Opinion: Mining Industry or Human Washing Machine?

I've pretty much either lived or worked in this industry for almost all of my 47 years. As a result, inevitably people ask me where the industry is headed next and have I seen this before?

I’ve pretty much either lived or worked in this industry for almost all of my 47 years. As a result, inevitably people ask me where the industry is headed next and have I seen this before?

The answer to the first question is “I don’t know” and the answer to the second is “yes, yes, yes – several times.”

I’m not a futurist but looking backwards is easy and what I see is that we’re now 12 months into a new (most believe temporary) cycle of this washing machine style business called the resources industry.

I describe it as a washing machine because it is highly cyclical with often very little time between the end of one cycle and the start of the next, never still, always in motion, sometimes forward, sometimes backwards.

Sit inside it long enough and you will eventually pop out, wrinkled but strangely cleansed of fear and apprehension, having weathered more ups and downs than most people would experience in 5 life times.

That’s the resources industry and for some of us it is the ONLY game in town!

So where are we now?

Leaving aside the bulk commodities – Coal, Iron Ore and the like – we’ve seen severe price retractions in most other major commodities. At the same time global financial problems are severely restricting the ability of most small to medium sized mining companies and explorers to attract capital. An ex-colleague of mine and now successful mining company promoter and MD said:

“Mate, there is a capital strike on out there!”

This should remind us all that the mining industry is very polarised. It always has been but the trend has been accelerating in recent years. We now have seen the formation of a number of truly major global companies who usually have exposure to different commodities, usually own the large scale projects with large mine lives and large operating margins and of course always have big balance sheets.

The other end of the market is the resource industry equivalent of the Nasdaq.

So where are we headed and what does it mean to me  - as an employer and as an employee?

Despite not knowing what the future holds, like everyone in this industry I have to have a view. Mine is that you can argue about lots of things but not the fundamental laws of supply and demand.

The process of moving literally billions of people in different countries on the planet, from fundamentally subsistence standard lifestyles to modern towns and cities with an accompanying rise in demand for the household items most of us take for granted, is underway. It is described by most commentators as an unstoppable force and one that will underpin the economies of resource rich countries for the next 25 years. Logic tells me they are right.

So most commentators are still saying that the Iron Ore and Coal Miners are safe and will under-write solid demand for many professionals for decades to come!

This coupled with a decade or more of minerals industry education underinvestment, leaves us unable to meet the demand for top quality technically trained people who are prepared to work in remote places for periods of time.

What about salaries?

A fascinating speaker at an event I went to last year made the point that when he completed his mining education in the United Kingdom in the 60’s and travelled to work in the African mining industry as many expatriate Brit’s did back then, that his salary was a factor of several times more than the salary for most other graduates from other professions.

Compare this to the situation where 10 years back Geologists, Mining Engineers and Metallurgists were almost back on a par with salaries offered to other graduates working in the city based professions and you see one of the reasons that contributed to the shortfall in technically trained resources graduates.

Operating mines will continue to employ relatively lower %’s of technically trained people, simply because they need to find ways to automate as many processes that they can, to reduce the reliance on the high cost elements of their workforce. However those that have spent time  gaining a technical education will continue to be substantially rewarded so as to motivate them to go and work in a remote place away from family and friends for a period of time.

The Coal and Iron Ore miners of course don’t mind as currently they can comfortably afford to pay. They also don’t experience the same rapid cycle shifts that the other metals miners experience. The end result though is pretty much the same for everyone. If the bulk commodities miners employ all the graduates on high salaries, then that pushes up the salaries that all other miners have to offer, as much as they might not like it at times such as the period of cost and price pressures they find themselves in now.

So what does all this mean -

For employers and managers - with special reference to the non coal and iron ore companies:

  • Some of your younger employees have never experienced anything other than the past few years of permanent boom times. Stay close to them and listen to their concerns.
  • A recent mini-trend towards companies doing their own recruitment has been fed by the ease of access to internet advertising.  The ease of internet access does not make searching and screening activities any easier. Ultimately easier access, also means many more candidates, all of whom need to be dealt with professionally if you want to retain a reputation as a professional company and a good place to work. This is part of what you pay a recruitment company (like MPi) to do. We’re already starting to see a reversal of this mini-trend.
  • The positive sentiment towards the mining industry generally has been fed by the general media who have done a terrific job of promoting the industry and by association most companies within it. Even the companies with bad projects, bad culture and bad management could probably achieve some success with recruitment. Most of those companies though probably didn’t realise they were digging through a pool of the lower quality candidates.
  • The trend towards a willingness to employ older workers certainly gathered pace. Smart employers wont stop this as they realise these people add valuable diversification and life experiences. But a word of warning, older people are generally more fixed in their ways and views and less able to change so always ensure there is good cultural fit.
  • The best candidates, still have a number of good opportunities to choose from. So if you want to attract these people into your company, you must keep the process moving and be prepared to make decisions.
  • We’re seeing a continuation of the trend towards offering flexible rosters and residential bases to the broader group of employees, away from the traditional approach to extend such arrangements to department managers only. This reflects the notion that in Australia we are not experiencing a ‘skills shortage’ so much as a ‘people shortage’.
  • If you are a good company, with good medium to long life assets, a good cost structure and supportive culture, then NOW is a good time to be recruiting for good people. 

For employees/job seekers

  • You might notice it get a little tougher to find just the right opportunity that ticks all your boxes, while companies take stock for a few months.
  • Be prepared to consider taking a contract role if that perfect permanent opportunity doesn’t present immediately. The mining industry has never frowned on people with stints of contract work embedded in their work history. Right now as some companies face an uncertain funding landscape, they might be less willing to sign up permanent employees, but they still need to review projects and move things forward so you will see more Contract opportunities become available. 
  • Stop presuming that you will walk out of a job one day and straight into another the next.
  • If you are an unskilled or non university educated candidate wanting to get a start in the mining industry, your best chance is still to go to a regional town, be prepared to do anything as a start and become known.

Source:

The list of these key drivers above was gathered by poling a dozen or so of our most experienced mining industry recruiters from around Australia. The fact that even in the times we are experiencing now, the majority of the tips were aimed at employers, perhaps suggests that while we might be seeing some softening in sentiment in some metals companies, all this has done is bring back a little bit of the equilibrium into the supply/demand equation as it applies to candidates.

In the same way that some of the strongest banks and other companies will be using this period to buy up some of their weaker competitors and take them out of play, the smart companies with an eye on their long term plans might use this period to snare some the better people who come onto the market in the coming months.

Keep at least one eye firmly fixed on the future and happy hunting. 

Steve Heather FRCSA
Managing Director & Principal Executive Search 
Mining People International
steve.heather@miningpeople.com.au

With input from Mining People International’s senior consulting team.

Steve Heather signature
Steve Heather – BAppSc (Mining Engineering) WASM, FRCSA

Managing Director & Principal Executive Search - Mining People International (MPi)

Fellow/National Board Member – Recruitment, Consulting & Staffing Association Aust. & N.Z. (RCSA)

Steve.heather@miningpeople.com.au