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Need for Strong Management in Global Mining

26 Feb 2013

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Mining

With the volatility in commodity pricing, labour unrest, community opposition to projects, and reduced shareholder value, Carl Bosman writes on the need for strong management in global mining.

 Few people could say that 2012 has not been a tumultuous year for mining with continued pressure on the world’s consumer markets. 

The industry has had to deal with a variety of issues, including: volatile commodity pricing, depressed shareholder value, aggressive stakeholders evicting management (most conspicuously in South Africa and Canada), violent labour unrest (most conspicuously in South Africa and Australia), continuing consolidation in the sector through mergers and acquisitions and high profile community opposition to advanced projects across the globe, most recently in South Africa around ‘fracking’ and in Malaysia around supposed radiation poisoning.

 In review, and here we use that perfect of attributes – hindsight; we could assume that these are all issues that mining, and the other resources sector industries, need to get used to, adapt to and manage for.  Commodities are not becoming more prevalent and the locations where these minerals are found is becoming more remote and more environmentally sensitive, as such increasingly requiring community involvement with communities who have not dealt with companies of any form in the past except through aggressive or illegal exploitation of their resources. With this past track record it is understandable that many communities would not be overjoyed and welcoming of, firstly, mining explorers and secondly, the extractors or miners.

 Perhaps by way of argument we can look towards how the ‘playing field’, if you will, has changed and the demands on management?  Employment in mining management is no longer an environment purely focused on production and health and safety.

 In December 2011 Deloitte produced a list of issues facing mining, where Tim Richards, Deloitte’s Australian Mining Leader, is quoted as saying that:

 “The mining sector is facing a perfect storm of converging global forces. The unrelenting rises in the cost of doing business, unprecedented commodity price volatility and an ever-tightening regulatory environment mean mining companies will increasingly need to seek out unconventional solutions if they are to overcome these challenges.  … the looming skills shortage, the cost of doing business and increased capital project risk were just some of the major challenges facing the mining industry on both a global and domestic front.“

 Deloitte identifiedtop ten Issues, which can be read in more detail on the company website.

 The first issue is the cost of doing business and Deloitte contended that what goes up does not always come down.

 The second issue is commodity price chaos and Deloitte observed that there is no price stability without great transparency.

 The third issue is the battle to keep profits. According to Deloitte, government taxes target the mining sector.

There is also the fourth issue of restless stakeholders, especially the demand for heightened corporate social responsibility.

There are also labour pains - bridging the precarious talent gap.

 Deloitte identified the sixth issue as capital project quandaries, noting that project risk rises as the supply/demand gap widens.

 The seventh issue is non-traditional financing.

New sources of funding, according to Deloitte, require new levels of knowledge.

 Deloitte also noted that the big get bigger, while risk multiplies as companies diversify.

 The ninth issue identified by Deloitte is that volatility is the new stability, and stressed the need for planning for the unforeseeable.

 Finally, the tenth issue is what Deloitte called legislative Olympics.

According to it, countries compete to become the world’s toughest regulators.

While mining and other resources companies have become more community conscious, environmentally aware and even corporately responsible over the last decade, or so; these same companies face a looming crisis: a crisis that involves succession planning, current management skills and impending retirement of management.  These issues point to a skills shortage and a staff development and up-skilling crises.

For nearly a decade the industry has been aware of these impending issues and a decade ago the industries management was a decade from retirement. Now the industry is forced to face an impending disaster where the majority of skills currently employed will be considering, or actually retiring in the next decade.

 With this impending issue of skills shortage and the tumultuous nature of the mining and resources working environment; I believe HR is going to become another of the tough environments of this industry. No longer will it be an environment viewed by many as a “soft option”.  It is now time for the good Human Resources skills to stand up and be counted! You will all be responsible for identifying, sourcing and selecting the industries management going forward. Management that is in short supply and scarce, and will be mostly inexperienced when required.  As many detractors and critics have intimated through 2011-2012; management in our sector is lacking decision-making ability when tough decisions are required.

This was not always the case, as we know. Our industry has a system of competency instilled to identify, training and empower decision-making. What has happened to this system? Decision making has to be decisive.  If there is no tolerance for fatalities at the operations there can be no tolerance for fatalities during times of crisis, i.e. natural disasters, labour unrest and times of force majeure.

 By its dangerous and exploratory nature, methods of production, risks, dependence on worldwide traded commodity prices and need for experienced skills; the mining industry is a global business with global concerns. I believe Deloitte has summarised the issues; as a result, the larger issues affecting Australia, or South Africa, will affect African, American and European miners. 

 The main solution to all the highlighted issues is the sourcing and keeping of good, solid individuals dedicated to the success of your business and focused on their own progression, growth and prosperity.  Pedersen and Partners is an ideally situated to help mining and mining related companies source individuals and talent for such high stakes and demanding positions. The Industrial Practice Group of Pedersen & Partners has professionals placed in key regions, globally which specialise in the mining sector and the ability to source this talent worldwide due to its integrated structure

Bosman is a Principal at Pedersen & Partners, based in South Africa

Tags: Business, Nigeria, Featured, Management in Global Mining

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