Mining exchange launched

A consortium of mining suppliers have launched MiningXchange, an Internet-based vertical trading hub which will service the mining, oil and mineral processing industry on a global basis.

Launched in Sydney, the exchange has gone live to members in the Asia-Pacific region and plans are in motion to market it globally in the near future. The exchange was established by Asian e-business ventures Unifize and Yapster e-conglomerate, as well as Australian-based mining supplier Tennant. The technology is based on the Oracle Exchange platform, while PricewaterhouseCoopers has been contracted to provide business planning and strategy services.

Stephen Wolfe, director of MiningXchange, expects buyers and suppliers to save substantially in procurement costs and transaction processing, as well as being able to share industry intelligence for mutual benefit.

According to Wolfe, the mining industry in Australia is very technologically advanced and quite competent at procurement. But a problem the industry faces on a day-to-day basis is buyer uncertainty - receiving stock on schedule - as mines can go down at any time and leave buyers without inventory. Subsequently, there is a lot of "safety stock" floating around in the supply chain to ensure buyers and sellers can avoid being cut short.

"There is an excess amount of inventory in the supply chain that doesn't need to be there," he said. "With increased information flow, inventory management will become more efficient."

The first transactions on the exchange in the Asia-Pacific region are expected to be complete by the end of this week. Wolfe is confident the region will prove a successful case study for taking the exchange to the rest of the world.

"Getting one of these businesses to work and be meaningful on a global basis is difficult," he said. "We will be getting the kinks out in the Asia-Pacific, and when we have an incredible offering, we'll go into other markets."

One issue the management of MiningXchange will find challenging is convincing buyers and sellers that the hub will be run in a neutral fashion and will not give its founders an unfair advantage. Tennant, for example, is a supplier to the industry and stands to gain significantly from the venture. Wolfe is involved at a director level for both MiningXchange and Tennant, but suggests that independence has been assured to all parties involved.

"The founding shareholders are only here to get the ball rolling," he said. "We don't want to have a dominating position in the exchange. The initial acorn of investment has come from partners with very relevant experience in this field."

"Our intention is that, at the end of the day, no one will have more than a 15 per cent share," he said. "We will offer bona fide industry participants a chance to own equity."

Wolfe admits that there are few fully functional B2B exchanges at present because the majority of the exchanges being set up are horizontal (ie cross-industry) and difficult to establish. The advantage of a vertical hub such as MiningXchange is that "everybody kind of knows everybody", making it much easier to link businesses together. Wolfe plans to make some alliances with those horizontals that can add value to the exchange. PricewaterhouseCoopers e-markets leader John LaVacca commented that he expects most parties involved to be members of several exchanges.

The exchange does not have any online payments functionality as yet, which, according to Wolfe, is due largely to legislative concerns. Current legislation states procurement contracts need to be physically signed to be valid. He is confident, however, that Governments are acting to make electronic signatures acceptable and that online payments will become a value-add they must offer in the future.

Copyright © 2000 IDG Communications, Inc.

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