Crisis Turns Skills to Gold

22 April 2009 (Last Updated June 1st, 2018 15:01)

The mining sector has taken a financial hammering and seen a skills shortage converted into a sea of pink slips. For some smaller players, however, the swelling ranks of unemployed professionals mark a welcome opportunity to find new talent. David Binning reports.

Crisis Turns Skills to Gold

Few industries had quite as much to lose from the global financial crisis as the mining sector. The drying up of demand for key commodities and resulting price freefalls led to one of the heaviest waves of redundancies the industry has ever seen. Reluctance to fund exploration and new projects has led to even further cuts.

Currently, there are about 15,000 applicants for 3,000 positions throughout the mining sector globally. Naturally candidates' expectations for salaries and other benefits have been tempered to suit the realities, according to Deloitte resources analyst Debbie Thomas.

HR professionals in the mining sector who had been working so hard to understand, for instance, how to make Generation 'Y' happy, can confidently disregard much of that learning for now.

"Currently, there are about 15,000 applicants for 3,000 positions throughout the mining sector globally."

"For miners in the development phase, struggling to get talented people, the market has opened up for them," Thomas says. "If you are close to producing, have cash support and a good balance sheet, then you would probably be able to access resources far more easily now."

For many smaller miners in still-buoyant areas like gold and copper, it means a rare opportunity to recruit new talent without having to compete with bigger rivals.

Golden times

While most commodities have bottomed out, gold has managed to retain its strength, partly due to its traditional safe-haven status in times of strife.

"Looking at gold the price is high and going up," says Thomas. "They [gold miners] are insulated from what's going on in the rest of the market."

London Randgold Resources made its debut in the FTSE 100 in December, after announcing a bumper year despite the prevailing doom and gloom. The company is looking to accelerate production at several of its key gold operations in Africa and elsewhere, and is expected to increase its recruitment efforts throughout the year.

Rival minnow Anglo Asian Mining is looking to ramp up production at a number of its sites. The company owns eight copper and gold development properties in three separate mining areas of Azerbaijan, with rights to three additional contact areas in the occupied territories when access is obtained. The company announced recently that it wants to achieve early production at the Gedabek Contract Area.

Before the credit crisis Anglo Asian Mining reported difficulties in accessing labour and other resources to meet its production schedules, but now finds that the situation has been reversed, at least at the operations level. Most of the redundancies in the sector to date have been at the operations level, with business managers and mid-level executives still in short supply, notes Thomas.

Strong copper

Smaller copper producers are also benefiting from improved fortunes, due largely to improving sentiment in the US housing market. Copper prices have increased by about 25% since January this year.

"The US housing market has pretty much led the way – it's been ahead of the copper price movements," Thomas says.

"Companies should take care to develop new systems and procedures for recruitment."

Companies holding assets for in-demand commodities had until recently been struggling to get enough engineers and other professionals to aid in getting the stuff out of the ground. Now they're spoiled for choice, but this does not mean that now that resources are there, companies should take what they can get from skills for granted.

Thomas says smaller mining companies should take care to develop new systems and procedures for recruitment if they want to make the most of the current opportunities. For one thing, they may not last long.

With signs of recovery in the US housing market, some analysts are tempted to suggest that the worst may be over for the mining sector. This means that fierce competition for labour and other essential resources may well return by next year, if not sooner.

China goes shopping

Even without a broad market recovery, an expected acceleration of China's mining activities in the developing countries of Africa and elsewhere, including in its own backyard, is expected to breathe much-needed life into the market, albeit at the expense of labour supply.

India is also expected to see increased demand for people with engineering and other skills, and has an advantage over Chinese operators, in that there is no expectation to know a language other than English.

In the six-plus months since the economic meltdown, China has dipped further into its cash reserves to snap up mining assets around the world as well as to fund exploration. State-owned Chinalco's bid for Anglo-Australian miner Rio Tinto would have major implications for the latter, which has been one of the miners worst hit by the financial crisis, with several thousands of people losing their jobs. A successful deal could well see many of those positions brought back to support a revival of activity.

The Australian government's stalling of its approval of China Minmetals' bid for Oz Minerals recently sent a signal to China and its state-owned entities that the foreign transfer of Australian mining assets is far from a given, despite the fact that so many are desperate for funds. The deal was eventually approved in mid-April.

"Analysts have speculated whether the recent spate of job cuts was a little excessive."

Rumours that Chinalco may not get the green light to buy Rio have fuelled speculation that BHP may revive its previous offer for the company. A united BHP Billiton and Rio would likely opt for a fairly aggressive market strategy.

Accompanying such a move would probably be a major recruitment drive, especially aimed at reinvigorating Rio's operations, many of which have been stripped of staff and other resources as the company struggles to address the fall in commodity prices and its own massive debt levels.

Across the mining sector, companies have reacted aggressively to the downturn and shown that they are quite fearful of the future. But many analysts have speculated whether the recent spate of job cuts was a little excessive.

Improved sentiment towards mining equities in the last few months has provided cause for optimism and with it talk of an imminent upswing in demand for labour.