K2fly’s SaaS Based Solutions Reinforcing Resource Companies’ Social License To Operate

K2fly Ltd (ASX: K2F) is a technology company based in Subiaco, Perth, Western Australia. It operates as a consulting systems integrator focussed on digital transformation and process improvement for clients from the asset-intensive industries such as; Mining, Oil & Gas, Electricity, Water, Aviation and Defence, Rail, and Facilities Management worldwide. K2fly seems to be well placed in order to support these asset intensive sectors, that continue to face new challenges which can only be solved with technology adoption and innovation.

K2fly’s Business Offerings

K2fly offers various SaaS solutions. It has an impressive combination of leadership, people, products and strategic alliances in place, aiming to become a ‘digital enabling partner’ for Tier 1 asset-intensive clients.

K2fly’s three key revenue generation streams can be broadly classified as: Owned Software, 3rd Party Software and Consulting Services.

The company is working to build a high margin business with a focus on driving revenue growth on the back of its own software solutions (Infoscope and RCubed) and establishing alliances with large technology companies such as: GE(USA), Esri (USA), and SAP (Germany).

Source: Company’s Investor Presentation

K2fly also re-sells software developed by other industry leaders (see below) in Australia, Europe, the United States, and the UK. So far, the 3rd party alliances include software developed by OBI Partners (USA), Kony (USA), Pointerra Limited (Australia), ABB (Switzerland), Totalmobile (UK) and Capita plc (UK); with these companies having a proven outstanding record of delivering benefits to clients.

In addition, K2fly offers consultancy services (see below) whereby it deploys subject matter experts possessing expertise in different domains where the client companies operate.

Significance of proprietary Software Solutions

• Mineral Resource Governance - RCubed software generates resource and reserve reports that support reporting codes such as JORC, NI43101 and SAMREC across the major five stock exchanges –NYSE, LSE, TSX, ASX and JSE.

RCubed is a globally applicable mineral resources and ore reserve governance, compliance and reporting software application. Its underlying methodology enables the capture of data, approvals at the various stages of consolidation, retrieval and portrayal of data in a manner consistent with multiple compliance regulations across major Resource exchanges and reporting codes.

More on the RCubed acquisition can be READ Here.

• Natural Resource Governance – Infoscope is an Enterprise Land Management, Natural Resource Governance and Stakeholder Relations solution for the Energy and Resources market.

More on Infoscope can be READ here.

Infoscope and RCubed catering to Resource Sector

While RCubed is the new addition to the SaaS-based solution suite, Infoscope is already transforming the way resource and infrastructure landowners manage and govern their land assets by delivering spatial first visibility, speed and efficiency in understanding, decision making and collaboration for the users across the spectrum of Land Management.

The amalgamation of Infoscope and RCubed forms a comprehensive solution and a standardised single source for Resource and Energy companies to manage their Environmental, Social and Governance (ESG) responsibilities by delivering sustainability reports which reinforce their social license to operate.

Glimpse at Australia’s Resource sector

Australia is blessed with an exceptional endowment of natural resources including minerals and petroleum. The minerals industry is dynamic, technologically advancing and receptive, capital intensive, as well as environmentally and socially progressive. According to the Minerals Council of Australia, the industry’s contribution to the national income, investment, high-wage jobs, exports and government revenues is significant within Australia.

Specifically, the Western Australia’s resources industry alone accounts for nearly one-third of the $ 248 billion Western Australian Gross State Product (GSP), according to the Chamber of Minerals and Energy.

The Resource industry appears well poised for greater growth than it has seen in a decade, as estimated by the leading management firm, Deloitte.

However, there is an essential need for mining companies to determine how to effectively operate in a market that is characterised by frequent disruptions, including increasing stakeholder demands, greater conditions across land access, environment and native title.

The global factors driving change and industry response in this regard can be understood from the figure below.

Source: Company’s Investor Presentation

Sustainability and Reporting Requirements

A sustainability report published by a company or an organization essentially contains the economic, environmental and social impacts of its activities. The report acts as a key platform for companies to communicate their sustainability performance and impacts to employees, governments and the community. Increasingly it would contribute towards any Resource company’s valuation, and its cost of capital.

ESG is a generic term used most commonly by investors in the capital markets to evaluate the corporate behaviour and determine future financial performance of a business.

Source: Company’s Investor Presentation

Over the last two years, the amount of investment in ESG has increased by 38%. Increasingly, ESG can also be considered as a point of differentiation and reliability, as society, including Millennials particularly, demand higher standards of governance and transparency from the companies that they work for, or invest in.

Source: Company’s Investor Presentation

According to EY’s research, the 10 business risks facing mining and metals in 2019-20 include (in the descending order)- license to operate, digital effectiveness, maximising portfolio returns, Cyber security, rising costs, Energy mix, future of workforce, disruption, fraud and new world commodities.

As per Deloitte’s research, the top 10 measures transforming the future of mining as per the trends observed so far, may be briefed as below:

Source: Company’s Investor Presentation

K2fly strongly advocates GRI reporting

The Global Reporting Initiative (GRI), now in its 21^st year, is an international independent standards organisation which assist businesses and governments to identify sustainability measures and report the material data to stakeholders.

GRI provides a framework that categorises sustainability reporting into key indicators – economic, environment, social, society, product and responsibility. The parameters in the framework guide companies on defining their stakeholders, importance to stakeholders, and identify relevant disclosure indicators for companies to consider.

According to K2fly within Australia’s top 50 mining companies, approximately 50 per cent, produce a sustainability report, with the majority of these being in the top 25 by market capitalisation. However, many businesses still find the notion of producing a sustainability report very daunting.

As stated by K2fly’s Chief Commercial Officer, Nic Pollock, “K2fly has responded to this issue and developed technology that can capture and publish data across stakeholder engagement, land access, tenement management, environmental approvals and compliance, community relations and performance and indigenous relations and cultural heritage”.

For K2fly, the strategic goal is to attain Global Leadership in Environmental, Social and Governance (ESG) for Resources Industry through accelerated commercialisation and adoption of Infoscope and RCubed combined.

The current client base for the two solutions include:

Stock Performance

K2fly’s current market capitalisation stands at AU$ 11.3 million with ~ 75.35 million outstanding shares. Today, on 12 June 2019, the K2F stock was trading at AU$ 0.145. The stock has offered a YTD return of 15.38% to its investors.

Disclaimer

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