The following are findings from the Mining Recruitment Group’s (MRG) latest annual Executive Survey, which was distributed during the first week of June and completed by 140 mining leaders.
This has been a year of tremendous volatility for the mining industry, felt by resource companies across all stages, from the junior explorers up to the large-cap producers.
Lack of investment capital and the volatility in commodity prices have already taken their toll on a number of companies surveyed, though apparently, many of the tough decisions have already been made.
The short-term sentiment proves bleak, but the biggest finding is the optimism of those on the inside track, and their confidence in the industry’s regained strength in the coming years.
Only 22% of respondents thought the mining sector would perform better in the second half of 2012 compared to the first, with another 41% suggesting it will likely perform worse. When comparing the next 12 months to the last, it doesn’t get much better, with 63% of executives operating under the impression that the sector would perform the same as it has, or get worse.
But self-confidence is high, and respondents felt bullish about the prospects for their own businesses for the remainder of 2012: 63% of executives think that their company is well positioned to outperform the market as a whole. Only 3% felt their own businesses would have a worse time in the year ahead, which shows confidence in their own organizations.
This emphasizes that senior management teams have absolute confidence in achieving growth in their companies, but have disparaging views of the competition and the sector in general.
Short term, it does not look pretty. When asked about their 6- to 12-month outlook on the overall strength of the mining industry, 38% expressed negative sentiments by responding they were slightly to extremely bearish, with 54% of executives holding a neutral view. Only 8% of respondents were bullish to any degree over the same period.
There was a marked difference in respondents’ perspective looking at a three-year period: 82% are bullish as to the strength of the industry over this time frame, whereas only 5% are bearish at any degree. The remaining 14% had a neutral view.
When asked to predict when market conditions would take a sustained turn for the better, 56% of executives surveyed thought it would take until the first quarter of 2013 or beyond to develop traction.
But many are optimistic that things will turn around in the fourth quarter, with 38% of the vote. Only 5% anticipated improvement before the fourth quarter.
Regarding the financial elephant in the room, 76% of respondents were moderately to extremely concerned over the lack of investment capital moving into the industry, whereas only 43% were moderately to extremely concerned with the volatility of commodity prices over the next two years.
When asked about how the current conditions affected short-term business objectives, 53% of respondents admit that their companies have already made tough decisions and scaled back previously laid exploration and development initiatives, whereas only 32% say that current conditions have had no affect on their plans.
An overwhelming 71% of those polled said that their companies have made a concerted effort to reduce overhead.
This reduction has been accomplished in several ways: 80% have scaled back exploration and development plans; 64% have reduced their marketing and investor relations budget; 20% are laying off existing employees; 24% have implemented organization-wide hiring restrictions; 32% noted a reduction or elimination of incentive pay; and 8% have made salary cuts.
Somewhat surprising was how effectively positioned most companies are to ride out the current conditions, with a dramatic 59% of those polled stating that their company has a runway — or months of cash remaining at their current burn rate — of more than nine months.
Only 6% seem to be “running on fumes,” with less than three months of capital left in the treasury.
For those currently employed, a small sigh of relief can be had, with 76% of executives indicating that they were not considering further layoffs for the remainder of 2012.
If the respondents ever do leave their posts, it won’t be because they feel underpaid. A whopping 94% were satisfied to extremely satisfied with their current remuneration package.
In terms of their base salary, 43% of executives indicated no change over the past 12 months, while 39% reported a modest increase between 1% and 15%.
Of those polled, 58% came from companies with market capitalizations below $50 million; 14% came from companies between $51 million and $250 million; and 17% came from companies with market caps between $251 million and $1 billion. Executives from $1 billion or more entities made up 11%.
The lion’s share of responses — 54% — came from executives at companies that would primarily be described as explorers. Among those remaining, 16% were at the development stage and 30% were producers.
— Andrew Pollard is president of the Mining Recruitment Group, a Vancouver-based boutique executive search firm established in 2006 and focused on the unique needs of the mining industry. He can be reached at firstname.lastname@example.org or www.miningrecruitmentgroup.com.