Early 2010 a ‘wild ride’: MRG report

— The following are the findings of the Mining Recruitment Group’s (MRG) latest Mining Executive Outlook survey, which was distributed and completed during the last week of June 2010. This survey is the sixth in a series put together by the firm to address issues specifically related to the mining industry, with 102 executives taking part.

No doubt, the first half of 2010 has been a wild ride for those tasked with running resource companies. Fluctuating commodities prices and shaky investor confidence provides further evidence that being an executive isn’t for the faint of heart.

Overall, things seem to be heading in the right direction. Only 15% of respondents think that the mining industry will perform worse over the coming 12 months as compared to the last 12 months, with 53% counting on things to get even rosier.

Many believe this year should be good, with 88% of those polled being either bullish or neutral as to their short-term (6-12 month) outlook on the industry.

Long-term sentiment seems to be getting better and better: a whopping 83% have a bullish and promising outlook on the industry from a long-term perspective.

In terms of what commodities are hot and which are not, executives expect gold (74%), copper (59%) and silver (47%) will be the best performers among commodities in the coming year.

The least-dazzling commodities? That would be zinc (40%), nickel (36%) and molybdenum (36%).

Geopolitically, executives see Australia as a trendsetter, with 76% of those surveyed being concerned about other mining jurisdictions following Australia’s lead by imposing new taxes directed on the industry.

Within their own companies, executives are still keeping a close eye on the purse strings, with 62% of executives saying that their companies are as focused on maintaining cost-cutting initiatives as they were a year ago. Not much has changed from the 64% of respondents that were as focused on it six months ago.

Are executives being scared straight or is it business as usual? When asked if the fear of another downturn over the next 18 months was impacting current budgeting and hiring behaviour, 55% of executives stated it was not.

In the “show me the money” category, the overwhelming (and unsurprising) consensus is that it is much harder to secure equity financing than it was in pre-recessionary 2008. Some 52% of executives say that they are finding it requires much harder work to raise much less money as compared to 2008, whereas 45% state they are still able to raise similar amounts, though it requires a lot of hard work and effort as compared to the good old days. The lucky remaining 3% think it is as straightforward as it has always been.

Investor confidence may still be shaky, but that’s certainly not the case for the executives who were polled, 74% of whom expect to see their stock price increase over the second half of 2010. Some 21% expect their share price to move in tandem with the markets as a whole. How many expect to see a decrease in their valuation? None, though 9% think things will pretty much stay at the status quo.

Next, we asked what is the number one issue executives see the industry facing over the next 12 to 24 months?

Up massively from the 71% that cited this in our last polling, 92% of executives stated that they were cautious to extremely concerned over the volatility of commodities prices. Also up dramatically from the 63% of respondents that cited this in our last polling, 77% indicated they were cautious to extremely concerned over a lack of investment capital.

When asked what are the limiting factors affecting your company directly, 47% of executives responded that access to capital is a major issue for them, 44% have noticed a shortage of skilled labour, and 40% cited a lack of good projects.

Only 47% of executives say that their companies are executing the same business strategy during the recovery as the one they were operating under pre-recession.

Switching to personnel and compensation issues, this recruiter is delighted to report that 71% of respondents indicated they are expecting to recruit over the next six months. This is up significantly from our last polling where 58% were expecting to hire.

As respondents indicated that the first place money would go would be into exploration and development, it makes sense that geologists are in the highest demand at present. Of those companies planning to hire, 79% will be looking to add geologists to their team and 54% will be actively looking for mining engineers. The executive job market looks quite promising as well, with 38% of those companies that are hir- ing planning to make additions to their executive team.

Of note, 42% of executives have spent the last 5-7 years with their current employer and 21% are heading in that direction, having spent 3-4 years at their company.

Only 55% of executives have received a raise in their base compensation over the past year. Of those that received raises, 29% were rewarded with an additional 10-14% of their base salary and 18% received substantial raises of between 20- 50%. Most raises granted were nominal in nature, with 41% receiving a boost of 1-4%.

Lastly, note that those that took part in this survey were executives from mining companies of all sizes. Of the 102 responses, 38% came from executives of companies with market caps below $50 million, 33% from companies between $51 million and $250 million, 15% from companies with market caps between $251 million and $1 billion, with the remaining 15% of responses coming from companies with market caps in excess of $1 billion.

Though the findings are not scientific in nature, it is my belief that they reflect an accurate cross-section of the industry.

— The author is president of the Mining Recruitment Group, a Vancouver-based boutique executive search firm focused on the unique needs of the mining industry. He can be reached at apollard@miningrecruitmentgroup.comor www.miningrecruitmentgroup.com.