​This week I was preparing a list of ASX listed mining and exploration companies to whom I intend to send a short survey to try and gauge sentiment in the industry for 2016. In fact if you are interested, please feel free to complete the survey yourself once you have read this blog. It is only nine questions long and will probably take you less than 5 minutes to complete.
 
The process of preparing the list proved to be an interesting exercise because of the various insights it gave me into the industry at present.
 
My first task was to list all of the metals and mining companies listed on the ASX and then determine contact details for them. Without the benefit of something like SNL Metals and Mining database, this is a tedious process. Having obtained a listing of the GICS group, Metals and Mining, I set about locating contact details for each company. This was done by searching for each company using Google and then trying to locate a contact email address for those for whom I did not already have one.
 
Bergin's first law of email address discovery is, the larger the company the less likely it is that you will find a general enquiry contact email address, the best that you can hope for is an investor relations person.
 
It appears that the junior mining and exploration companies are; in the most part, more generous with their contact details, in a few cases I even found the MD/CEO/Chair providing their company contact email address. Greatly appreciated.
 
There were a few companies for whom I found it completely impossible to locate an email address and deleted these from my list. Whilst they may be glad that they avoided my survey, they might be less keen on avoiding potential investors!
 
If I can offer some device to those seeking email contacts for mining companies or perhaps any listed company, my routine is as follows. Do the obvious first and go to "contact us", if this is unsuccessful the "corporate directory" is sometimes helpful. My next stop is the last quarterly report and failing that the last annual report or sometimes company presentation. There were a number of instances where the only place that an email address was listed was in the annual report.
 
So apart from becoming very deft at finding contact details, what else did I discover in the course of my list compilation?
 
Perhaps the first thing to mention is that I used Excel’s sort feature to rank companies by market capitalisation. Based on this criteria producers started to peter out by the time I got to the high 50’s and low 60’s in my sorted list. I suppose that this is to be expected with producers who are struggling intermingling with explorers/developers who are about to commence construction or production and for whom the market rates their chances of success well.
 
David Flanagan would probably not be surprised to find Atlas ranking in the mid-60’s and indeed he may well consider this to be a good outcome. Takeover target Aditya Birla found themselves another 10 slots lower. Surprisingly, they were only three spots lower than the other current takeover target Phoenix Gold Ltd.
 
Mincor Resources and Mineral Deposits will no doubt be very peeved at their ranking in the low 90’s, but perhaps the standout anomaly for me was Millennium Minerals which was found somewhere around the 240‘s!  Well below many an exploration company with a geological theory or three, a twinkle in their eye and barely a moth in their wallet. Perhaps we should all be piling into Millennium because there only seems to be one way that this company can go based on recent production performance. They were however trumped by Straits Resources, who came in around the 300 mark.
 
My list compilation terminated at around 300 of the just under 600 companies listed in this GICS grouping; excluding those whose shares are currently suspended. By this stage, inspection of their last Appendix 5B indicated that most had $200,000 or less in the bank and probably wouldn't be looking for any hired help!
 
There were a couple of other observations that gave me a little chuckle along the way. There were a couple of companies who obviously believe in keeping it all in the family with the surnames of a couple of directors being identical, surely not a coincidence? I won't name names but some of you at least will know the companies concerned.
 
I found it interesting the number of companies that have either "Mines" or "Mining" in their company title, yet when one looks at their website it becomes apparent that these names are aspirational. I guess that there is something to be said for reminding people what we are all striving for, others less generous, might term it misleading.
 
Perhaps another observation is the number of companies that have only the minimum required three directors, often with one of those being an executive director. There were a few companies who had no executives and only non-executive directors. Both structures a reflection of the severely constrained availability of cash at present and the need to minimise expenditure wherever possible, especially for those with little near term prospect of revenue.
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And finally the position titles that people have given themselves or perhaps were bestowed upon them, gave me the odd wry smile, particularly the gentleman who was listed as "Executive Director & Chief Operating Officer", .............of an exploration company. Okay, if you want to be pedantic one could view “operating” a drill rig as meeting the criteria, but I always take it to imply production, and I don't mean of drill core. There was also the "Executive Chairman, Managing Director & CEO". Quite a mouthful. Personally I would have thought Executive Chairman would have said enough.
 
As I said at the beginning, you are more than welcome to participate in my sentiment survey and if you would like to do so, please click on the link below.
 

Rob Garnham, one of my associates and I, meet up periodically for a coffee to compare notes on where the industry is going and where the opportunities might be, as well as solving the problems of Australia/the World, largely because we have the time to do so, unfortunately.

When we met up a couple of weeks ago Rob posed an interesting question. He was pondering whether he should just close up shop for the time being and go on holiday for the next six months and hope that things will have improved by the time he returned and that companies will have started to undertake studies once again and be in need of a hydrogeologist.

We debated the merits of this approach and came to the conclusion that although the prospect of obtaining work during the course of the next six months might be slim, there was a significant risk that once confidence returned to the industry that his absence from the market might make him invisible to potential clients and therefore less likely to pick up work than if had he maintained a presence. Whilst the industry may stay in the doldrums for the next six months or more, actually picking the bottom of the market and when companies might start spending money again is fraught with difficulty.

So we concluded that both he and I would continue to maintain a presence in the market place even if, for the time being at least, it is quiet out there.

One of the factors that drove our decision process was the knowledge that a significant number of other mining professionals are currently unemployed and whilst not all of them will have hung up out their shingle as a consultant, most we assumed, would be more than happy with taking on some form of contract work if it were available. Therefore, there are a significant number of people potentially competing for the work that we do.

A week or so later, I thought that it might be interesting to try and quantify the level of unemployment in the industry and therefore the level of competition for work within the mining sector.

I found three sources of information regarding employment and unemployment in the mining industry. These are referenced at the end of this article.

The first was an Industry Outlook published by the federal Department of Employment in mid-2014. This indicated that total employment in the mining industry as at May 2014 was 268,000 people. If we use the AusIMM/AIG criteria for membership, i.e. a bachelor degree or higher as defining a “mining professional”, then taking the data from the Industry Outlook paper, which shows the industry workforce broken down by educational achievement level, this indicates that there are a total of 56,500 people with a bachelor and postgraduate degrees.

My second source of data was the AusIMM Professional Employment Survey issued in October 2015, which indicated that 16.2% of mining professionals were currently unemployed. Interestingly this figure correlates well with the number produced by the AIG which shows that 15% of its members are currently unemployed.

Based on these numbers we can reasonably assume that around 9,200 mining industry professionals are currently unemployed. Now whilst these will be spread across a variety of disciplines it still means that at a significant number of people are competing in each area of specialisation for what is currently, a limited amount of work.

Another interesting statistic from the AIG data is that 20% of their membership is currently under-employed. If this statistic holds true across all disciplines, there could be another 11,300 people who are currently under-employed, suggesting that there are around 20,500 people competing for available work in the mining industry at present!

Statistics like that grab your attention and in my mind at least, endorses Rob’s and my decision to keep ourselves in front of potential clients, even if the prospects of immediate engagement may be slight.

One other interesting statistic from the Industry Outlook paper that I would like to share, is that the mining industry has a much higher percentage of people with Certificate III & IV qualifications than for all industries (35.1% versus 20.7%) but for all higher qualifications (diploma, advanced diploma, bachelor degree and postgraduate degree) we have a smaller percentage of people holding those qualifications than in all industries combined.

I haven't yet worked out what that tells us about our industry but it is certainly something to contemplate over a bottle of red.

In the meantime it seems like an opportune time to acquire some new skills!

References:

https://cica.org.au/wp-content/uploads/2014-Mining-Industry-Employment-Outlook1.pdf

http://www.ausimm.com.au/Content/docs/policy/pep2015/emploment_survey_2015_summary.pdf

https://www.aig.org.au/no-signs-of-improvement-in-latest-australian-geoscientist-geoscientist-employment-survey-results/
 

Would you travel from Perth to Melbourne, at your own expense, to attend a 30 minute ‘interview”? That’s what I was asked to do this week. Unsurprisingly I declined!
 
The background to this request started about three weeks ago when I noticed an advertisement for a non-executive director role with a renewable energy company based in the eastern states. The ad clearly stated that candidates could be domiciled anywhere.
 
This sector interests me, particularly coming from an industry that is energy hungry and for whom energy; at most sites at least, is expensive. I am therefore interested in anything that can assist in reducing that cost.
 
I also felt that I could add value to the company because of my previous board experience and in addition, my presence would bring diversity of experience to the board.
 
As I noted earlier, their ad clearly indicated that candidates could be domiciled anywhere in Australia, otherwise I would not have even considered applying.
 
Early indications from the company concerned were positive, in that they responded very promptly to my letter of application. They also provided me with a copy of an offer document for a capital raising that they are currently undertaking and invited me to provide them with a critique of the document as well as something in the way of a SWOT analysis.
 
I found this exercise interesting because, being a small scale offering, the document relied on some exclusions under section 708 of the Corporations Act. I noted the following statement on page 4 of the document with interest, having previously been involved in the preparation of a prospectus, “In particular, no verification of, or due diligence exercise on, the information contained in this Offer Document has been undertaken by any person for any purpose.” Very much a case of DYOR (do your own research).
 
A couple of days later I sent back my review. I received no acknowledgement of my submission.
 
Some six days later I received an email advising me that they had now arrived at a shortlist of candidates whom they would like to meet face-to-face and I was invited to attend a meeting in either Melbourne or Sydney, this being described in the following way, "This meeting will be casual in nature (around 30 mins) and provide an opportunity to meet the management team and discuss the role in more detail.”

My eyebrows were certainly raised by the suggested brevity of the meeting. Whilst I agree that one can often determine within the first few minutes of conversation whether a candidate has the right "fit" for an organisation, but in my opinion, one owes it to the company and the candidate, to explore their capability and character in full, before making a decision. I certainly don't believe that 30 minutes is a sufficient duration in which to make that sort of call.
 
Nonetheless arrangements were made for me to attend a meeting in Melbourne on Wednesday 7 October.
 
The email setting the time and date for the meeting was silent on the question of travel and I responded by asking whether or not the company concerned would like to make my travel arrangements or whether they wished me to.
 
Again the response was slow in coming, indeed a weekend passed before I received a response, which advised me that the company would not be paying any travel expenses for this round of interviews!
 
My decision was easily made and I responded, advising their representative that I would be withdrawing my candidacy. I subsequently wrote a letter to their managing director expressing my concern over the degree of discipline and rigour that had gone into their selection process.
 
As I pointed out to him, in my 35 year career I had never once been expected to travel at my own expense to attend an interview and I certainly had no intention of doing so on this occasion. I went on to comment that, even as a student seeking sponsorship to attend university, my travel to and from interviews and where necessary, overnight accommodation, had been paid for by the potential sponsor.
 
I believe that at this stage in my career I have a reasonable concept of how a good recruitment process works, having been through it many times both as a candidate and as a client.
 
Whilst I have undoubtedly made some bad recruitment decisions, particularly early in my career, as with most skills, experience and training have improved my abilities in this area over time so that I believe that I am now at least competent to pass comment on other people's processes.
 
The fact that the meetings were scheduled to be of such a short duration to me suggests that very little screening had been done to arrive at the supposed "short list" and indeed I strongly suspect that it would be better described as a "long list".
 
In my view there are two possible causes for this lack of filtering. Either it was simply laziness on the part of the person managing the recruitment process, or the requirements for the role had not been clearly defined, therefore there was no criteria on which to base a decision whether or not to include candidates in the shortlist. It even occurred to me that maybe they hadn’t clearly defined why they are creating this role.
 
If they were unable to apply some culling of candidates from the applications received and the feedback on the offer document, and still wished to gain a greater insight or “feel” for each of the candidates prior to arriving at a shortlist, then this could have been done via telephone or Skype calls at limited or no cost. Following those calls they would have been in a position to arrive at a shortlist of probably three candidates who would then be invited to attend a more formal interview, probably lasting at least a couple of hours.
 
Following those formal interviews I would have expected the preferred candidate to be invited to visit their base and get to meet the rest of the team, just as a final check before they made their final decision.
 
If the cost of travel was a significant factor for them, then surely they should have limited their search geographically, at least initially, to within their home state and if unable to find suitable candidates there, extend the search further along the Eastern Seaboard.
 
The fact that the position was advertised as being domiciled anywhere, indicated to me that they were more concerned about finding the right candidate with the right skills, than they were about the cost of that person travelling to attend interviews or board meetings.
 
I am not suggesting that I was necessarily the right person to fill that board vacancy, indeed I may not have been suitable to have made it to the shortlist. As I don't have a clear picture of exactly what attributes they were looking for in a candidate, it is impossible for me to make that assessment. The troubling thing is, I wonder if they do.
 
They will undoubtedly fill the role from the candidates who are not put off by the need to cover their own travel expenses to attend the interviews, or who reside in Melbourne or Sydney where the interviews are being held. Whether they are the best candidates or just those that need the job, they will never know.
 
What are your experiences with recruitment processes? Have you ever been asked to pay for your own travel expenses to attend an interview and if so did you?
 
 

In a week when Glencore lost 30% of its market capitalisation and the AusIMM released the results of its membership survey that found 16% of professionals are currently unemployed and of those 30% have been out of work for 12 months or more. One could be forgiven for feeling rather pessimistic about the mining industry, its prospects in the short term and the outlook for mining employment.

That Glencore and those who invested in the company appear to have misjudged the market is perhaps no surprise given that there does not appear to be a consensus on where markets are headed. Only last week, on consecutive days, MiningNews.net published two starkly contrasting views of the industry.

On Thursday 24 September, Robin Bromby was asking the question “Two more years of this?” quoting various sources including Macquarie Research, the Bank of England and Goldman Sachs, all of whom have a gloomy outlook for commodities over the next couple of years.
However on Friday 25 September, Hedley Widdup of Lion Selection Group told the Rising Stars conference that “Mining (was) past the bottom", and he was ringing the bell on the new mining cycle. Lion Selection’s "mining clock" is well known, at least in the Australian mining sector and Hedley confidently stated that it was currently at 4:30, this is early in the period when mergers and acquisitions take place before the upswing.

Two commentators in two days presenting two different views of the sector to me illustrates the uncertainty that currently exists in the market. It is no wonder that retail investors are scared of the resources sector at present as the "experts" appear unable to agree.

I have always taken a rather cynical view of forecasters. For any economic parameter that one might wish to forecast, there will be a range of views, often quite a wide range. Inevitably someone is always right, or at least close enough to be able to claim that honour. In my view that makes them lucky rather than right. The real use of forecasts is to use the multitude of forecasts to arrive at some form of consensus, at least of market direction. So in absolute terms I do not believe any single forecast but in overall terms I believe that forecasts give us a vector on where the market is heading.

I believe that the complicating factor in the present environment with commodities having fallen so far from their peaks, is that every forecaster is now taking a very conservative view because they don't want to be wrong, more than the want to be right.

I also believe that sentiment does indeed play a role and industry commentators, politicians and economists may be surprised how much influence their talking up or talking down the economy can have on public sentiment and hence the markets and perhaps even the economy. In other words I believe that we need more people like Hedley talking the economy and the industry up, so it was great to see Christine Legard being cautiously optimistic about the world economy in her IMF speech yesterday.

The media's role is interesting, particularly with its commentary on Glencore suggesting that it is the new Lehman Brothers with potentially worldwide consequences in the event of its collapse. Again my cynicism comes to the fore and I wonder if the media, having not foreseen Lehman Brothers collapse is trying to get in early and make its "forecast" on the collapse of Glencore.

Obviously only Glencore knows the true extent of its exposure, particularly with regard to its trading arm and whether there is a real risk that the company may collapse or not. If it does survive then I am sure that there is still a story in it for the media!

Turning to the unemployment levels amongst mining professionals, at least in Australia. At 16% of professionals, this is around three times the national average rate of unemployment, and if one looks at the granularity, the rates of unemployment amongst those previously employed in the iron ore industry are higher still at around 23%. 

At the risk of stating the bleeding obvious, such an outcome is not unexpected given the relatively small number of people employed in the mining industry compared with other sectors, the significant fall in commodity prices and consequential company failures and mine closures. That being said I feel for each and every one of those people. It is a hard thing to swallow, to be out of work when your mates are still in jobs.

However, I perhaps have a more optimistic view of the world than many others who have been made redundant in recent years.

Firstly, there are still mining jobs available, it's just that most of them don't happen to be in Australia. I, like many in the industry, receive a daily update on the employment market from CareerMine, part of InfoMine. This consistently lists jobs available in Canada, Russia and to a lesser extent, the USA and this trend has been sustained for several months.

Miners have always been itinerants. The Cornish set the trend in the 18th and 19th Centuries travelling to all corners of the world when tin and copper mining in Cornwall declined. Indeed there is a saying that the definition of a mine is, "a hole with a Cornishman at the bottom of it."

Many miners in Australia have been itinerant. The mines of Kalgoorlie and Kambalda in the 80’s were full of people from everywhere it seemed, except Western Australia. So for those who are prepared to take up an itinerant lifestyle once again, there are jobs available, it just means that you need to roam little further than you once did.

For those of us who don't fancy upping stumps and moving to yet another country, there is still opportunity because the mining industry has taught us a multitude of skills that are applicable in many other industries.

Whilst it is perhaps more true of mining engineers, who, let's face it are generalists, most mining professionals who enter the industry based on a technical skill, sooner or later end up in management at some level or other. This requires us to call on skills that we often only paid scant attention to during our university time. We bolster them with a good dose of on-the-job training. If we have been lucky our employers have supported us by providing additional training to help us deal with the requirements of a management position.

In these management roles we have learned a multitude of skills; problem solving, project management, industrial relations, OH&S, human resources management, environmental and social management, regulatory compliance, approvals processing, budgeting and financial management are those that spring immediately to mind, there are probably more.

The great news is all of these skills are applicable to other industries, indeed many mining industry professionals are better prepared for management and ownership roles in other industries and in particular in SME’s than many people working in these positions.

The AusIMM has expressed concern that the industry will lose a significant number of experienced and knowledgeable professionals who will choose to go into other industries in order to gain employment during this downturn. I certainly agree that this is true, indeed I believe it is inevitable. However, I do not share the institute’s pessimism regarding the impact of this "brain drain" on the industry’s future.

The industry has been through many cycles in the past 30 years and on each dip we lose professionals permanently from industry, yet the industry has always survived. As on previous cycles there will be sufficient number of experienced and knowledgeable professionals who remain employed to be able to coach and mentor those less experienced as well as the new entrants who will join the ranks on the next upswing in the cycle.

I agree that it is hard to leave an industry that one loves and in many cases has given many years of commitment to, but for those who want to remain in the industry there are positions if they are prepared to travel to other countries and for those who remain in Australia, I believe that they are highly employable in other industries, where they will undoubtedly have successful careers.

To sum up I can do no better than to quote Monty Python, “Always look on the bright side of life!” 

References:

http://www.bbc.com/news/business-34380490

http://www.ausimm.com.au/content/default.aspx?ID=536

http://www.miningnewspremium.net/storyview.asp?storyID=826956193&section=Outcrop&sectionsource=s175

http://www.miningnewspremium.net/storyview.asp?storyID=826956241&section=Events+%26+Conferences&sectionsource=s1450168&Highlight=widdup&aspdsc=yes

http://www.imf.org/external/mmedia/view.aspx?vid=4520901292001

http://www.infomine.com/careers/?utm_source=job-alert-150929&utm_medium=email&utm_campaign=job-alert

https://en.wikipedia.org/wiki/Cornish_diaspora