It might not sound very sexy, but an Enterprise Resource Planning system not only benefits mining companies – it is also a great indicator of whether a company is likely to make it to production.

That can be handy for investors and brokers when deciding which stocks to invest in.

Enterprise Resource Planning (ERP) is a computer system that manages areas such as planning, purchasing, inventory, plant maintenance, sales, finance and human resources and strongly promotes the company as having good business process in place.

Leading data provider MakCorp’s ASX mining platform — founded by Steve Rosewell (pictured) — identifies which listed companies are using ERP.

Companies using a part or full ERP solution include gold explorers De Grey Mining (ASX:DEG), Millennium Minerals (ASX:MOY) and Gascoyne Resources (ASX:GCY), bauxite explorer Metro Mining (ASX:MMI) and uranium explorer A-Cap Resources (ASX:ACB).

Also using a full ERP system are zinc and lead explorer Symbol Mining (ASX:SL1), gold producer Doray Minerals (ASX:DRM) and heavy rare earths player Northern Minerals (ASX:NTU).

Knowing which companies use an ERP system lowers the risk to investment.

To discuss the impact of ERP on mining and exploration companies we talked with two leading suppliers of mining ERP solutions to the ASX market – Andy Thomson, GM of business development for Addax Business Solutions, and Scott Yull, managing director of Classic Information Systems.

Benefits to miners and explorers

ERP provides more structure and control for mining companies, bringing all departments – for example maintenance, exploration and purchasing – into one.

“The earlier that you can set your procedures and your business processes the more control you can have over that business moving forward,” said Scott Yull, managing director of Classic Information Systems.

“When you’re looking at companies that are going into mining you’ve got a disparate group of people who are involved in multiple disciplines on a mine site.

“ERP brings all of the disparate costing and costing controls into the one place where the CFO has a greater overall view of the business and a control over the lower end processes.”

An ERP is also very handy in simplifying compliance processes and in turn reducing the costs associated with that.

“Potentially you could reduce the amount of time manually spent compiling and reconciling data,” Mr Yull explained.

“You’re also improving your compliance ability. Compliance is a big cost to companies.

“In exploration companies, having your system produce a form 5 report at the press of a button rather than sending it out to a third party to have it compiled is a direct cost saving.”

Classic provides a low-cost entry level templated solution for exploration companies.

Trigger for investment

While having a low entry point ERP solution in place from the beginning is ideal. Andy Thomson, GM of business development at Addax Business Solutions, said “investors often use ERP spend as a show of confidence that construction is on the cards”.

“We work with mining companies to tailor solutions to parallel the growth stage of the mine”, Mr Thomson said.

“Significant investment in ERP tends to marry with the construction phase. A flexible ERP solution will allow project and construction modules to be added for managing mine and plant construction.

“Subsequently, for operational mines simple real-time reporting and inbuilt tenement management are critical to the mining business moving forward.”

A full ERP system usually costs around $250,000, but exploration companies can implement a scalable version earlier in their life cycle from about $25,000.

Classic and Addax provide ERP systems to the global mining industry.

Need more convincing? Check out this investor’s story

Terry Leister, a resources investor and retired GM at ERP Vendor, says a company’s move to invest in a comprehensive ERP solution is a strong indicator that the management of a junior miner is planning to be in business for a while and has a plan to support growth.

“As an investor, I have done well over many years buying shares in miners who have invested in a comprehensive ERP solution,” Mr Leister explained.

“As a vendor of a comprehensive ERP solution, I had ready access to a range of quality miners who were in the market for ERP software.

“I also had the opportunity to assess the quality of the management and the fundamentals of the business of those miners that few could equal.”

MakCorp and Stockhead

Stockhead is a partner with MakCorp.

Part of director Steve Rosewell’s vision for MakCorp when starting his website was to improve communication between investors, brokers and mining executives.

“Another important thing was to help educate myself and share that education with other investor and brokers,” he said.

Thank you to Terry Leister, Scott Yull, Andy Thomson and Steve Rosewell for contributing to this article.

To see the full list of ASX mining companies already using ERP, subscribe to MakCorp.

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