Most residents are unaware of the vital role mining plays in our economy. As part of Nevada Business Journal’s monthly Industry Focus series, we brought together mining experts for insight on their industry. Connie Brennan, publisher of Nevada Business Journal and Russ Fields, president of the Nevada Mining Association, served as moderators for the event. Nevada Business Journal’s first Industry Focus on mining included a discussion of issues such as gold depletion, environmental regulations, and the recruitment of a skilled workforce. Following is a condensed version of the discussion.
Recruitment
Russ Fields (Nevada Mining Association): The mining industry is the highest paying sector in Nevada’s economy, with an average annual wage of $68,000 per year. Why aren’t more people excited about going into the industry?
Fortner: One problem we have confronted in Elko and Winnemucca is the depleting supply of skilled labor, and we’re unable to recruit new people into the area because of the lack of affordable housing.
Cashman: With unemployment – both in the north and south end of the state – hovering in the 4 percent range, all of us have difficulty finding employees. In addition, we have a unique and specific set of schedules, schooling, and expertise that the industry requires. On top of that, you’re asking them to relocate their lives in remote locations of the state that don’t have a wealth of cultural activities for them to engage in.
Taranik: Last year, mine schools, all 15 of them, graduated 87 engineers nationwide. The demand was about 300. And that demand is going to continue for at least the next decade and beyond. We think by 2011 we’ll graduate about 150 nationwide and still be 50 percent short of salaried employees with degrees in mining engineering.
Jensen: The average mining engineer is older than 50 years of age. So, we see a very aging workforce.
Taranik: In the past 15 years, we have lost nearly 10 schools with departments that offered mining engineering or some similar subject.
Cashman: It’s a very stiff curriculum. I had a nephew going to MacKay, and he changed to marketing.
Taranik: Yes, it is difficult. That’s why we have worked with Great Basin College in Elko to create a mining center and a curriculum for enhancing the skills of our workers. Skilled workers in underground mining, mechanics or electricians are so hard to find. So we have invested around $750,000 into Great Basin College to train and improve the skills of 800 employees over a two-year period.
Cashman: Does India provide a resource as far as developing engineers?
Taranik: China and India do train up a fair amount of engineers, including some in mining engineering. It’s often been suggested that we should just go to China and India and hire the engineers that we need. There is an aspect of leadership and management as an engineer that has cultural issues, and it isn’t that easy a fix. We put a lot of leadership and management training into our programs, and it’s done quite differently in those particular countries. It’s a whole different matter to get them into the pipeline. The other significant issue is there was a period of time when the mining industry either laid off or didn’t hire engineers. So, we have a gap in the young engineers that are being hired today. And there is a real gap in competency, which is the real issue here. In many cases you learn a lot about the complex job while you are doing the job. And we’re missing that group of people. So we need an educational program where we have some constants in our industry.
Taylor: We definitely suffer from location issues. And a good example is our joint venture operation with Barrick, a camp shop. It doesn’t appeal to everybody; so it’s difficult to attract talent. As a corporation, this year we started a program called Project Gold. We have taken four students who were about to graduate and set them up with four-year contracts with our company, where they will work for about a year at each of our operations. We’re realizing that we should have recognized this opportunity several years ago. It’s a small start with four, but it’s hard to attract them. We weren’t their only opportunity at the time.
Lang: We also face competition from the federal government. The regulations have become much more tight and sophisticated, and we have found it to be within the federal government fairly easy to track mining engineers and geologists who are industry trained. The Bureau of Land Management used to train its own people, and they stopped doing that because they could pick up industry people. Although Northern Nevada, to a lot of people, is kind of remote, when you finally do recruit people here, they love it and don’t want to leave. I think that is a competition that needs to be addressed from the supply side. So as you look for additional miners and the visibility of Newmont or Barrick, or even Round Mountain, is much higher than a small supply operation like we have. This past year our turnover has been extremely high, as we have lost workers to the mines. We used to go to the same labor market to find people to retrain and recruit. So it’s an interesting dynamic. The last time we had the good times, back in the ’80s, domestic oil was down, so we drew a number of people from that industry. With oil experiencing this resurgence, we’re all in the same boat, and we can’t count on Wyoming to ship us workers now.
Taranik: Also we’re looking at a shortage in people that train the mining engineers. Within the next five to 10 years, somewhere around 60 percent of faculty in the mining engineering department at Mackay is probably going to retire. Many of them are already age 65 to 70. So they are already teaching really beyond the average retirement age. And to replace them, requires that you train up Ph.D.’s, and you have to have a research program that will support research at the graduate level so that they can finish a Ph.D., and get the union card to practice in academia. There is going to be a significant shortage in that respect. In fact, we’re already seeing it. It’s extremely hard to recruit good, talented professors who have Ph.D.s who also have industrial connections and industrial experience. That’s vital for a successful mining engineering program.
Connie Brennan (Nevada Business Journal): Do you think the shortage of people is more critical with salaried employees or with hourly employees?
Taranik: That’s an interesting question. Actually, I think it is equally severe in both areas. I think it requires different solutions.
Mudge: I agree. We have a strong need for engineers, but we really need underground miners too. For example, more and more underground operations in this state are competing for the same limited source of trained miners.
Brennan: Where do you go to recruit those people?
Mudge: We’ve had job fairs all around the country. We will go to Montana, Idaho, Michigan, Minnesota and Washington state.
Brennan: Do you think the shortage is going to get worse before it gets better?
Taranik: It’s pretty bad now – hard to imagine it getting much worse. There is a good chance it will get worse if we don’t fix things. The only demand side we see is 300 jobs a year. My guess is that 10 years from now we will still be behind the power curve because of the aging upper management workforce that exists in the industry, which is a different dynamic than I know we’ve had in the past.
Fortner: With the average age for mining engineers now being 50, what are we doing for retention?
Taranik: Actually, a number of companies that I have talked to have said that they are looking at trying to keep their older employees beyond the normal retirement age. Some of the British mining companies have a retirement age of 60, and they are beginning to wonder whether that’s a very wise thing. And I know America in particular, is talking about increasing the retirement age to 65. It’s a very challenging time. It’s up to us [schools] to be very aggressive in the way we teach, recruit, retain and get these students in the pipeline. That’s especially challenging today because of the way our industry has been perceived and because many people do not understand how we do business in the mining industry. It’s really a very high-tech business and it requires very talented engineers to develop and operate these plants. That is the message we need to get out to attract the people we need.
Cashman: There are also a multitude of scholarships that are available for UNR’s Mackay School of Earth Sciences and Engineering. And I’m of the opinion that some of them go unused.
Taranik: Today we have about $400,000 in scholarship programs and we award around 185 scholarships each year. Some of these are multiple scholarships, not all of them go to mining engineers. They go to geologists and geophysicists, too.
Taylor: We’re trading around the same underground miners through all of our operations. It’s not just mining engineers. It’s hard to find accountants and people to support almost all the functions in our industry. It’s difficult to find people with management experience, especially in accounting.
Taranik: Research shows that in the past 15 years there has been a 10 percent decline in students enrolling in engineering courses.
Cashman: Don’t you think that part of the reluctance of today’s student population to go into those fields has to do with the way science is taught? I don’t think science is taught with an exciting curriculum. And mining has not had the best reputation. People are unaware that miners are good stewards. So it hasn’t been the glamorous career trajectory to latch oneself onto. We need to get back on the ground level and somehow spark that interest in students.
Taranik: The teacher workshops offered with the Division of the Department of Minerals are very important.
Fields: How can we fill the pipeline?
Burrows: It goes a little deeper than that as students coming out of high school are less prepared to enter into an engineering curriculum.
Taranik: That’s true too. The math, physics, chemistry skills and the hard science skills are not adequate. There’s been reluctance in some states to even teach science and the American Geological Institute is working very hard to try and offset those trends. Nevertheless, there’s actually been a move in many school systems at the state level to take science out of the textbook.
The Mining Boom
Fields: What impact have you seen from the mining boom?
Taylor: The impact is not just for one particular sector. Since I’ve been in the business, base metals, precious metals and petroleum are all experiencing a boom. That’s a huge part of what’s exacerbating our ability to keep our workforce in place.
Mudge: We talk about boom, but there haven’t been that many new projects in Nevada. The majority of what we are experiencing is more intense activity at our existing mines. Prices are up, so we can mine more materials at a lower grade and that’s putting pressure on the whole system.
Burrows: If you don’t replace the ounces, then stock prices of the respective companies are impacted.
Taranik: In terms of Nevada’s economy, the minerals industry has a major impact and has had for a long time. We are fourth in the world for precious metals – that’s a significant mining enterprise. But the gross state product that, in terms of the mining industry affects the state’s economy, is generated by 15,000 workers.
Fields: If you add in all of the industry’s impacts, plus gross sales, we generate over $6 billion for the state.
Brennan: Do you think Nevada will ever experience gold depletion?
Mudge: We’ve been mining on the Carlin Trend since ’65 and I could easily see it going another 40 years. Methods have changed and technology has improved dramatically, allowing materials to become more economic, that weren’t previously.
Cashman: Waste material is reprocessed.
Mudge: When I started in Nevada in ’85, we were drilling shallow for open pit oxide. Now we have evolved to drilling deeper. A number of our mines are going underground – going after the higher grade material, coupled with processing techniques that we have developed over the last 20 years that allow us to recover that gold. It’s hard to see an end to the gold mining.
Burrows: The equipment has offered new economics of scale too, because of what you are able to haul in one load.
Taranik: A lot of exploration in development has been in uplifted bedrock mountainous terrain. The inter-mountain valleys are open for exploration but it must be done with very sophisticated tools. If you look at a map of Nevada, they describe it as caterpillars all trying to go north. In between those caterpillars are the intermountain valleys.
Brennan: How is the increase in energy and labor costs affecting your profit margin?
Mudge: The price of metal has also gone up, which has been very helpful. But diesel and natural gas are huge costs. At Newmont, electricity is second only to labor in overall costs, something greater than $100 million a year. It’s had a significant impact on the net at the end of the day. We’re building a 200-megawatt, coal-fired power plant so that we can guarantee electricity at a certain rate into the future, and are not vulnerable to the fluctuations that could happen from the increase of power costs.
Lang: Our industry tends to focus on the negative. Five years ago, the price of gold was less than half of what it is now. The business has never been more profitable. I would much rather trade the challenges we have today with the business that was barely alive five years ago. We can find a way to get through challenges with people and power, but we can’t overcome low prices. I think the business is a great business to be in, and it’s going to get better. There will always be challenges.
Environmental Concerns
Brennan: What are you doing to help the environment? Are there regulations you must follow?
Mudge: Environment is such an important thing for the industry, and it’s embraced by everybody around this table. The first thing we do is develop a plan for environmental protection. Those plans are developed and permitted through the Bureau of Land Management. Each project has a well-thought out environmental plan from the start. Then we put bonding in place, a guarantee that the work is performed during and at the end of the project. We’re really proud of the reclamation that we have done. Further, we have gone off-site in many cases to just restore natural lands that have been degraded for various things to provide off-site improvements to riparian habitat, creeks and trout habitat. The mining industry always looks for a good project to showcase, in addition to the good work we do at the mines to reclaim the property when we’re done. The state mining regulations went into place in the 1990s. We’ve had a real strong program for at least 16 years. I think there is a stronger public recognition of it now. But we are judged by what was done 50 years ago. Obviously, they weren’t concerned about that environmental aspect, at the time.
Fortner: That’s right. The environmental movement didn’t begin until the1960s. I believe the mining industry has been a leader in addressing those concerns.
Mudge: The federal surface management regulations for mining actually began in the early ’80s. The mining industry intends to follow through on reclamation efforts.
Cashman: We’re in the design phase of a 250,000-square-foot new facility in Las Vegas, with the goal of achieving silver certification in the LEED-certification process of environmentally sound building design. We’re doing a lot of geothermal heating and cooling and we are very excited about being environmentally responsible as we develop this facility.
Jensen: It’s interesting. When I started my career in the mining business as a young mining engineer some 30 years ago, I don’t think we had an environmental engineer on the site. At the last operation I managed, there were more environmental people in the department than there were mining engineers in the mining department. Environmental stewardship is embraced industry-wide. A lot of people find this to be one of the more rewarding portions of their work. It’s more than regulations. For example, we have technology today that we didn’t have 20 years ago that allows us to be zero-discharge facilities.
Public Education
Brennan: What are you doing as an industry to educate the public on the fact that you’re good stewards?
Fields: Many members look to the Nevada Mining Association to help educate the public and that wasn’t always the case. Our public outreach activities include speaker bureaus, attending various fairs and working with editorial boards for the major newspapers. We do a fair amount of advertising. We have done some opinion-polling work to guide our messages and our target audience. As a result, we have seen that mining is now viewed by many of our citizens in Nevada as environmentally responsible.
Burrows: Even the recognition of excellence in exploration helps get the message out that people are doing a good job. We are proactively approaching things today.
Fields: There are mining districts in Nevada that were mined under a completely different set of standards. We have major mining in the Ely area, and Battle Mountain is another area that is seeing a rebirth. One of the best ways to address environmental concerns that are left behind from old legacy mining activities is to put a modern mine in that location. It’s going to address those sins of the past and provide economic benefits to the community and to the state.
Fortner: The community is actually reaching out to the industry, as well. Elko, Battle Mountain and Winnemucca have created standard development – depleting the resources down where you can no longer mine. The environment is good and the community is sound because the mine is going to leave a legacy by working with the community on future development opportunity.
Brennan: Do you think Nevadans understand and appreciate the contribution this industry has made to the state? Is rural Nevada different?
Fortner: Rural Nevada is absolutely different. Clark County has very little understanding or even acknowledgment that the mining industry exists. People have asked me, “We actually mine in Nevada?” It just boggles my mind.
Brennan: Are there any legislative issues that the industry will be following this session?
Fields: We have a government affairs committee made up of mining employees that works with the Mining Association. We will be working very hard on mercury air emissions. This industry, Nevada and the U.S. EPA have worked together to address mercury air emissions and our mining operations. We have agreed to be regulated and to install the maximum achievable control technology on plant equipment to minimize emissions of mercury. We’re also going to closely follow the water issues. We’re going to follow closely anything that deals with human resources and mine safety. Nevada has a tremendous issue with the abuse of methamphetamine. How does that affect the mining industry? Well, it affects the communities where we work. So mining might be part of the educational solution.
Taranik: I think it’s important to realize that Nevada is a place where people like to come and find and operate mines. We’re looking for mines offshore now. What has worked well for the state and the federal agencies has worked well for the operators to create a favorable climate for essentially the industry. We’re looking to see that climate improve. That’s the goal.
Brennan: What do you think is the biggest challenge that this industry is facing in the next five years?
Fortner: There is a great opportunity that the mining industry will be addressing in the next five years – availability of renewable energy and the development of energy. We are working to develop some renewable energy opportunities by actually taking inventory of wind power-generating sites, and using pit lakes for water and pump storage. I think you are going to see the mining industry get a lot of credit for the state’s ability to reach renewable energy standards.
Mudge: Another challenge is the replacement of reserves and keeping the gold production at certain levels. As we have acquired and grown into larger companies, we’re producing millions of ounces a year. It’s a huge challenge to find more and keep that production profile up. Not just in Nevada, but around the world.
Burrows: I have seen a few bumper stickers that read, “If it isn’t grown, it has to be mined.” This industry helps provide the high standard of living that we enjoy. It’s helping to improve the standard of living throughout the world.
Mudge: Mining is so strong from an economic standpoint for the rural counties – it contributes to our state’s tax structure. Clark County does not subsidize the rural counties.
Jensen: There is no place better than doing business right here in the state of Nevada. We have infrastructure here and a business climate that is reasonable to work within. Those are the things that make doing business in Nevada great.
