People, pricing and production subsidies – navigating cyclical nickel.
Nickel’s fall into the doldrums has sparked a rapid rationalisation of plans and projects by mining companies involved in the commodity. While redundancies are inevitable, my advice is to do everything you can to hang on to your best people. Here’s why.
Nickel’s fall into the doldrums has sparked a rapid rationalisation of plans and projects by mining companies involved in the commodity.
This sort of moment is not new. Mining is cyclical and many of us with longer memories have seen such periods of withdrawal and contraction many times before. Having grown up in Kambalda in the 1970s, I’ve watched the fortunes of that town’s nickel mines rise and fall several times.
But if I’ve got one piece of advice for mining industry leaders from thirty years in mining recruitment, and years more working in the industry as an Operations Manager, it’s to be careful not to throw the baby out with the bathwater. While retrenchments are inevitable, do everything you can to hang on to your best people.
The state of play in terms of jobs
The situation with nickel is moving fast but, at the time of writing, at least eight projects have been cancelled, mothballed or scaled back. It started on 5 January with Core Lithium’s Finniss lithium mine in the Northern Territory and the downturn has since swept up major players including First Quantum’s Ravensthorpe nickel operations and both Wyloo and BHP’s nickel mines at Kambalda.
If you include Alcoa curtailing operations at its Kwinana alumina refinery, all told around 1,740 jobs have so far been affected—and that’s before any official announcement about BHP’s plans for its Nickel West and West Musgrave projects. Some 3,300 people are employed at Nickel West.
The Chamber of Minerals and Energy of Western Australia has warned that up to 10,000 jobs and $2 billion worth of economic activity are at risk if the nickel industry fails—which is why the WA Government is talking about royalty relief.
Retrenchment, redundancy, redeployment… and recruitment
Disruption of this scale potentially represents a massive movement of talent in an industry that has long been gripped by an intractable skills shortage. Whatever happens on royalty relief, we’re going to see a vast number of retrenchments, redundancies and redeployments.
Redeployment will be easier for the larger companies with deep pockets. FMG, for example, with its rivers of cash from iron ore, has already telegraphed they will endeavour to redeploy staff laid off from Wyloo. Northern Star, with its strong gold cash flows, has made similar noises into the market more broadly that they will absorb anyone who is prepared to work residentially.
But not everyone can redeploy and I’m sure many in mining company HR departments that have struggled for several years now to find experienced candidates will welcome the influx of talent to the market—even if it provides only temporary relief. (I note the construction industry, also hit by a massive skills shortage, is already advertising that it has opportunities available—so there’s still plenty of competition for labour.)
The bit about the baby and the bathwater
It’s this release of talent into the market where, in my experience, the trap lies for mining companies. In current market conditions, good talent is hard-won. That is going to remain the situation for some time. Nickel’s downturn, however, may not be quite such a long-term squeeze. I have had a long enough history with Kambalda’s nickel mines to understand that much (and, indeed, there are already some analysts saying rumours of nickel’s death have been greatly exaggerated).
Which is why I am quite sure that there will be opportunities that come out of this present predicament and those who hold their nerve will probably win. My advice is to hang on to your best people, if you can. Find something else for them to do. Keep them employed, engaged and happy.
Those who hang on to a small number of key people will be ready to hit the ground running when things turn around. This is the smart play. The alternative is those companies that have thrown the proverbial baby out with the bathwater will be on the back foot. They will have to start all over again—and at a time when everyone is competing for the same talent.
Lastly, it makes financial sense.
The equation for smaller companies is harder, but if you have a good near to mid-term development project, it is worth considering the costs of having to start from scratch. We estimate the cost of recruiting someone is easily 50%+ of their first year’s salary by the time you attract, hire, induct, train, etc. Throw too many of your key people out and when the tide turns you will have the added costs of a loss of momentum, often many times the salaries of the vacant roles.
If you want some holistic advice across these matters, please come and chat to the experts at MPI.