Mining Industry Economic Outlook in Canada: Planning and Preparing for the Next Upswing

By: 
Molly Shaw

Although the global mining sector continues to struggle through a considerable downturn in commodity prices, the industry still contributes a great deal to Canada’s economy as one of the leading mining countries and one of the largest producers of metals and minerals. 

According to the Mining Association of Canada’s annual report, Facts & Figures of the Canadian Mining Industry, the industry employs more than 375,000 workers across Canada in mineral extraction, smelting, fabrication and manufacturing. More than $57 billion from the mining industry contributed to Canada’s gross domestic product (GDP) in 2014, including $24 billion in mineral extraction and $33 billion in mineral processing and manufacturing.

The same year, the industry accounted for more than 18% of the value of exported Canadian goods. Exports of aluminum, copper, gold, iron and steel, iron ore, nickel, silver, uranium, zinc, diamonds, potash and coal ranged from $500 million to $11.9 billion. The mining industry is also the largest private sector employer of Aboriginal peoples in Canada.

The health of the mining industry is not only important to local Canadian communities; it also contributes to large economies in cities such as Toronto, a global hub for mining finance. The Toronto Stock Exchange (TSX) and TSX Venture Exchange were home to more than 57% of the world’s publicly listed mining companies in 2013 and accounted for 62% of the global mining equity raised in 2014. Vancouver also features the world’s leading cluster of exploration companies, while Montreal is home to major aluminum and iron ore firms. Edmonton has become a global center for oil sands expertise and Saskatoon for uranium and potash.

 Ups and Downs

A closer look at commodity price performance

Commodity prices have dipped industrywide, says the Mining Association of Canada in a pre-budget submission, released February 2016. Dropping from 2011 highs, nickel and copper have fallen, losing nearly 70 to 50% of their value.

Similar trends with more subtle variations are seen in silver, uranium and potash. Aside from gold’s $7000-ounce fall, iron ore and coal have experienced dramatic swings. The monthly average price of iron ore (62% Fe) dropped by over two-thirds (an 86% decrease) from $187.18-ton in February 2011 to $46.16 in November 2015. Quarterly benchmark prices for seaborne metallurgical coal have dropped from a peak of $330 per metric ton in 2011 to $81 per metric ton in January 2016 — a four-fold decrease in value.

The volatility in the mining industry is the result of an oversupplied market from a lengthy upswing in the last decade. “As a cyclical industry, the Canadian mining industry has navigated many downturns in commodity prices; and Canadian companies are adept and experience at controlling costs and steering through uncertainty,” says the Mining Association of Canada report. “Nevertheless, the downward pressure on mineral prices is real and companies are feeling it. It is during a downturn, however, that industry and governments should be thinking about, and planning for the next upswing.”

Some analysts see this upswing starting in 2016.

Pedersen & Partners, an international executive search firm based in Canada that helps find top talent for global clients, has focused research on employment in the mining and natural resources industries. “Based on the atmosphere at the March 2016 PDAC Convention Prospectors & Developers Association of Canada, although the outlook for 2016 is still very uneasy, there is some longer-term optimism for the sector,” says Mary Murray, a principal at Pedersen & Partners. “Numbers were down by 22,000 in attendance, but the overall outlook was more positive than last year, with precious metals and some other commodities starting to rally in price.”

A pressing problem in finding new talent

Although the recovery is still slow, the demand for a solid workforce will be a pressing issue once the upswing begins. “When prices eventually recover in the sector, the demand for skilled employees will grow exponentially,” cautions Murray, who has 20 years of experience in providing strategic human resources, human services and customer service guidance to local and international clients in the mining, environmental, and natural resources sectors.

“The cyclical nature of the mining sector means that there is frequently a gap between supply and demand for talent, which in turn affects the availability of mining-related academic programs. A number of universities closed their mining programs in the late 1980s and early 1990s, and the impact of this is still being felt today, as the number of fresh graduates with relevant degrees is insufficient to meet even the basic needs of the industry during booms,” adds Murray.

To that end, more than 40% of mining sector employees are over 50 years old, with one-third expected to retire by 2022. “As the industry recovers, many mining companies will try to tempt back their retirees in order to mentor younger recruits,” predicts Murray. “Many companies now think that it is relatively easy to find skilled professionals, but the shortage of technical skilled labour is still one of the most pressing concerns in the sector.”

Skilled metallurgists are particularly hard to source. Many universities across Canada have cut programs in metallurgy and metallurgical engineering. “With regard to project management, there are few qualified candidates with experience handling large-scale mining projects, so it is frequently necessary to complete a global search to fill this type of role. There will always be a shortage of skilled technical candidates unless we build more programs to educate them,” encourages Murray.

Murray says Pedersen & Partners has seen significant interest in mining and mining-related careers among millennials in the last five years. “They see the field as lucrative and highly technical,” she says.

“Unfortunately, while increasing numbers of students are entering and graduating from mining-related engineering and geological programs related to the mining industry, the industry is experiencing a growing dearth of opportunities for summer students and new graduates. With a lack of opportunities in the sector, new graduates are increasingly seeking work in other sectors to make ends meet and entering graduate programs focused on entirely different industries.”

“The Mining Industry Human Resources Council report ‘Canadian Engineers for Tomorrow — Trends in Engineering Enrolment and Degrees Awarded 2009-2013,’ shows that across Canada, mining and minerals engineering programs are the fastest-growing engineering disciplines. Enrolment has increased by 56% from fewer than 900 enrolments in 2009 to more than 1,300 in 2013. Essentially, this means that students graduating between 2011-2016 (and probably 2017) are or will be experiencing difficulty in procuring entry-level jobs and internships within the sector,” explains Murray.

Murray says the best way to avoid another “lost generation” in mining is for the sector to work hard in a joint effort with academic institutions to address this situation ahead of the next upswing. “According to industry experts, one of the simplest solutions is for larger companies to offer internship programs with numbers maintained throughout the peaks and nadirs of the mining economic cycle,” she says. “These programs are not costly, and they can provide new graduates with a basic level of experience in the field.”

The question remains — how can such a cyclical industry avoid this massive skills shortage when the sector inevitably rebounds? Murray says it calls for a concerted effort to address this issue between academic institutions, government bodies, and industry leaders, to iron-out the issue before a talent shortage hits home.