Mining sector faces human resource crisis: Conference Board (January 23, 2007)

Vancouver – The Conference Board of Canada says the domestic mining sector is challenged by declining mineral reserves and a human resource crisis caused by a shortage of engineers and skilled trades people.

The warning is contained in a Conference Board report that aims to influence government policy and spur reform in the way that Canada’s natural resources are handled.

Despite high commodity prices and robust exploration activity, the report says Canada’s reserves of base and precious metals are declining rapidly and much more activity will be required to sustain the sector and meet rising global demand

Due to a curtailment of exploration activity prior to the recovery in commodity prices, Canada’s share of global gold production had fallen to 5.3% in 2004, from 6% four years earlier. In the same period, its ranking among the world’s gold producers has fallen to seventh from fifth.

The Conference Board says few new mines are being developed and possible exploration sites are located in increasingly more remote and environmentally sensitive frontier regions, making exploration and production more costly.

Meanwhile the number of Canadians employed in the mining sector is declining.

In 2005, the mining sector directly employed 189,400 Canadians, down from 205,700 in 1997. In that period, the number of workers employed in mineral extraction fell by 23%.

According to the Conference Board report, the decline was sharpest in coal extraction, (a decrease of 46%), while metal extraction fell by 35%.

Those declines were offset by a 13% increase in employment in non metal extraction, reflecting the emergence of Canada as a major diamond producer.

As the level of employment declines, the Canadian mining sector faces a looming human resource crisis due to a critical shortage of physical scientists, engineers, technologists, technicians, and skilled tradespeople, the Conference Board said.

It attributes the shortage to factors such as retirement, competition from outside the mining sector and the mining’s stereotypic image of cyclicality.

Currently, half of the mining industry workforce is between the ages of 40 to 54, compared with only 39% of the overall Canadian workforce. “The sector therefore faces a significant reduction in available workers and expertise when this group retires,” the report said.

That situation is expected to get worse because 40% of mining employees state that they plan to retire within the next decade, the report said.

Facing that scenario, the Conference board is suggesting that mining companies make it a priority to hire from 1,300 Aboriginal communities, across Canada, 1,100 of which are located within 200 kilometres of an operating mine or advanced resource operation.

While only 5.3% of the mining workforce is Aboriginal, it is a percentage that compares favourably with that in the Canadian workforce overall, at just 2.6%.

The relatively high percentage of Aboriginal employees in the mining sector is attributed to impact and benefit agreements between Aboriginal groups and mining companies.

“These agreements represent a useful way to increase the Aboriginal engagement in new mining projects,” the report said.

THE CONFERENCE BOARD REPORT ALSO NOTES THAT:

In the last couple of years Canada regained its former ranking as the world’s leading country for attracting mineral exploration investment. It accounted for 19% of global exploration investment in 2005.

The TSX and TSX Venture Exchange are still among the best places in the world to raise mining capital; however, the major mining houses prefer listing with the New York Stock Exchange and the London Stock Exchange, where all the largest investment funds go to shop.