If we can’t find it, we can’t extract it!

We read an couple of  interesting articles today which gives rising concern to the spiralling cost of all natural resources exploration.  Over the last few weeks several projects have been halted as companies have run short of funding to complete their exploration programs.   Even the biggest players of the market have seen their profits impacted in the rising cost and it’s clear some projects once thought feasible are for now off the table.

In respect to Mining Justin Niessner published an article called  in the MiningNewsPremium.net online magazine.  It stated that Official data produced by the Australian Bureau of Statistics has revealed an 8.3% drop in Australian exploration spending over the March quarter to $A487.7 million, with Western Australia leading the investment retreat.  it also showed  in Western Australia exploration spending as falling 14.9%, or $44.8 million, over the period.

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In seasonally adjusted terms, the national trend indicated a 9.2% fall in expenditure to $480.2 million over the quarter, compared to a peak of about $1 billion in the March 2012 quarter.

and in respect the oil and gas industry, Sylvia Pfeifer wrote an article recently of the Financial Times titled “Exploration: Rising cost of complex projects hits majors” in which several big player like Chevron, Royal Dutch Shell and ExxonMobil all clearly feeling the pain.  However it’s not stopping the small explorations companies from trying their luck.  We are keeping a close eye on several companies like Orogen Gold  over the next few months to see it’s decisions to explore a greenfield asset rather than develop infrastructure in a brown field asset turns positive of becomes another victim of escalating exploration cost.

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Clearly commodity prices have a lot to do with deciding what is feasible and what is not.  Untimely what is not feasible today, will be tomorrow as we remain a consumptive society with limited resources.  “If we can’t find it, we can’t extract it!”  However why the sudden rising costs?  Are we now starting to pay for acceptable inefficiencies?

Bucking the trend

9 Months ago the outlook for recruitment in mining was certainly looking a bit dismal.   At the time the Manpower Employment Outlook Survey in Australia and New Zealand  showed hiring in Mining and Construction is expected to continue its downward trend in quarter four of 2013.   Employers in the sector had reported a Net Employment Outlook of -6%, down ten percentage points from the same period the previous year time.

The survey, which measures the hiring intentions of nearly 1,500 employers in Australia for the coming quarter, found 14% plan to increase their hiring, 19% plan to decrease and 63% will make no changes to their hiring plans. The resulting Net Employment Outlook of -6%, is the lowest result the sector has recorded since 2009.

The consensus was this was a bubble waiting to burst.  Pay scales and the demand for mining labour were excavating their own grave as skill were in short supply and a name your price mentality had set president in the Australian mining industry.  I can remember leading up to the report being published I was delivering a restructuring project in a gold Mine in WA territory.  The company I was assisting was developing their organisation structure based on requisite principles.  The whole premise of  the approach is to build a trust inducing environment based on allowing employee to exercise their Managerial judgment and discretion within the limits of their role.  However this can only be successful if capable employees are in the right roles.   Capability being a combination of skilled knowledge, (Education and Application / Experience) + Mental processing ability + attitudes and behaviours.

As capability is key to any individual being successful in their role, what happens if there are not enough capable people in the organisation?  The organisation we were assisting had this problem and like may of their competitors needed to pay overt the market rate for skills, or bring in those who had training and development requirements that needed to be addressed before the role hold could truly be held to account for making good managerial decisions.  The trouble is the mining industry was in such a boom the companies could not keep pace in terms of training and development support

The downward turn in demand should have allowed a respite, but is it a case now there is no pressure for the requirement to perform in terms to training and development support for managers?  Well it looks like the pressure is back on and the Human Resource departments have hopefully take the downturn and the opportunity it has created to get the necessary systems and processes in place to support the business.  So will the Human Resource Professional buck the trend and prepare the organisation, well it looks like we are about to find out.

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The latest Manpower Employment Outlook Survey results show employers in Mining and Construction expect to increase hiring slightly in 2014, the Net Employment Outlook improves six percentage points to +1% in the first quarter next year in a quarter-over-quarter comparison.

 The survey, which measures the hiring intentions of over 1,500 employers in Australia for the coming quarter, found 22% of employers in Mining and Construction plan to increase their hiring, 22% plan to decrease their hiring and 56% will make no changes. The resulting Net Employment Outlook of +1%, reflects the cautious sentiment in the market and the patchy activity within different sectors in the resource market.