Mining sector faces human resource crisis: Conference Board (February 19, 2007)

Vancouver — Despite high commodity prices and robust exploration activity, 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, says the Conference Board of Canada in a new report. At the same time, the sector will have to overcome a human resource crisis caused by a shortage of engineers and skilled tradespeople.

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

In the report, which aims to influence government policy and spur reform in the way that Canada’s natural resources are handled, The Conference Board says few new mines are being developed and possible exploration sites are located in increasingly 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 report, the decline was sharpest in coal extraction, (a decrease of 46%), while employment in 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 in the sector declines, the mining industry faces a looming human resource crisis due to a critical shortage of physical scientists, engineers, technologists, technicians, and skilled tradespeople.

The Conference Board attributes the shortage to factors such as retirement, competition from other sectors and the mining industry’s reputation as cyclical.

Currently, half of the mineral sector’s workforce is between the ages of 40 and 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 says.

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

Facing that scenario, the Conference Board suggests that mining companies make it a priority to hire from the 1,300 aboriginal communities across Canada, 1,100 of which are located within 200 km 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 says.

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; and

* 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.