Mining brains – by David Robinson (Sudbury Mining Solutions Journal – November 2012)

Dr. David Robinson is an economist at Laurentian University in Sudbury, Canada. His column is from Sudbury Mining Solutions Journal a magazine that showcases the mining expertise of North Bay, Timmins and Sudbury.

Question: What does the mining industry have in common with the zombie apocalypse?

Answer: Mining companies and zombies both have an insatiable appetite for brains. And who supplies the brains? That is the interesting question for the mining supply sector.

An industry that depends on increasingly sophisticated geological science, ever more complex equipment, more expensive transportation systems and more elaborate management systems while trying to meet ever more convoluted environmental and safety regulations clearly needs brains.

The muscle-power going into an ounce of gold or a kilogram of nickel has gone down. The energy input per unit output has risen, which is a growing problem. And no one knows if more brainpower is invested in an ounce of gold today than in an ounce from the Klondike gold rush 115 years ago.

Calculating a brain-to-gold index would be interesting, but it isn’t necessary. Brainpower has always been an essential input for the mining industry.

The more sophisticated its technology gets and the more outsourcing the industry does, the more brains that suppliers will sell.

The brain input may be direct or indirect. It may be embodied in staff or in little black boxes screwed to the wall. It may take the form of training, consulting or management services.

Every year, the industry uses more brainpower. Every year, the market gets bigger. Suppliers of all sorts should be looking for ways to cut themselves in.

There is a complicated and changing market for intellectual capital as an input to the mining industry. Public sector institutions are major players. Universities train engineers and geologists. York University is now planning an MBA in global mining management to grab some revenue. Even basic training that companies once did themselves on-the-job has been outsourced to colleges as common core training.

At the same time, private suppliers are taking a larger part of the business. There is growing competition for specialized training programs, video-based training and on-line instruction for line workers and management.

Major companies like Vale contract out preparation of training packages for specialized equipment. Dozens of consulting firms offer courses in real options analysis for mining executives.

Others provide training in specialized accounting systems, inventory control and supply management. Consulting is a growth field for mining as for other sectors. Mine planning is usually done by consultants rather than in-house.

Hydrology and rock mechanics are provided by hired specialists. Sudbury mining experts travel the world dispensing wisdom collected at home and abroad.

Kennedy Information, an industry monitor, forecasts that consulting on operations management alone (advice on how to do the same things better) will grow by 5.1% a year through 2014. IT consulting in general will rise by 3.9%, and personnel consulting by 4.0%. Consulting firms hired 28% more MBAs in 2011 than in 2010.

Like firms in every other industry, mining companies and even mining suppliers hire public relations specialists, writers, photographers and even videographers.

It’s no surprise that Sudbury boasts a tribe of mining media specialists. It is tempting to thinks some of these services are not about mining but, in fact, they take specialized industry knowledge, they add to the costs of producing minerals, and they all end up as part of mining’s contribution to GNP.

Installation and maintenance is probably the most neglected area where mining companies buy brainpower.

Companies that supply equipment and supplies are constantly developing new, more refined, more efficient products. Their specialized mining knowledge is built into their products. They can expand into maintenance, inventory control and training services. They may be able to enter joint ventures with educational institutions, creating an additional market for their expertise.

The key is that the market for mining brainpower is growing and there are more and more opportunities. When mining companies focus on their core business, everybody else wins. Consultancies have exploded in almost every area. There is room for equipment suppliers to expand as well.

There is a second answer to the question about zombies and miners. It is good news for the creative side of the mining supply sector: mining companies and zombies both face shortages when they start competing for brains. Suppliers with brains to rent will be in demand.