s zero-carbon energy needs.

Waiting for the tide to turn in the resources sector may be too late for investors wanting to get on board this high-impact clean energy play, which is set to generate some exciting news flow over the next 12 months. info@berkeleyenergy.com www.berkeleyenergy.com

Business Reporter · October 2015 · 17

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he metals and mining industry has gone through a difficult time in the last few years, with prices falling and a general drop in investor interest.

But the bottom of an economic cycle can also present firms with unique opportunities and, according to Raj Khatri, senior managing director and head of metals and mining for EMEA at Macquarie Capital, there are currently two particularly promising areas for investors.

“Generally over the last several years we have seen a slowdown in China, and we’ve seen a massive reduction in prices across the commodities space in metals and mining,” he says. It is this concern that has led to reduced investor interest.

“There has definitely been a step change down over the last several years as people have been increasingly concerned about where China’s economy is going.”

But, as the Chinese economy moves out of what he calls its “great development” period and into a new, more consumer-driven phase, other opportunities are opening up for businesses and therefore investors who know where to look.

“To get a good return on your investment you need to pick more niche sectors now, because the general sectors’ equities have underperformed massively for the last several years, year on year,” says Khatri, who highlights two niches with particular potential.

The first of the areas where he sees opportunity is the diamonds and coloured gems sector. Despite some near term price weakness, the tight supply and increasing demand provide a promising outlook in the medium term.

Peak diamond production was reached in 2005, when 177 million carats of diamonds were produced.

Since then production has been in steady decline, dropping to 124 million carats in 2014, meaning there is a “highly constrained” supply within the industry over the longer term.

The growing Chinese middle class and its increasing amount of disposable income will drive demand in the medium term for luxury goods like jewellery, which makes use of diamonds and gems, while the sector is also doing well on the back of purchases from wealthy buyers seeking diamonds and coloured gemstones as an investment class.

The dynamic duo: gemstones and technology presenting a unique opportunity “We’re seeing record prices across the high-end jewellery and gemstones space from that 1 or 2 per cent of the population who can bid on these kinds of things,” Khatri says.

“They have probably weathered the storm better than a lot of us over the last few years. It is not only jewellery, but also a source of luxury and value, and we are seeing very, very strong trends in supporting that.”

Another area where niche metals have seen strong performance in recent years is technology, with an explosion in the popularity of mobile devices like smartphones and tablets

fuelling demand for commodities such as lithium, graphite and cobalt.

These materials, along with the rare earth minerals used in the permanent magnets in electronic devices, also go into consumer products like LED TVs, and as electric cars gain popularity more will be needed to build their batteries. “This again is being driven very much by consumer spending, but in a very different aspect of consumer spending,” Khatri says.

“With companies like Tesla and a lot of the Japanese and German manufacturers moving to hybrid or 100 per cent electric-powered vehicles,

there is a lot of buzz around the future demand for battery technology and the future of battery tech. Today this is going to continue to be driven by lithium – lithium technologies and lithium ion batteries, predominantly.”

At present, electric and hybrid vehicles account for only a million of the 80 million auto vehicle market sales each year, but this share is on the rise.

Nearly 21,000 UK motorists bought a “plug-in” vehicle between January and September this year – a figure up 139 per cent on the same period last year.

These trends are boosting the lithium, graphite and cobalt markets, which

Macquarie expects to sustain an annual growth rate of 20 to 25 per cent for the next five years. In a niche market with a small number of producers, this is set to produce big winners. “The lithium space is very similar to the diamond story in a way,” Khatri says. “There was a lot of talk about expansion of capacity in recent years that has not come about. There are a lot of players in the market trying to become the next supplier to meet that lithium demand and secure contracts.”

And as in the diamond market, he expects there to continue to be a limited supply – although there are big opportunities for new projects to be launched. While new iron or copper mines can cost billions of dollars, a new diamond or lithium mine can be developed for as low as $100million and $300million.

“I think there will continue to be a tight supply and a need for interesting projects,” Khatri says.

“Tech-related commodities are less capital-intensive than a lot of other segments. So, in a market where it is very tough to raise capital for bulk mining projects, these projects can be built on a fraction of that.”

As engineering industries seek greater efficiency there is also a lot of potential for demand to grow further. These commodities are used in wind turbines, for example, as well as in the development of highstrength, low-weight materials in the aerospace sector.

Tesla’s in-home battery – a potentially trend-setting project that makes more efficient use of inconsistent renewable energy sources like wind and solar power by allowing consumers to store electricity – also uses lithium. If the technology takes off, demand could soar again.

Even after a drop in prices in the general metals and mining industry, diamonds, gemstones, lithium and rare earth minerals present exciting opportunities for investors.

“From our perspective, we are continuing to spend time with clients who are very active in these sectors,” Khatri says of Macquarie’s work within the industry. “What is really interesting is that there are very few ways to play a lot of the stories in the commodities sector, so the good projects will get a lot of interest.” raj.khatri@macquarie.com www.macquarie.com

Business Zone

18 · Business Reporter · October 2015

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Lighter, faster and more efficient: a track record in innovation

Driving global business growth

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cott Bader is a global speciality chemicals group with annual sales of around £200million, employing more than 650 people.

Its adhesives & advanced composites division has a worldwide reputation as an innovator of high-performance materials and structural adhesives for composite parts used in demanding interior and exterior applications by the marine, rail, road transportation, wind energy and building markets.

The focus of Scott Bader’s R&D team is on continuously developing new materials to improve the performance of customer endproducts, to make them tougher, lighter, more UV-weather resistant, and with improved fire resistance.

Manufacturing cost is important, hence new innovations also look at ways for composite parts to be produced with greater precision, more cost effectively and with increased productivity.

The company additionally has a strong R&D focus on creating products with consideration for personal health and safety, sustainability and the environment: developed two years ago, Crystic Ecogel® S1PA is an ultra-low styrene content spray gelcoat used globally by a leading global wind energy blade manufacturer, as it cuts total styrene emissions by more than 55 per cent.

New bio-resins compatible with

A Image courtesy of Axon Automotive

natural fibres are also under development.

Recent advanced technology products developed include: Crestapol® high performance acrylic resin compatible with carbon fibres; “halogen free” fire retardant Crystic® Fireguard gelcoats; the Crestabond® range of primer-less structural adhesives for bonding metals, composites and plastics, which compliments the long-established Crestomer® range of marine adhesives, used structurally by leading fibreglass boat builders.

Scott Bader’s advanced material technologies are award-winning.

At the JEC International Composites exhibition in Paris, the 2015 Jury Prize was awarded to Hyundai and design partner Axon Automotive (part of Far-UK Ltd) for the Intrado crossover concept car, which used both Crestapol resin and Crestabond adhesive products to produce the super-lightweight carbon fibre composite chassis. Crestapol technology also features in two companies shortlisted by Composites UK for the 2015 design and manufacturing category Innovation Awards – confirming the validity of Scott Bader’s “We think innovation” strapline.

dvanced composite materials have been widely used in the marine industry and in the production of wind turbine rotor blades for years across the globe.

At the same time, aspects such as fuel consumption, efficiency gains, and performance drive adoption of advanced composite materials in ever new application fields such as cars, buses and trucks.

Among the crucial success factors for the transformation of metal structures and conventional constructions into lightweight composite solutions are the development of the geometry, the consideration of loading constraints, the analysis of projectspecific requirements and the careful selection of the best qualified composite materials.

Gurit has a track record of innovation in the composites industry spanning more than 30 years. From engineering the first advanced composite sailing boat, patented material technology to the production of smaller-series, high-class automotive components for super premium and premium cars, the company combines a fundamental understanding of composite technology, with one of the broadest ranges of composite

enquiries@scottbader.com www.scottbader.com

materials available from a single manufacturer.

This heritage has led to the development of a complete range of automotive composite materials for structural as well as cosmetic applications, with a focus on both high-quality and high-volume manufacturing. Gurit Cosmetic Carbon Prepregs produce superior surface quality and thus contribute to increased production output and a major reduction in scrapped parts.

The company’s prepregs for press moulding enables cycle times of less than five minutes, resulting in time and cost savings per part.

With production sites and offices in Europe, North and South America, Asia and the Pacific region, the company is well positioned to support and supply a global customer base.

Find more information online at www.gurit.com

How increasing diversity gives companies an edge Video special

Claire Buchanan, CCO of Self-Configuring Infrastructure Optimised Networks (SCION) vendor Bridgeworks, examines the growing big data opportunities and challenges. See more at http://bit.ly/1W6DG1W

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he biggest challenge facing the engineering sector is how to remain profitable, productive, innovative and viable in a challenging environment in which we are facing serious and worsening skills shortages and an ageing workforce.

Increasing diversity in engineering – especially gender diversity where there is a fairly large pool of untapped talent – is the obvious solution, and it has the advantage of not only supplying talent but also supplying an edge to companies who get inclusivity right. But the practicalities of how to achieve this remain a mystery for many companies who want to do the right thing without it being merely a box-ticking exercise, but don’t know how to.

Much talk of quotas has appeared lately, and while these seem unpalatable to many individuals, including the women themselves, there is no doubt that legislation drives

change. While quotas for employment may be a step too far, quotas for a 50/50 male-to-female ratio for jobs shortlists is a serious and plausible alternative. Another key driver of behaviour would be the publishing of not only pay but also of corporate gender ratios per occupational grade, and these should be published openly, along with targets for improvement.

At the end of the day true corporate diversity requires a cultural change, and this is true of our society in general as much as it is for the engineering sector in particular. But change is coming, and companies who wish to survive and thrive should ensure that they are at the front of the race.

Dawn Bonfield (left) is president of the Women’s Engineering Society info@wes.org.uk www.wes.org.uk

Business Reporter · October 2015 · 19

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The debate What are the challenges facing the engineering sector?

Tim Stubbs General manager ASDEC

Dr Sue Halliwell Operations manager Composites UK

Elvin Majchrzak Chairman Tufcot Engineering Ltd

Tony Carter VP sales and marketing Fenner Precision For UK business to survive, organisations need to meet head-on the complex challenges that have come about due to societal changes.

Engineering-biased organisations and the people who strive to make them successful need to develop products that help to improve human conditions as a driver for national economic development. In order to do this, there is a fundamental need for training, development and lifelong education that builds upon essential engineering principles, thereby helping engineers to form a more holistic understanding of the polices, behaviours and the entrepreneurship needs to be successful globally.

In recognising the urgency to nurture these skills, support for training and development is an essential challenge for UK PLC. The next generation of culturally aware, socially conscious, entrepreneurial engineers need to be cultivated now in order to have the skills and passion to take on the challenges facing their organisation and the wider society, so as to empower them to become leaders in the future. info@fennerprecision.com www.fennerprecision.com

Whether your product generates vibration or is vibrated by external influences, ASDEC can benefit you. Understanding structural dynamics can help in many ways, from improving performance to reducing warranty claims.

ASDEC’s unique facility provides advanced structural dynamics, vibration and acoustic consultancy services. We link our systems with state-of-the-art computer modelling correlation which enables us to improve your whole product development lifecycle. We can help you reduce unwanted vibration or tune desirable vibration all with the aim of engineering the best possible performance in your product.

Combining the accuracy of lasers with the speed and precision of robots the ASDEC system is independent of material properties, condition and temperature. We bring detailed understanding to products from the lightest advanced satellite to heavy industrial machines.

ASDEC can provide detailed information orders of magnitude higher than traditional techniques in significantly shorter timescales.

Contact us – we can benefit you!

According to market experts, the global industry for composites in 2013, across all sectors, had a value of US$68.1bn, with estimated grow in the next six years to about $105.8bn in 2020. There are several major opportunities for the UK in the global arena, with considerable growth predicted by Lucintel to 2020. Alongside these opportunities lie challenges for the industry:

The UK government is working with the sector to address these challenges and has highlighted these and others in the UK Composites Strategy 2015, published later this year.

As a company manufacturing and machining specialist composite material, we rely heavily on our machinists’ skills and experience to hit demanding dimensional tolerances. Recruiting and keeping skilled machinists with the ability to grow with Tufcot is a big issue.

We must set about attracting high-quality individuals into engineering.

Society seems to peddle the notion that a university education is the only way to go. But for some there is a better alternative; engineering needs people with drive, imagination and life skills on the shop floor as much as it does in the boardroom, enabling all areas of the business to thrive.

We are addressing this, investing in our apprentice programme, which is now into its third year, and making sure we have a nucleus of talent working its way through.

We can’t control the economy or the UK’s place in Europe, but we can affect the quality of our workforce, and that has to be our priority for the medium term.

024 7635 8780 www.asdec.co

info@compositesuk.co.uk www.compositesuk.co.uk

0114 244 2363 www.tufcot.co.uk

• To meet high-volume low-cycle time production for the automotive sector will require investment in manufacturing processes.

• Production of large-scale structures for construction, oil and gas and marine needs investment in large-scale production/testing facilities.

• A critical issue is a shortage of skilled workforce across the supply chain to meet design and production demands.

Engineering employers predict education system won’t keep up with technological change

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emand for engineers continues to rise, but more than half (53 per cent) of employers are struggling to recruit suitably skilled staff, says the 2015 Skills & Demand In Industry report.

Published by the Institution of Engineering and Technology (IET), the report reveals that 61 per cent of employers are least satisfied with skills among graduates – and that two thirds (66 per cent) are concerned that the education system will struggle to keep up with the skills required for technological change.

The report also highlights that, while more than half (53 per cent) of employers say they are recruiting engineering staff this year, 64 per cent claim a shortage of engineers in the UK is a threat to their business.

This is the tenth year the IET has published its skills report, and the role of education comes under the spotlight, together with ongoing diversity issues in engineering and a lack of available graduates and more experienced engineering staff.

Women account for only 9 per cent of the UK engineering workforce – and yet 57 per cent of employers

do not have gender diversity initiatives in place. Other findings include: • 6 9 per cent of employers recruiting graduates report a lack of available graduates • 6 8 per cent are having most difficulty recruiting senior engineers with five to ten years’ experience • 7 5 per cent do not have LGBT/ethnic diversity initiatives in place • 5 3 per cent feel that government initiatives for recruiting apprentices are not straightforward • 9 4 per cent recognise they have a responsibility to support employee transition to the workplace Nigel Fine (left), IET chief executive, said: “Demand for engineers in the UK remains high, with supply unable to keep pace – and employers continuing to highlight skills shortages as a major concern. Stronger and deeper collaboration between employers and academic

institutions is needed to agree practical steps, to ensure that young people are suitably prepared both academically and practically before they start work. Supporting and encouraging teachers and academics to spend time in industry – and employers to visit schools, colleges and universities – would also be hugely beneficial.

“Employers also need to recognise the need for workforce diversity and do more to attract recruits from a wider talent pool. This might include looking at other professions, such as medicine and accountancy, that have been more successful at attracting a diverse workforce. It also means working with parents and teachers to promote engineering as a creative, rewarding and exciting profession for girls, as well as boys.”

Sheila Brown, director at South Midlands Communications, a specialist in radio, broadcast and communications products, says: “A whole generation has focused too much on the service industry instead of manufacturing, and now productivity, which has led to a gap that the next generation of school leavers need to fill.” policy@theiet.org www.theiet.org