‘Year of the Bear’ portends grizzly outlook for mining execs
RENO (MINEWEB) – How bad is this year’s outlook for the international mining industry?
So miserable that a measly 9% of mining executives recently polled by Vancouver’s Mining Recruitment Group said they are actually bullish on the year ahead.
In his second quarter 2013 survey, Andrew Pollard, president of The Mining Recruitment Group, observed, “2013 has been a year in which most involved in the mining industry will not soon forget; thought most will not want to remember.”
“Through the eyes of mining executives, this new report provides evidence that companies of all stage and size have had to make tough decisions in the wake of nearly unprecedented market turmoil,” said Pollard. “With investors sitting on the sidelines turning a blind eye, wildly fluctuating commodities prices and having to face escalating costs, executives aren’t counting on a short term fix, though long term, their sentiment is refreshingly rosy.”
In the document MRG: Mining Executive Outlook, Summer 2013, based on a survey completed by 2010 mining leaders, Pollard called 2013, “The Year of the Bear.”
“In the eyes of mining executives the next 6-12 months will prove to be bleak with 64% taking a bearish view when asked to comment on the overall strength of the industry,” he observed. “These findings have fluctuated dramatically since our last polling in Q4 where only 11% of respondents held a bearish outlook, when asked the same question.”
However, when asked the same question with a longer-term, three-year view, 66% of the respondents were bullish as to the future of the industry. “It would appear that for most executives, the long-term fundamentals of the industry are intact, despite the view things will likely get worse before they start to get better,” said Pollard.
Gold still glitters in the eyes of mining executives. Seventy-four percent of mining executives suggest gold will make the greatest gains among commodities over the next three years. Copper was second with 63% “expecting to see a massive appreciation in the metal while uranium rounded out the top three at 53%,” he noted. “Trailing close behind was silver at 50%, which was the only other commodity that there seemed to be a long-term consensus on.”
Commodities which executives view as having the highest likelihood of depreciating in value over the next three years are molybdenum, nickel and iron ore, respectively, with 44%, 36% and 27% of the multiple selection vote.
TOUGH TIMES FINANCIALLY
“When asked to rate their level of concern on the following issues the resource sector may face over the next 12-24 months, it seems there is a clear and present danger,” warned Pollard. Of those executives responding, 74% were moderately to extremely concerned over a lack of investment capital.
Fifty-four percent are moderately to extremely concerned with the volatility in commodities prices, while 39% are moderately to extremely concerned with rising operating costs,” he noted.
The survey found that 80% of the executives said they have made a concerted effort to cut spending, mainly through spending less on Investor Relations and Marketing. “Almost equally dismal, only 12% of respondents said they have increased their exploration spend,” said Pollard.
Of those 80% who have reduced their overheads, 55% have laid off employees; 53% have instituted organization-wide hiring restrictions; 47% have reduced or eliminated incentive pay; and 32% have made pay cuts.
Eighty-two percent of executives indicated that the fear of a sustained downturn has impacted their budgeting and hiring. However, only 27% of the executive in the smaller mining and exploration companies are considering more layoffs, while 63% of larger company executives (over $50 million market cap) have indicated they’re considering further reductions.
The survey revealed that 62% of respondents do not expect to recruit over the next six months. “This is a major reversal in outlook from our last polling in Q4 where 66% of executives had indicated they would be hiring,” Pollard noted.
Nevertheless of those companies who are planning to recruit, 62% will be hiring geologists, while 33% hope to make additions to their executive teams and 18% are looking for mining engineers. Only 6% of those surveyed will be hiring IR professionals.
Despite their tough cost cutting measures, however, only 26% of mining executives indicated an interest in succession planning. Meanwhile, only 10% of executives said they have received a raise in base salary.