Labor Scarcity Returns as Headache for Miners

A scarcity of skilled labor is forcing junior miners and developers to dig deeper for talent, a trend that is likely to accelerate cost increases, squeeze profit margins and threaten projects.

While higher costs for labor have yet to make a significant dent in companies' profit statements, executives at the Prospectors and Developers Conference (PDAC) in Toronto this week said the issue is rapidly getting worse.

The math on mining labor is simple: higher metal prices equals more development and mining, stretching the pool of available miners, engineers, geologists, mechanics and other trades needed to run a mining operation.

Meanwhile, rising oil prices can lead to deep-pocketed energy companies poaching workers from the mining side.

For explorers working on a shoestring budget, coming up with extra cash to find geologists or drillers can be a major headache.

Industry players say the scarcity of labor in boom times is part of a larger labor shortage that will increasingly sting the industry.

While the high metals prices of the past decade have made the mining industry a lucrative place to seek jobs, the weak prices during the 1980s and 1990s essentially killed the sector's intake of talent.

"We have this gap that's developed," said Peter Drobeck, head of exploration at Gammon Gold. "There's not many people between 30 and 50 in this industry anymore."

Compounding the issue is the nomadic nature of the mining industry, where workers often move from one job to another on short notice.

Jaguar Mining's Titcomb, who says his company has a turnover rate of only 2%–3%, said he tackles that problem with stock options plans that reward employees for sticking around for a few years.

"Sustaining your workforce by giving heavy incentives for the longer term is critical," he said.