Covid-19 industry survey finds high confidence in mining sector leadership

The Northern Miner and Canadian Mining Journal conducted a reader survey to gauge how the sector is faring through the Covid-19 pandemic, which began officially in March. The survey was open in July and August, with 384 people from the sector taking time to respond to a combination of multiple-choice and open-ended questions. Respondents represented principally mining and exploration companies, suppliers to the industry, and consultants, with a smattering of respondents who identified as investors, or as being part of financial institutions, government or NGOs.

The survey captured a range of views, from the optimistic: “We believe that [the situation] has been handled very well and we are stronger for it,” to others indicating that they are just “scraping by.”

In this first article examining the results, we’ll look at the state of the industry and how it has been coping with the disruptions and uncertainty of the pandemic. As 85% of survey respondents anticipate that the pandemic will continue to affect the economy and mining for the next year or longer, the second instalment will look at the longer-term picture for miners, and what the industry needs from governments and financial institutions to stay viable during the uncertainty.

First, a look at who responded to the survey.

The largest group of respondents were from mining and exploration companies (40%), followed by suppliers to the industry (38%), and consultants (6.8%).

Of the respondents from mining companies who answered the survey (148 in total), more than half (54.7%) were from juniors, with 25% representing majors and 20.3% from mid-tier miners.

Of these, 65.5% companies mine or explore for precious metals, with 38.5% in base metals, 8.1% in energy metals, 6.1% in uranium, 4.1% in diamonds, and 13.5% indicating “other” (including potash, coal, quarry, oil and gas, critical minerals, industrial minerals).

In consideration of how the jurisdiction of operation would impact respondents’ answers, we also asked where the companies’ assets are located. In terms of jurisdiction exposure, the vast majority of respondents (80.3%) have assets in Canada and the U.S. – two countries with widely diverging success in countering the spread of COVID-19 so far. The next most common jurisdiction was South America (21.1%), then Mexico and Central America (15%), Europe (9.5%), Africa (7.5%), Asia (6.1%) and Australia (5.4%).

Initial insights: High confidence in leadership

Across the board, respondents indicated that their organizations were doing well in terms of dealing with the crisis so far.

While only 59.3% of respondents indicated their organization had a business continuity plan in place to deal with business disruptions when the pandemic struck, most rated their organizations’ contingency planning efforts since the start of the crisis as highly effective, with 68.2% of respondents rating them as good or very good, and only 4.4% rating them as poor.

Even more encouraging, respondents expressed high confidence in their organizations’ leadership to make the right decisions through the crisis, with 48.9% of respondents indicating they were very confident in their leadership and 28.3% indicating they were extremely confident.

Respondents scored their organizations especially high in terms of their effectiveness in addressing safety concerns, with 42.5% ranking the response as very good and 34.8% as excellent, and less than 1% ranking the response as poor.

At the time of answering the survey, the majority of respondents (53.9%) were still working from home, with 16.9% indicating a hybrid workweek including working from home and some time in the office. A quarter (25.4%) of respondents said they were already back in the office and 20.1% indicated they were still working in the field. About 11.4% indicated they personally were working reduced hours, with 5.5% laid off or furloughed.

Asked what their organizations are doing well through the crisis, the answers were a mix of communication, safety measures such as screening and testing, operational performance (lowering costs and keeping up productivity), as well as adapting to the new work-from-home reality.

Specific answers included: “Strong leadership with pre-emptive measures for work from home support, specific guidelines for sites and corporate, testing as necessary, pre-shift quarantine periods for FIFO (fly-in/fly-out) employees and regular update meetings,” said a project manager for a precious metals and base metals mid-tier company with assets in North America.

Flexibility of organizations to support employees was especially appreciated by respondents, as well as keeping employees safe and minimizing layoffs. One respondent who works for a mining supplier/service provider praised the company for “viewing staff as genuine people with real needs for flexibility, support and culture-building in a major shift; making commitments to staff and following through.” Another respondent who works for a supplier/service provider said it had done well “keeping its team intact, supporting employees, and communicating in a clear, timely manner.”

Organizational adaptability was also highlighted in some of the answers, including one respondent, an executive at a precious metals and base metals mid-tier operating in South America, who said: “Adaptation to (a) constant changing environment and compliance with health protocols in our operations.”

Others highlighted communication with communities as something that’s being done well: “Seeking alternative ways to engage with remote communities,” said one community engagement and sustainability consultant.

A few respondents could not pinpoint any strengths of their organizations, with one indicating that it was “completely caught off guard by the pandemic and are now playing catch up.” Another who works for a mining supplier/service provider said: “The situation is quite chaotic! The simplest task is overwhelmingly complicated due to regulation and procurement disruption.”

Room for improvement

While organizations in the mining sector are generally seen as coping with the Covid-19 crisis well, there does seem to be room for improvement. When asked where performance of the organization during the crisis could be improved, the most common answer was related to communication with employees, clients, governments and communities (31 of 245 who answered).

“Job security and loss of staff are likely the highest concerns in the consulting side of this industry. Short-term plans have been put in place and acted on; however, the uncertainty over long-term impacts requires additional communication to staff,” said one engineering consultant.

Others indicated health and safety protocols and testing could be improved (12 people) with “faster implementation and reaction to changing government policies and those of equipment suppliers, contractors, etc., as the Covid situation evolves,” said one junior precious metals executive with assets in Mexico/Central America.

While the pandemic has been widely seen as a catalyst to hasten digital transformation in the mining sector, several respondents flagged technical concerns that are holding their organizations back (seven people).

“[We] could do more on adopting digital strategies and technology to be able to walk along with our mining customers in the next decade,” said one person from a supplier/service provider.

Interestingly, one respondent from a U.S. mining regulator had quite basic work-from-home concerns: “[Our] organization is doing well, but many of our offices/staff do not have access to sufficiently robust internet capabilities to support fully effective telework.”

Coping with the downturn

In terms of their organizations’ overall response to the pandemic-induced downturn, the most common strategy has been to reduce capital expenditures (58.7%). About a third of respondents said their organizations have also reduced headcount (35.3%) and salaries (31.1%), and reduced or eliminated exploration programs (33.9%). Companies have also commonly targeted contractor costs (33.5%) or supplier costs (22.9%). The cutbacks have trickled down to shareholders, with 13.8% indicating their organization has cut or eliminated their dividends, and 4.6% indicating that share-buybacks have been reduced or eliminated.

Many respondents said that spending has been cut across the board at their organization: “Limiting of all expenses in every department (lean and mean),” said one, with others indicating that equipment, IT and technology spending has been targeted. With ongoing international travel restrictions, reduced domestic travel and the cancellation of physical trade shows, many indicated they were saving on travel. Other respondents said they were delaying capital projects and exploration to 2021, cutting spending on engineering and feasibility work, and not pursuing planned acquisition of new projects.

Some miners indicated production costs have been reduced, while – somewhat worrying for the long-term health of producers – others indicated maintenance costs were being cut.

A small minority of respondents said rather than cutting spending, their organizations were holding the line or increasing expenses as they are “busier than we were last year,” in the words of one consultant, or “continue to aggressively expand,” in the words of one junior gold company with assets in Mexico/Central America.

Different jurisdictions, different experiences

Most respondents with assets in Canada praised the responses of various jurisdictions in the country for keeping case counts low and keeping the industry going.

“Thank goodness all our properties are in Canada!” said a director of a junior focused on critical minerals. “Most government jurisdictions in Canada are working with us to weather the storm and that is all one can ask,” said another head of a junior precious metals and base metals company with assets in Canada/U.S.

While most respondents said the jurisdictional response to Covid-19 would not affect where they will do business in the future, others have had negative experiences that may shape their choices differently in future, including one precious metals junior with assets in Canada/U.S., who said “They made it difficult to get people in and now we are facing contractors who now cannot do the work.”

Another precious metals junior with assets in South America also indicated poor handling of the pandemic will affect their future choices of jurisdiction, saying “There are regular new and at times contradictory and nonsensical regulations and other, sometimes soft, rules the application of which are hard to define. Government is overwhelmed and reacts with knee jerk responses.”

Some miners report that regulatory and other burdens have increased costs, but exploration companies were more likely to report limited access to remote regions of Canada, in particular Nunavut and the Northwest Territories.

“The Yukon, Alaska and Nevada have done well. Exploration work is busy and moving along somewhat slower than previous years,” said one respondent from a supplier/service company. “In the Northwest Territories and Nunavut, it feels like a complete lockdown. Unless you had a large, advanced project or active mine there is no ability to run a program.”

“We cannot have access to the project areas in a cost-effective way (quarantines required, etc.) so we cannot raise funds to complete work,” said an executive of a diamond junior.

Next time, we’ll take a look at respondents’ concerns about the medium to long-term impact of the pandemic in the mining industry, and what they think governments and financial institutions can do to help.

– Alisha Hiyate is the editor-in-chief of The Canadian Mining Journal. The Canadian Mining Journal and The Northern Miner are part of Glacier Resource Innovation Group.