Founded by three partners in July 2019, ERG Industrial has changed the face of blasting, a critical parameter in the quarrying and mining value chain. As with all other successful businesses, the young business was founded on the back of several failed ventures, recalls Preis, who says that the knowledge acquired through failure facilitated successful
entrepreneurial re-emergence for the three ERG partners.
When establishing the business, the three partners – two mining engineers and one civil engineer – were driven by their desire to help mines and quarries optimise their drill and blast practices. Why blasting? "As the very first process in the mining value chain, blasting has a significant bearing on the performance of all other downstream processes," explains Preis. "By making a small change in outcomes at the beginning of the value chain, operations can see exponential gains downstream."
From a macro perspective, he adds that if all mines and quarries could improve their blast outcomes by 5%, for instance, there would be an incredible knock-on effect on their bottom line and the industry's contribution to the global economy. He says this was one of the founding reasons behind ERG Industrial – to help the industry improve its fortunes through blast optimisation.
After identifying drill and blast as their preferred area of the mining value chain, the three partners further narrowed it down to stemming – an important parameter in good blast outcomes. Upon doing their market research, they stumbled upon the Varistem stemming plug, designed and manufactured by a United States-based company, MOCAP. Following discussions with the company, ERG Industrial was initially awarded the distribution rights for the Varistem for the African territory.
"We identified stemming as a crucial area of focus for our business," says Preis. "During blasting, stemming plays a key role in confining the explosives and effectively utilising blasting energy. Typically, the loss of explosive energy through stemming ejection reduces the performance of the blast. Therefore, the core principle behind stemming plugs is to improve the effectiveness of stemming material in the blasthole. As a result, this helps better contain the explosives' energy within the rock mass and yield a more controlled and efficient blast."
Bringing the Varistem to market, however, was not without its challenges. Soon enough, the team realised that there was a generally negative perception towards stemming plugs in Africa. "Initially, 99% of our engagements with potential clients were unsuccessful. We quickly realised that there was a misconception about stemming devices, stemming in general and its value in the blasting process," he says.
The only way to quell the perception was to prove that the product worked. As a result, ERG Industrial adopted an in-field test-based approach to its business. "We started doing infield tests to demonstrate the product's capabilities and build collateral. The science behind the product made sense, but the tests were meant to prove to the customer what could be achieved in their unique operating environments," says Preis.
The testing approach soon translated into paid deals as customers saw the product's value first-hand. The first paying customer was South Africa's Raumix Aggregates, part of the larger Raubex Group. It started using the Varistem product at its Eastern Cape-based Aliwal North Quarry in January 2020. However, soon after that, the Covid-19 pandemic hit, with lockdowns bringing the industry to a standstill in March 2020. As a service provider to the mining industry, which was classified as an 'essential service', ERG could continue with its operations during the lockdown.
In fact, the Covid-19 pandemic, says Preis, shaped the ultimate structure of the business – to be as lean as possible. The company generally outsources a great extent of its non-core functions, such as warehousing and logistics, essentially converting what should be operating costs into direct costs.
While the pandemic harmed a macro-economic level, with shipping costs going through the roof and lead times doubling, Preis says the period actually ushered in a sustainable growth trajectory for the business. Over the past four years, ERG has averaged a 323% annual growth rate, with a whopping 450% growth projected for the current financial year.
Central to the growth, he says, has been the company's ability to prove the capabilities of the technology through scientific evidence. "A founding principle of the business was not only to help mines and quarries optimise their blasts but also to quantify and demonstrate the benefits and value created to the customer. During in-field testing, we started using drones and other monitoring technologies to collect data to scientifically show the value created by our Varistem stemming plugs," explains Preis.
The overarching philosophy of the business is that it only sells where it can demonstrate the value of its product. "We do not have a copy-and-paste approach to our product sales. For every new site, no matter how big or how small, whether it's a mine or a quarry, we treat each operation as unique. Our process is to first understand the site-specific challenges and then determine if there is an opportunity to change the blasting recipe by adding the Varistem plugs to the equation," he adds.
Following its success in Africa, ERG started receiving more enquiries from outside the continent, which informed the next step of its growth trajectory. Having seen the growing global appetite for the Varistem product, particularly as a result of its aggressive LinkedIn marketing campaign, ERG approached MOCAP for global distribution rights of the Varistem, with an official agreement reached in June this year.
"We are now the global distribution rights holder for the Varistem. From a customer perspective, one of the key benefits of this development is that we have standardised the pricing of the plugs globally, barring the shipping costs and duties, which vary from country to country. The reason behind that approach is to ensure there is no unscrupulous sales activity, especially in the resale and redistribution game," he says. "The standardised global price also makes sense for multinationals operating across various mining jurisdictions in the world."
As with its successful approach in Africa, the initial focus in the global market is not necessarily on immediate sales but on in-field testing to build up collateral. The challenge, however, is to get stock to different markets for testing, which is why ERG has set its sights on establishing logistical centres in various markets.
The strategy has been set in motion with the establishment of a warehouse in the United States in June this year. The facility will keep inventory for the United States, Canada and South American markets. The same approach has been adopted in the UK, where the first batch of inventory arrived in September this year. The UK facility will cater for England, Scotland, Wales and England. The same model is in the pipeline for Perth, Western Australia, where ERG is working with a longstanding Varistem supplier in the country.
The next step of the global expansion strategy is establishing a global headquarters in Ireland, which will take priority in the next six months. The move is a necessary structure aimed at optimising the global distribution of products to different markets worldwide.
As part of its UK strategy, the company has partnered with Ground Engineering Applied Research Services (GEARS), which has developed innovative AI-based software for analysing blasts in quarries. GEARS confirms Preis has already conducted several test blasts at quarries in the UK, using its software to evaluate the impact of Varistem stemming plugs on blast outcomes.
Commenting on the business's overall success, Preis is impressed by some of the flagship projects the company has executed thus far. A case in point is the blast improvement feat achieved for the manganese and iron ore commodity areas.
"There are two main products in the manganese and iron ore sector – lump and fines," he explains. "Fines are anything less than 6.3mm, while lump is anything between 6.3mm and 26mm. Whatever the lump market value is at the time, there is an immediate 30-40% discount on the fines, which is why it is important to find a good balance between your lump size and fines."
He says that manganese and iron ore mines generally work on an 80:20 lump-to-fines ratio. "Based on the work we have done with manganese and iron ore mines over the past few years, we have successfully shifted the lump-to-fines ratio to 85:15. The financial benefit of that shift is incredible. To provide context, on one of the mines, this shift generates an additional ZAR150 million (about £6.5 million) per year for the mining company."
ERG has also had massive successes in other commodity areas such as diamond, gold, coal and PGMs. Remarkable projects have also been successfully executed in the quarrying industry, where the focus is largely on improving fragmentation. Good fragmentation, according to Preis, has a positive impact on downstream processes such as load and haul, as well as crushing and screening. It also eliminates the need for costly secondary or mechanical breaking of oversize material.
"Because quarries are also by their nature close to communities and existing infrastructure, they need to find ways to control flyrock and keep their noise and airblast down. Using our Varistem stemming plugs, we have proven on many quarries that we can reduce the likelihood of stemming ejection and flyrock," concludes Preis.