Published in the December 2008 Australia’s Mining Monthly

Staff shortages have been a major concern for just about every mining sector employee for a long time. Suddenly, almost overnight, those workforce pressures seem to have fallen away.

Hundreds of mining sector employees have lost their jobs due to the mining industry slowdowns. This has lifted some of the acute workforce shortages companies were feeling.

Indeed, it has enabled some shrewd companies to pick up talented, experienced employees at all levels of the organisation. Not the least of these was Bannerman Resources’ recruitment of former Perilya chief Len Jubber.

However, this relief from worker shortages may only be short-lived. There is a suspicion that the hundreds of billions in incentive packages various governments have pumped into their economies will come in with a rush. If that comes to pass the workplace shortages will be felt in full force and then some.

The problems driving the labour shortages the industry has suffered are still there. The growth in the Russian, Chinese and Indian mining and metals sectors has not gone away. There are still insufficient numbers of graduates coming through. The workforce is not getting any younger. HIV/AIDS is still a big issue in Africa.

Ernst & Young global metals and mining leader Michael Elliott said this was a good time to beef up staffing levels.

“The fundamentals around the things feeding the skills shortage, such as the ageing workforce, are still there,” he said.

“We’re still seeing companies being prepared to invest to deal with some of these underlying issues.”

Elliott believes the slowdown is only likely to be short-lived.

“The amount of fiscal stimulus that’s been put into the economy will, when it comes in, come in hard and fast,” he said.

“Companies that forget these issues, such as skills shortages, will be in a worse situation than they were.”

Elliott said mining companies had traditionally been very good at investing in capital equipment but poor at investing in human capital.

“They were not very good at attracting or retaining people,” he said. “In many ways the mining sector got that sort of religion belatedly. Understanding the value proposition required to attract people into the mining sector first and then to their project.

“They need to understand what motivates their workers. What will appeal to a 23-year-old electrician is quite different to what drives a crusty old 53-year-old leading hand.

“There are quite different value systems in the ‘Y’ generation. What culture do they want to be part of? Generation Y has more of a social conscience.”

Elliott said besides staffing, the challenge for miners would be to manage their margins.

“Marginal costs are what everyone is concerned about,” he said. “If you can reduce those you can make a difference.”

Elliott reckons there will be a complete reassessment of how they mine. Grade and efficiency rather than volume will rule.

“Miners made a lot of compromises for additional production. Now most companies are being challenged to go back and assess how they can protect low margins. There is some room in quite a lot of these mines to take out some costs.

“Some of these costs could be in their mine planning. What grades they are mining. Rather than margin maximisation they were looking at output maximisation.”

Equipment supply contracts are also likely to come under the microscope.

“In order to lock up their regular suppliers miners were prepared to pay higher amounts for equipment and service,” Elliott said.

“Some of the premiums that were paid may not necessarily need to be there. Think of the enormous sums people paid to lock up tyres. Some might think that the criticality of tyres is not as great as it once was.”