Monsters of Rock: Mining workers continue to be very hard to come by, and what did analysts think of BHP’s iron ore ambitions
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A new report from the National Skills Commission is out, highlighting the areas where we are looking for workers amid what many industries say is a labour crisis not seen in years.
According to the the NSC 31% of occupations assessed are in a national shortage, 286 out of 914 recognised fields.
Unsurprisingly, a number of mining roles, including surveyors, mining engineers, petroleum engineers, geos, metallurgists and drillers are among these.
Given it has already flagged the need for another 24,000 mining workers by 2027, that is unsurprising news for the Australian Resources and Energy Employer Association, a body which lobbies on these sorts of things.
“Today’s NSC data reaffirms what employers have been experiencing on the ground for the better part of two years. It also confirms such labour supply and skills challenges will persist well into 2023 and possibly beyond that,” AREEA’s director of operations Tara Diamond said.
“Crippling skills shortages threaten the continuity of existing operations as well as create headaches for new project development, potentially impacting both the future growth of the industry as well as Australia’s reputation as a reliable country to invest in.
“These issues demand strong industry and government collaboration. There is no silver bullet, but momentum on practical medium and long-term solutions must be escalated and maintained.”
One job description that isn’t in dire need is that of managing director/CEO. It seems there is plenty of talent to go around, don’t ask the Essendon Football Club about that though.
Or Northern Star Resources (ASX:NST) chairman Michael Chaney, the well-heeled elder statesman of WA business who this week said competition for executive talent justified a $15 million bonus splash in the latest remuneration report the gold miner will put to shareholders at its upcoming AGM.
“As a result of the competitive labour market for experienced executives in the mining industry, and in response to concerns held by the Board and investors alike about executive flight risk, Resolution 4 in the Notice proposes an award of conditional retention rights to the Managing Director & CEO,” Chaney told shareholders in the notice of meeting on Monday.
“This award is part of a broader plan being introduced which will apply to senior members of the Northern Star management and workforce deemed critical to the achievement of the Company’s ambitious objectives over the next few years.
“The broader plan will have a total cost to the Company of up to $15 million over three financial years – an investment the Board considers worthwhile in the current circumstances.”
Chaney says the package reflects investor feedback, with the proportion of “at risk” pay for the MD and CEO increased to 80%.
The world’s biggest miner has spent the past few days herding analysts and investors around its Pilbara iron ore operations, where it has set long term targets of pushing its production up to 300Mtpa and then 330Mtpa with a few billion bucks worth of capital investments.
While iron ore prices have been mild of late and miners have been troubled by falling commodity prices out of China, Goldman Sachs analysts Paul Young, Hugo Nicolaci and Caleb Heiner still rate BHP a big buy coming out of the talkfest.
Their three big takeaways?
BHP expects steel demand to continue to rise over the next decade, BHP’s WAIO will have higher free cash flow than its competitors Rio Tinto (ASX:RIO) and FMG (ASX:FMG), and while studies are under way on the expansion to over 300Mtpa, creeping to 330Mtpa will take until the end of the decade with the acquisition of a new car dumper and port de-bottlenecking required.
That’s OK by BHP, given as noted in our Bulk Buys column (linked above), it is pretty bullish on steel demand, saying it will be a net beneficiary of decarbonisation and climate change.
Despite product suited to these methods being only 3% of the global iron ore mix BHP also expects DRI and electric arc furnaces to make up 10-15% of iron ore demand by 2050.
That’s well below expectations from researchers like Wood Mackenzie in their 1.5C decarbonisation scenarios, and understandably positive for BHP’s currently very profitable met coal business.
GS has maintained its buy rating on BHP, with a 12 month price target of $40.50 per share, saying it can maintain a premium against global peers like Glencore and Anglo American.
“We believe this premium vs. peers can continue to be maintained due to ongoing superior margins and operating performance (particularly in Pilbara iron ore), high returning copper growth, and lower iron ore replacement & decarbonisation capex vs. peers,” Young, Nicolaci and Heiner said.
“We also highlight BHP’s higher exposure to lower operating jurisdictions such as Australia and Canada relative to global mining peers, along with their #1 global position in the high quality metallurgical coal seaborne market.”
BHP was up 0.64% today to $40.76.