Contractors strike gold as profit sharing reshapes the rules of mining and turns service providers into project partners

Australia’s contract mining sector is undergoing a quiet revolution—one that could fundamentally reshape the relationship between contractors and mine owners.

According to Grant Thornton’s Balancing Risk and Opportunity in Contract Mining 2025 report, a new wave of profit-sharing and equity-linked contracting models is emerging, particularly in Western Australia’s gold sector. These arrangements see mining contractors contributing capital to mine establishment in return for a share of future profits or a minority equity position.

For an industry long defined by fixed-rate and margin-based contracts, the shift marks a major turning point. Instead of being service providers paid per tonne moved or hour worked, contractors are becoming capital-aligned partners with a vested interest in a mine’s success.

“Profit-sharing models are generating new sources of capital and better aligning contractor and mine-owner interests,” the report notes. This trend, while still in its early stages, is expected to spread beyond gold into iron ore and copper projects over the next two years as contractors look for more stable and rewarding commercial structures.

Pressure builds on traditional models

Contract mining remains one of the most capital-intensive and cyclical parts of the mining value chain. EBITDA margins across the sector softened slightly in 2025, halting a recovery from pandemic-era lows.

While contractors improved fleet utilisation and capital efficiency—thanks in part to a growing mix of civil and mineral processing work—the report found that overall profitability remains under pressure. With high fixed costs and limited pricing power, many contractors have been searching for new ways to strengthen balance sheets and achieve consistent returns.

Those challenges have been compounded by declining coal markets since mid-2024. Several coal miners have entered receivership, while others have scaled back production or deferred pre-stripping activity to conserve cash. The result has been a decline in contract volumes and tighter competition across the sector.

Against this backdrop, diversification into gold, iron ore, and increasingly copper has become a strategic imperative. Contractors with exposure to these commodities are now better positioned to weather volatility and maintain margins.

Gold prices fuel a new business model

Sustained strength in the gold price has been a catalyst for innovation. Contractors are leveraging elevated metal prices to enter joint venture-style agreements with mine owners, investing capital upfront in exchange for future returns.

This shift is being driven primarily by private contractors in Western Australia, many of which are smaller, agile businesses with deep operational knowledge and long-standing relationships with mid-tier miners. Their understanding of project costs and production risk gives them an advantage in assessing the commercial viability of such arrangements.

The report cites the approach pioneered by Mineral Resources and Develop Ltd, where service providers evolve into hybrid contractor-owners. In these cases, the mine owner retains control of the asset while the contractor holds a minority but influential equity-like position.

By taking a stake in the mine’s future performance, contractors gain exposure to commodity price upside and greater control over operational efficiency. For mine owners, the model provides a source of capital without diluting ownership and creates a built-in incentive for contractors to deliver productivity gains.

M&A momentum building

Grant Thornton’s analysis highlights a sector preparing for a resurgence in mergers and acquisitions. With leverage ratios improving across listed mining contractors—Net Debt to EBITDA falling to decade lows—balance sheets are in better shape to fund strategic expansion.

The report predicts that large-scale M&A activity will regain momentum through 2026. Expected areas of focus include distressed asset acquisitions in coal, bolt-on deals to strengthen mineral processing capabilities, and vertical integration moves into civil infrastructure.

Recent deals reflect that direction. Macmahon Holdings’ acquisition of Decmil Group accelerated diversification into civil projects, while NRW Holdings’ purchase of HSE Mining expanded its Queensland footprint. Earlier, Perenti’s acquisition of DDH1 bolstered its drilling capacity and operational scale.

Adding to the mix is a growing wave of international entrants. North American Construction Group entered the Australian market via its acquisition of Mackellar Mining in 2023. Indonesian groups such as PT Amman Mineral Internasional and PT Petrosea have established local presences, signalling that the next phase of competition will be global in scale.

Technology, sustainability, and the ESG dividend

While capital alignment is transforming commercial structures, contractors are also investing heavily in technology and sustainability to maintain competitive advantage.

Grant Thornton found that major contractors are pursuing mine electrification, automation, and emissions-reduction initiatives—not only to meet client ESG expectations but also to open new revenue streams. These investments are reshaping operational models and creating differentiation in an increasingly crowded field.

For example, electrified fleets and digital maintenance systems are helping reduce operating costs and improve fleet utilisation, while also satisfying the ESG requirements of major mining clients. In a market where margins are tight and tender competition is fierce, these factors increasingly determine who wins—and keeps—work.

Outlook: a two-speed market

Looking ahead, the report paints a picture of a sector divided between those adapting and those lagging behind.

Contractors with significant exposure to coal are expected to face continued headwinds, with lower volumes magnifying fixed costs such as equipment financing and project overheads. Managing cost structures and maintaining flexibility will be essential, but not sufficient.

By contrast, contractors with diversified commodity exposure and strong capital discipline are well placed to capture growth from a pipeline of new opportunities. Several major copper projects—Harmony Gold’s Eva, Cyprium Metals’ Nifty, and Rex Minerals’ Hillside—are forecast to engage contractors from late 2026 to 2027, providing near-term upside.

Gold remains a reliable source of demand, with elevated prices supporting continued exploration and expansion work. At the same time, the long-term outlook for lithium and nickel remains muted until pricing recovers, limiting short-term project starts in those commodities.

Resilience through reinvention

Grant Thornton’s analysis concludes that the next phase of the contract mining cycle will be defined less by cost-cutting and more by innovation and capital strategy.

The financial resilience achieved through deleveraging and improved capital efficiency has given many contractors room to rethink their business models. As a result, the sector is moving towards a more collaborative and financially aligned model of mine delivery—one that could rebalance power dynamics between contractors and mine owners after decades of volatility.

The shift toward profit-sharing and equity-linked contracts will not suit every operator. It requires both technical expertise and the financial capability to invest alongside clients. But for those with the balance sheet strength and appetite for risk, it offers a chance to transform the traditional service model into one that rewards long-term performance rather than short-term volume.

A defining moment for mining services

If there is a single message for contractors from this year’s report, it is that risk and opportunity are now intertwined more closely than ever.

Profit-sharing models are not just financial innovations—they represent a cultural change in how mining projects are conceived and delivered. The contractors who embrace this change, diversify intelligently, and invest in sustainability will define the future of Australia’s mining services industry.

As the report notes, those able to balance risk with opportunity—through diversification, disciplined capital management, and flexible commercial structures—will set the pace for the next decade of growth in contract mining.

In short, the contractors who choose to take a stake—literally and figuratively—will be the ones shaping the next era of mining.