Mining firms seen growing into integrated producer/processor

You are entering an industry notable for the challenges that face it. You know that we have to produce commodities for sale on international commodity markets at price levels that largely reflect the costs of the lowest cost producers. The international commodity markets are basically unstable, leading to the boom and bust cycles we see in Canadian mining. If boom and bust are to continue, as they will, with mining industry employment levels also fluctuating, as they will, how are we to attract and keep the best of the available Canadian workforce? Our industry has been geared to emphasize the production of commodities. But now adays traditional end products that use our commodities face major new competition in the marketplace from the new products coming out of the composite and engineered materials laboratories.

Mining companies have to make a strategic choice: either to continue to be principally diggers and preliminary processors of bulk commodities, or to integrate forward into more advanced processing and forming of metals, and then, from there, perhaps to integrate backwards into the new materials production area. My vision of the future mining company is therefore that of an integrated materials producer and processor.

All of that leads to two questions: how do we identify what new skills we need to add if we are to participate in these new activities, and how are we to attract and retain the workers with those skills? All this, of course, in addition to staffing for the continuance of our present activities. The competitive rigors I have just described can only reinforce the trend that I have seen split our industry into two extremes: just three or four larger corporations with the financial strength to manoeuvre and survive in fundamentally changing circumstances, and right at the other end of the scale, a constantly changing population of junior companies relying upon entrepreneurship and luck to achieve survival. Over the last 20 years, the ranks ofthe mid-sized companies have been really thinned out, and so has your choice of employer. What skills must you equip yourself with to slot into companies that are poles apart in size and maybe in operation style? For the industry itself, the problem this trend brings is how to equitably share the financial burden of any industry-wide program. It is neither fair to expect the majors to pick up virtually all of the costs, nor to burden marginal producers withindirect costs that might put them out of business.

John Udd of the Canadian Centre for Mineral and Energy Technology (CANMET) publishes an annual survey of the number of Canadian university graduates in mining and metallurgical engineering. When you look at this survey it is apparent that university enrolment levels are influenced by, but lag, perceived employment levels.

The last survey depicted a crisis situation for universities. Looking at first degrees only, in 1989 there were 27% less metallurgical engineering graduates than the previous peak in 1982. In mining engineering the drop was an enormous 54%. These are crisis figures, threatening the university departments concerned, some of which may have to close. But are they crisis figures for our industry? We don’t know and we must find out. We do know that our own industry-wide employment levels are down 23% from their peak, to a 1989 total of 106,000. We don’t know what our future employment levels wil be an ou individua perception var widel becaus the ar draw fro ou ow persona experience i th presen an the recent past.

S whil w hav 20/2 hindsight an whil d thin w ca d muc bette jo a forecastin th kinds o skill w will need, can’ fo th lif o m se ho w ca forecas ou futur numerica need fo graduate whe w continuall fai t be able to forecast more than a few months ahead what the level of our industry’s activity will be.

I, therefore, foresee a continuation of the situation in which graduate numbers continue to oscillate either side of industry requirements.

That was a demand side look at numbers; now let’s look at the supply side. Demographic studies tell us that the numbers of young people entering Canada’s workforce will steadily decline from now on.In mining we are in straight competition with all other domestic industries for our share of the best and brightest of each year’s intake. Some other Canadian industries have already begun to implement the types of recruitment and training programs that I am going to advocate to you as ways in which to make our industry more attractive to potential recruits. The heat is on, and now we must make our move.

The impact of a reduced intake into the workforce is worsened for our industry by the fact that an ever larger proportion of students are choosing at Junior High levels to drop the “hard” science and math courses, choosing instead the “easier” arts courses. This shortfall is a reflection of the unduly low value our society places on trades and even to an extent on engineering vocations, and also, I am led to believe, by a low standard of science teaching throughout our school system that fails to convey to the student the relevance of science to our everyday life, and the excitement to be found inputting scientific knowledge to work in real-life situations.

I’ve spoken about technological changes. We need constant unit production cost reductions to maintain our competitive position in the international marketplace. We did well in the 1980s to cut costs by the implementation of new technologies. This must and will continue in the future, hence defining three needs.

First, there is the obvious need to train up the new skills that new technologies require. (You can visualize today’s requirements a tour mines for electronics maintenance — a need that did not exist until a few years back).

Second, out of the new technologies comes new and sophisticated production equipment, which in turn brings the need to give much more advanced training much further down the employment hierarchy. You don’t put a $500,000 piece of production equipment into the hands of someone with only rudimentary operating skills and you don’t put a complex operation manual in the hands of someone who can’t read.

Third, changing societal values cause changes in business values and these are bringing about structural and operational changes in the corporation; I’m thinking of issues as diverse as occupational health and safety, radiation and pay equity.

This means that when I talk about training I’m not just talking about technical graduates or people in the skilled trades. I’m talking about the entire work force range from top to bottom, from the chief executive officer to the most junior production worker.

Modern management concepts support this thesis. We are pushing responsibility and decision-making further and further down the organization. We are making workers on the shop floor responsible for quality control and devising better ways of organizing their owntasks. Not only must we ensure that everyone is given the skills with which to properly exercise these new found responsibilities, but we must also ensure that top management is equipped to lead and hold together the very different kind of organization that will result. Patrick MacCulloch is a retired director and senior vice-president of BP Canada. This article was excerpted from a recent speech to a Students Night gathering organized by the Toronto branch of the Canadian Institute of Mining, Metallurgy and Petroleum.