Despite the turbulence in the Australian and global share markets this week, mining companies around the world are still facing industrial issues that are throwing curveballs at the smooth operation of their mines. From skills shortages, rising wages, a strong Australian dollar and angry unions, crisis management and human resources departments are no doubt currently in over-drive.
Offshore, BHP Billiton Limited
(ASX:BHP) faced a significant halt in production when workers went on strike for 15 days at its Escondida mine in northern Chile – the largest copper mine in the world. The strike's impact went so far as to alter copper prices: they rose by as much as $30 on the London Metal Exchange last week. The miner reportedly lost about 3,000 tonnes of copper output for every day of the strike.
Mines have been in the business headlines back home, too. Queensland mine safety and health commissioner Stewart Bell said Australia was "slightly behind the eight-ball" when it came to mine safety.
Last week he spoke at Mackay's Bowen Basin Coal and Energy Conference, where he said the Australian mining industry was lagging behind the rest of the world in regards to collision avoidance technology and proximity detectors on site.
Meanwhile, miners at Anglo American's Moranbah North coal mine Queensland's Bowen Basin went on strike on August 9, protesting over what they call the dangerous practice of 'hot bedding' – where they must give up their room key immediately after a shift. They also protested about the lack of accommodation in the area surrounding the mine.
Then in Newcastle, environmental activists broke onto a 15 metre high conveyor belt at Kooragang Island Coal Terminal in protest of coal mining – a feat that attracted a lot of media attention and shone mining companies in a negative light.
What the Unions sayAustralian Council of Trade Unions secretary, Jeff Lawrence, told the Australian Mines and Minerals Association's national conference recently that there are four myths in the current mining industry: the 'wages breakout'; that the Fair Work Act is 'destroying the economy'; that Australia is grinding to a halt with skills shortages, of which only large-scale, temporary migration can fix; and that unions are not prepared to engage constructively with business.
ABS data shows that the pace of wages growth is around its long term average, or below average on some measures. Lawerence said that data tells a clear story.
"Wages growth across the economy has been moderate, and if anything has lagged behind the growth in profits. If wages grow strongly in one sector, while overall wages growth remains moderate, that is merely the operation of the price signal in a competitive market for labour," he said.
"The commodity price boom has resulted in an increased demand for labour in the sector, which in turn has led to increases in the price of labour, the wages paid to mining workers."
The secretary also said that temporary migration is not the answer to a skills shortage.
He said before temporary migration is used, companies must demonstrate that they could not find workers locally; they are contributing to training workers in Australia; and, that they have programs to improve the participation of women, indigenous peoples and disabled Australians, many who desperately would like a job.
Mining can be a convoluted business, but is it a convoluted investment?
What investors should think aboutKPMG partner and demographer Bernard Salt said negative media coverage about Australia's mining industry would certainly impact the way investors think about the resources, commodity and energy sectors.
With Australian-based mining companies outlaying growth plans, such as BHP Billiton's Olympic Dam project, or plans for a major gas project north of Darwin, Salt said there are considerations investors need to make.
"How do you deliver a workforce to somewhere like the Pilbara or the Gorgan site which is 40km off the coast of Karratha?" he asked.
"Having those sorts of projects in and around a capital city is fine - you've got that deep labour pool you've got access to, but these are constraining to the ability of the company to deliver that project. Now, at the moment the solution has been flying in and flying out, and that seems to be working, but does it work at a scale that is double the level at the moment."
Salt said last Tuesday's census will shed some new, important light for demographers on the scale of the fly-in, fly-out workforce, as well as the rate of population growth in those areas.
"I see labour and skills delivered to remote areas as being a major factor constraining the ability of these companies to deliver on their promises, also to deliver on their potential," he said.
"Certainly the reserves are there and the demand is there, but we just cannot find a way to deliver the labour into those areas."
The baby boomers: from workforce to investmentThis decade will see, and has seen, the retirement of baby boomers from the workforce. The picture often painted of 'mum and dad investors' is now one portraying retirees sitting at home, investing in Australian shares and being advised by professionals on how to most safely ensure a steady flow of income from the market.
Baby boomers leaving jobs in urban areas also creates a gap in job vacancies, to be filled by the next two younger generations, creating a ripple effect on the availability of labour to the resources industry.
"That's the double whammy of this decade," Salt said.
"The boomer generation wouldn't want to invest in a project that could be contingent upon something that the company has no control over such as skills."
Self-funded retirees are left seeking information on how well-run companies are, what the demand for its resource is, and what its capacity is to deliver on promises.
"You are effectively constrained in your ability to deliver on that capacity or that potential by a third party that you have no control over. And if you're a baby boomer relying on that income you might start to look for safer places to put your money.
"Investors do not like uncertainty, they don't like surprises, and they don't like things being taken out of control, out of the hands of what they're investing in."
- Rebecca Richardson
