Chile’s mining boom is set to run and run as investors rush to cash in on sky-high prices for copper, gold and other minerals.
Speaking at a major industry conference in Canada last month, Chile’s Mining Minister Hernán de Solminihac estimated investment in the industry through 2020 at a staggering US$91 billion. But he warned new projects are increasingly under threat from a shortage of trained workers.
A report by non-profit institute Fundación Chile released earlier this year suggests the industry’s human resources problem is at least as serious as the difficulties it faces securing reliable supplies of water and electricity.
Looking just at projects at the feasibility stage, the report estimates that the industry will need to recruit another 44,000 operators, professionals and maintenance staff through the end of the decade.
The figure could be on the high side, says John Byrne, managing director in Chile for global head-hunters Boyden. Past experience suggests that only half of the projects in Chile’s swollen pipeline will make it into production in the next few years.
But that still leaves the industry struggling to fill more than 20,000 posts for skilled workers and professionals.
“The problem is that this is still an enormous amount of people,” he says.
Take into account the number required to build new mines, estimated at over 190,000 by Fundación Chile, and the situation grows critical.
The shortage is already causing headaches for mining companies. Turnover is up as firms poach each other’s employees. Amongst professional staff, it reached 10% last year, double its level a decade ago, says Edwin Ugarte, head of human resources at Anglo American Chile.
To keep staff onboard, companies have had to offer pay increases of around 20%, while those jumping ship often bag rises of 30% or more, says Byrne.
For those specialists most in demand, pay has reached astronomical levels. Entry-level geologists, metallurgists and mine engineers can now expect to earn more than graduates in civil engineering, business administration or even medicine. Experienced project directors, charged with bringing billion-dollar construction projects into being, can command salaries up to US$1 million a year.
Even lower down the pay-scale, the going is good. Mineworkers at big copper mines, backed by strong unions, regularly demand bonuses worth thousands of dollars each time they renegotiate collective pay agreements: as even a brief stoppage could cost millions of dollars, most companies prefer to pay up.
But wages for contractors on mine construction projects can be even higher.
“This is the first time in 30 years that I have seen contractors being better paid than direct employees,” says Alvaro Leiva, senior human resources manager for Goldcorp’s El Morro project.
Although personnel represents a much lower share of industry costs than equipment or energy, spiraling wages are helping to push up costs of projects in development.
The volatile nature of the copper market explains the situation facing the industry, says Byrne. Ten to 15 years ago, with copper trading at less than US$1 a pound and few mines being built, hardly any young Chileans looked forward to a career in mining.
Schools of mines in Australia, Europe and Canada were closing while Chile’s mining faculties produced no more than half a dozen graduates each year. As bust has turned to boom, the numbers of students has risen sharply, but not nearly fast enough to match the industry’s rocketing demand for new workers.
The result, says Byrne, is a stark lack of professionals in the industry aged between 35 and 50. Many engineers at or beyond retirement age are continuing to work because the pay is good and there is no one behind them to push them out.
But that situation is unsustainable. Sooner or later, their mortgages paid off and pension pots swollen, they will hang up their helmets.
Recent events in Chile have not helped. Nationally, unemployment is at a 15 year low, while many contractors, many of whom hail from the south of the country, have found work closer to home rebuilding after the 2010 earthquake.
The situation is likely to worsen as more and more new projects are brought online.
Goldcorp’s El Morro project, due to begin construction later this year, will employ a maximum of 5,000 contractors and another 1,800 as the mine moves into production in early 2016, explains Leiva.
The giant Collahuasi mine, which plans to double production to a million tons this decade, took on 900 new staff last year but is looking for another 1,500 during 2012.
“The trouble is that these people are just not available,” says Byrne. And, without enough staff, some projects will inevitably be delayed.
In a multinational industry like mining, bringing in workers from abroad must be part of the solution. But the shortage of mining professionals, like the boom in investment, is a regional phenomenon. Peru, Brazil, Colombia and Mexico all face similar shortfalls in personnel. So recruiters are scouring the planet to find workers with the right skills.
Byrne says his firm has already placed engineers from Spain and Romania on projects in Chile. The crisis in the Eurozone means Spanish engineers are not only competitive but often cheaper than their Chilean colleagues.
However, a 15% limit on foreign workers may be a problem. Many firms are already operating close to the upper limit and looking for ways to get around it.
“If we don’t want to lose valuable investment, we may have to find ways to make [the limit] more flexible,” says Byrne.
Another option may be outsourcing some work to other countries. Engineering firms that have turned Santiago into a global hub for designing new copper mines, are facing a shortfall of around 15,000 engineers over the next five years, not all of which can be covered by new graduates or foreign workers, says Andres Poch, president of the Association of Engineering Consultants (AIC).
AIC is working with export promotion board ProChile to create strategic alliances between companies in Chile and other parts of the world in order to broaden capabilities and share the workload. The association has identified Canada, home to many of the mining firms investing in Chile and the region, as a particularly promising market.
Training future miners
But these are only partial solutions as the bulk of personnel in Chile’s mines will inevitably be sourced locally. Here the main bottleneck is training.
Mining firms, and the companies that supply them, already invest significant amounts in training future workers.
BHP Billiton’s Escondida mine runs its own technical school. Others sponsor students in mining-related courses like geology, metallurgy and engineering.
Goldcorp is planning to help hundreds of young people in the Atacama Region complete their secondary education so that they can go on to train as mechanics and drivers.
But such efforts have proved insufficient. Leaving things as they are, Chile will not produce nearly enough skilled workers and professionals to meet the industry needs in the time required.
One solution could be to shorten existing courses. While mine engineers in the United States or Canada graduate in four years, in Chile they take six or seven years. Technical courses often last four years compared to just one or two in Australia.
Even when they do enter the workforce, graduates often lack the skills the industry is looking for. Chilean engineers are technically highly proficient, says Anglo American’s Ugarte, but many don’t have the skills needed to deal with “soft” issues like human resources, community relations and environmental protection.
According to Hernán Araneda, Fundación Chile’s human capital manager and the study’s author, the trouble is that companies often base programs on their own needs without considering those of the industry as a whole.
“It’s no use training 20 geologists when the industry needs 200, most of them will end up working for your competitors,” he notes.
The solution, says Araneda, is more collaboration. Only by working together will mining companies be able to create the critical mass to overcome the shortfall in trained personnel.
With the support of Fundación Chile and the ministries of mining and labor, the mining companies that participated in the study (Anglo American, Antofagasta Minerals, BHP Billiton, Codelco and Collahuasi) agreed to develop an ambitious joint training program, which could train 28,000 individuals in mining-related trades by the end of 2015.
Some companies, however, are having second thoughts about investing without guarantees they will receive any benefit.
The problem is that collaboration does not come naturally to the ferociously-competitive mining firms which compete for minerals, men, and money not only in Chile but around the world.
In the longer term, better and shorter training courses will count for little if mining companies cannot persuade more young Chileans to enter the industry. To many, mining still means living far from friends and family, in the middle of a desert or at the top of a mountain, and working grueling on/off shifts.
Juicy pay is helping to break down resistance, but the industry could do more, says Goldcorp’s Leiva. Technology is playing an ever greater role in mining, allowing professionals to design tunnels and operate shovels without having to step foot in a mine or leave Santiago.
Companies are also working to attract more women into the workforce. As well as transforming the centuries old male-only culture in mines, this means providing more flexible hours for working mums, tricky when she’s driving a truck 4,000 meters up a mountain or deep underground. Such efforts are paying dividends but the potential is still enormous. At Anglo American, women represent just 10% of the workforce, but that figure has tripled over the last few years, says Ugarte.
Finally, much more could be done to make dusty northern cities like Antofagasta and Copiapó more attractive places to live. Most now have malls and cinemas, but more green spaces, top-quality schools and clinics would persuade potential recruits that they are suitable places to raise a family and not just to build a career.
In fact, the labor shortage facing the industry should transform the regions dependent on it.
“The paradigm is changing from mining benefitting the community to mining depending on the community,” says Leiva.
Tom Azzopardi is a freelance journalist based in Santiago