The mining industry is currently in the midst of an unprecedented talent crunch that has left many of the world’s top mining companies scrambling to fill the gaps.
These companies have been forced to become more strategic not just in employee recruitment, but also in how they operate.
From an investment perspective, how a mining company tackles the talent shortage to optimize profitability and shareholder value is an important consideration — one that starts with understanding the labor market.
Feeling the crunch
The talent shortage in the mining industry is actually the result of at least four different trends intersecting in the worst way possible. We’ll start with the one most closely related to the industry itself: the sector’s aging workforce.
According to an industry report by analyst firm Deloitte, nearly 50 percent of skilled mining industry engineers will reach retirement age in the next decade. As if that’s not concerning enough on its own, many mine workers are at least 46 years old — close to the age when they might start considering a career change.
Of course, age had nothing to do with what many have come to know as the Great Resignation. Driven by changing priorities and an evolving job market, people began leaving their jobs in record numbers, with nearly 40 percent indicating a desire to do so in the years following the COVID-19 pandemic. That’s bad news for an industry that was already losing people — overall mining employment in the US has declined by over 20 percent in the past decade.
The nature of work has changed as well. Smart devices, machine learning and automation are increasingly finding their way into multiple industries, requiring employees to either develop new skills or find new occupations. For the mining industry, this trend could itself be something of a blessing in disguise, with technology picking up the slack of an increasingly sparse workforce. But more on that in a moment.
The global economy has also had a profound impact on the mining industry. Energy uncertainty and supply chain issues have resulted in massive price fluctuations and employment instability. Meanwhile, environmental, social and governance initiatives have placed increasing pressure on both mining companies and their employees.
How the mining industry views talent has shifted too. In the past, workers were largely a means to an end, and the real investment value in a company came from what and where it produced. Today, mining companies and investors alike recognize the merits of an experienced and skilled talent pool.
Unfortunately, that realization came hand-in-hand with something else — the mining industry’s image problem.
A bad reputation
In McKinsey’s 2022 Survey of Mining Industry Senior Leaders and Executives, 71 percent of respondents indicated that the talent shortage was holding them back from delivering on their strategic objectives and production targets. A further 86 percent told the firm that it is more difficult to recruit and retain talent today compared to two years ago, particularly in some of mining’s more specialized fields. The issue, notes McKinsey, is that mining simply isn’t an aspirational career path for most people with technical skills.
That’s due — at least in part — to the torrent of bad press the industry has historically endured, from public safety failures to pollution and environmental damage to a disregard for Indigenous cultural sites. This is an ongoing challenge, despite the fact that the sector has, in recent years, adopted many innovations and unique technologies that have helped improve operational efficiencies and lessen the sector’s environmental impact.
Mining companies will need to make a concerted effort to improve the public’s perception by better demonstrating and communicating their strategies toward a more sustainable and socially responsible industry.
How leading mining companies are dealing with staff shortages
To address this challenge, McKinsey recommends rethinking talent acquisition and retention strategies. Mining companies must take action to dispel the ongoing perception that mining is dangerous and physically demanding. More importantly, mining companies must provide employees with opportunities to pursue professional development, providing clearly defined career progression pathways for them to follow.
Beyond that, McKinsey encourages mining companies to focus on what matters to their employees. In no particular order, these are flexibility, meaningful work, engaging colleagues, sufficient compensation, workplace safety and a sense of community. Companies should also determine which skills are most crucial and invest more capital into them, while actively pursuing ethical business initiatives.
Of course, these recommendations are only a starting point. Mining organizations have adopted a multitude of strategies in addition to McKinsey’s suggestions. Investors would do well to familiarize themselves with the value of each one.
One strategy that has been widely and successfully adapted among mining companies is fractional executive employment.
The idea behind fractional hiring is simple. If a mining industry executive is skilled and experienced enough, they are able to offer their expertise to multiple organizations by dividing their professional time among different employers. On the flip side, by bringing in an experienced C-level executive on a part-time or short-term basis, mining organizations can cushion the impact of labor shortages and gain access to talent that might otherwise have been out of reach.
This approach is a great deal more common than you might expect. Multiple organizations affiliated with the mining sector have adopted and thrived by using fractional employment, including Marvel Discovery Group (TSXV:MARV,OTCQB:MARVF), Inventa Capital and Element79 Gold (CSE:ELEM,OTC Pink:ELMGF).
“We have evolved from a lean startup focused on M&A, driven to acquire key assets that would allow us to become a producer in the short term. Our early stage team and board reflected the skill set needed for that trajectory, and as the company evolves, so does our team,’ Element79 CEO James Tworek explained. ‘During this first, leanest of phases we kept in-house burn rate low with fractional-use teammates in house, and smaller, trusted consultants for the exploration and drilling programs.’
Element79 acquired Calipuy Resources in 2022, which allowed the company to bring in some vital team members, including Shane Williams, who was previously a board member with Calipuy and now supports strategic decision making as an independent director at Element79. Calipuy’s then-CEO, Antonios Maragakis, who was serving as Element79’s chief operating officer on a fractional basis at the time, was brought on as a full-time COO. Following the acquisition, Element79 also hired Kim Kirkland as vice president of global exploration. All of these hires deepened the company’s strength in global production, Tworek said.
‘A final key piece in our growth will come from on-demand consultancy from Mine+ Group and Ore Discover. These consultants bring the required experience and give us confidence to execute this last mile to successfully help us forge our social contracts, execute exploration to ensure mine life and restart production at our Peruvian Lucero project, as well as develop further resources on our key Nevada assets,” Tworek said.
Some companies have also sought to streamline their business processes and objectives, embracing new technologies and strategies to compensate for a lack of personnel. Others have taken a more direct approach, working to develop and educate the communities in which they operate. Something as simple as providing access to a vocational trading program can bring in a flood of fresh talent and skilled labor.
Investor takeaway
The mining industry is experiencing an unprecedented talent shortage. But this is not an insurmountable obstacle. Through technology, prioritization of employee needs and techniques like fractional hiring, mining industry leaders can overcome this challenge just as any other.
Those companies that succeed are the ones you’ll want to pay the closest attention to.
The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Readers should conduct their own research for all information publicly available concerning the company. Prior to making any investment decision, it is recommended that readers consult directly with Element79 Gold and seek advice from a qualified investment advisor.