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Miners' labor supply problem goes from 'challenging' to 'diabolical'

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A drill supervisor at Rio Tinto's West Angelas iron ore mine in Western Australia. Labor shortages have exacerbated COVID-19 risks to production levels, the company said.
Source: Rio Tinto Group

Mining companies have the work but not the workers.

Eager to meet the swelling demand for materials crucial to a transition to cleaner energy resources, companies are posting thousands of jobs, offering higher pay and improved benefits in an attempt to attract employees to remote sites. But after laying off thousands when economies worldwide tanked during the spread of COVID-19 in 2020 and 2021, many miners are unable to find the workers they need.

Even before the pandemic hit, the sector already faced a skilled employee shortage as older workers retired and few younger workers sought to join an industry labeled as the enemy by environmentalists. The industry is also one that requires hard labor and not a little peril.

Mining companies now find themselves on the short end of the stick. Labor force participation rates have declined in advanced economies around the world, and there are signs that workers' preferences have changed substantially since the pandemic began, according to a March note by the International Monetary Fund.

The COVID-19 pandemic also created issues with keeping employees working in mines. BHP Group Ltd. CEO Mike Henry said during a May 17 mining and metals conference that some operations in the Melbourne-based mining giant's global footprint are reporting up to 15% to 20% absenteeism rates.

"Where did all the workers go after the pandemic?" said Travis Deti, executive director of the Wyoming Mining Association. "I think everyone's asking that question right now."

U.S. miners: 'We've got a lot of hiring to do'

In the U.S., mining and logging sector employment, excluding oil and gas, declined to about 176,900 in April, down 8.1% compared to April 2019, according to U.S. Bureau of Labor Statistics data. Over the past 10 years, U.S. mining employment has fallen 20.4%.

"This is an issue we've seen coming for the last decade," Deti said.

A tighter labor market may mean that companies must pay more to competitively attract and retain employees. Executives from Hecla Mining Co., the largest primary silver producer in the U.S., said on May 10 earnings call that labor costs have grown 14% over the past year to become one of the Idaho-headquartered company's top expenses.

"With strong metal markets come high demand for the skilled trades," Hecla Senior Vice President and COO Lauren Roberts said.

MP Materials Corp. Chairman and CEO James Litinsky made a pitch for hiring referrals to its Fort Worth location during the company's first-quarter earnings call May 5. The Las Vegas-headquartered company runs the country's only operating rare earth mine and processing facility.

"We've got a lot of hiring to do," Litinsky said.

Enrollments in professional programs crucial to mining are also down substantially, even though demand for mined materials key to decarbonization is high and expected to rise, said Stephen Enders, head of the mining engineering department at the Colorado School of Mines.

"My view for students is it ought to be a bit of a call to duty that we want this," Enders said. "I think it's one of the big challenges of our times."

In 2021, the International Energy Agency estimated that the overall need for minerals could increase by as much as six times by 2040, depending on how rapidly governments act to fulfill global climate goals. If society wants a carbon-neutral world with more electric vehicles and battery technology, Enders said, they will need to support the development of new mineral resources.

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Australian miners look for workers as investment flows in

Western Australia, which is solely responsible for Australia being the world's largest iron ore and lithium exporter, faces a resource sector labor shortage of 21,000 workers, and it is expected to reach a peak deficit of 34,000 workers in the third quarter of 2024, according to a forecast provided to S&P Global Commodity Insights by Pit Crew Management Consulting Services Pty Ltd., a consulting firm to mining and construction companies.

The timing could not be worse for Australian miners flush with investor cash and a pipeline of new projects and expansion. Equity markets generated a record tally of IPOs from the metals and mining sector on the Australian Securities Exchange in 2021, according to S&P Global Market Intelligence analysis. The trend continued in 2022, with 26 more as of May 16.

Australia's resource sector demand is about 400,000, Pit Crew Managing Director Peter Dyball said, yet the country's mining operations employed 279,200 employees as of the government's latest data in February, an already record-high figure expected to grow by only 15,900, or 5.9%, over the five years to November 2026.

"My firm was forecasting shortages over 2.5 years ago across most of the country, and [COVID-19] has turned that situation from 'challenging' to 'diabolical,'" Dyball told Commodity Insights.

"There's no shortage of [equity market] excitement and demand ... but the market is constrained now, so projects now take longer and budgets go up — partly because of skills shortages — while production targets are not met and need to be revised."

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'One of the big challenges of our time'

Mining companies in Wyoming are conducting multistate recruiting efforts to get people to come and mine the soda ash critical to the production of certain metals and for manufacturing the lithium carbonate used in lithium-ion batteries, Wyoming Mining Association's Deti said. Companies in the Powder River Basin are also offering $5,000 signing bonuses to draw in workers as coal production rebounds from the lows seen in early 2020.

"It's a challenge to get people to do the job," Deti said.

Higher compensation, often accompanied by generous benefits packages, is one advantage mining companies have been able to offer prospective employees. For example, the average mining employee in Nevada earns just over $95,000 per year, said Nevada Mining Association President Tyre Gray. However, mines are often located in sparsely populated locales, and the opportunities for remote work can be limited. Associations with the industry's legacy of negative environmental and cultural impacts have also been hard to shake.

"We have to do a better job telling our narrative so that people know what mining looks like," Gray said.

Miners still filling positions

Still, some miners see evidence of fresh interest in the industry.

"We have been successful recruiting top professional talent with diverse backgrounds because there is widespread understanding that fighting climate change and securing our future cannot wait," Lithium Americas Corp. CEO Jonathan Evans told Commodity Insights.

Lithium Americas is developing the Thacker Pass mine in Nevada, which will produce lithium essential to energy transition industries such as electric vehicles or battery storage. The company is also investing time and resources into local workforce development.

Yamana Gold Inc. also recently reported success attracting employees to the underground development of Canadian Malartic, the largest gold mine in Canada.

"We're paying above average salaries and then benefits, so it attracts people," Yamana President and CEO Daniel Racine said on an April 28 earnings call. "We had no issues at all to hire people. It's tight, but we don't have any problem."

In 2020, the average annual total compensation per job in the Canadian mining industry was $127,300, twice the all-industry average in the country, according to statistics from the Canadian government.

Canada's mining employment rose steadily for most of the early 2000s, but that trend started to reverse in early 2014. As of April 1, the country's mining industry, including quarrying and oil and gas extraction, employed about 263,000 people.

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Cameco Corp., a Canadian uranium producer, also reported success in ramping up its hiring amid increased demand for uranium in the wake of Russia's invasion of Ukraine, tapping into a pool of employees that previously worked with the company in northern Saskatchewan.

"There are a few of the trades that are a little trickier to find," Cameco President and CEO Timothy Gitzel said on a May 5 earnings call.

S&P Global Commodity Insights and S&P Global Market Intelligence are owned by S&P Global Inc.

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