2015 half year market report...

2015 HALF YEAR MARKET REPORT

Q3-Q4Released: March 2016

2 STRATUM-INTERNATIONAL.COM Q3 – Q4 2015 HALF YEAR MARKET REPORT

Candidate data collated across all registered senior professional and executive candidates whether Active, Available or Passive.

Stratum International T +44 (0) 20 3627 3271E [email protected] www.stratum-international.com

Stratum International is committed to providing clients and candidates with original insights to help them make strategic decisions about their careers, their projects and their businesses. We provide this regular review of the mining job market, based on our own experience of senior level mining hires, as part of this programme of research and analysis.

We published two new research reports in 2015, which looked at the levels of staff turnover at senior levels in mining firms (The Lost Leaders) and the reasons they quit (The Great Escape). We plan a slightly different approach to our next research report, which looks at how

industry leaders got to their positions of power. We think it will give a new perspective on leadership in mining.

We are increasingly asked by a number of mining firms for more in-depth analysis or bespoke research as part of a wider advisory service for mining firms and investors. If you need objective data or knowledge to support your decision making, please call +44 (0) 20 3627 3271 or email [email protected] for a discussion.

As always, we would be pleased to hear your comments on this report and what you’d like to see in future editions.

In this, the eighth edition of Stratum International’s biannual mining job market report, we once again find a sector seemingly on the edge of recovery, but still waiting for the nudge of sustained investment to take it forward. That is not to say the overall recruitment market is flat. Juniors and mid-tier miners continue to compete for the best operational talent and we sense from the grapevine there might be modest developments elsewhere.

http://www.stratum-international.com

http://www.stratum-international.com/lost-leaders-staff-turnover/

http://www.stratum-international.com/great-escape-why-mining-leaders-quit/


ACTIVE:

Candidates currently employed but considering alternative career options

AVAILABLE:

Candidates not currently working and immediately available

PASSIVE:

Candidates fully engaged in current employment

H2 2014 – H2 2015

CANDIDATE MARKET OVERVIEW DATA

Continue overleaf for the market observations

H2 2015

55%

29%

16%

H1 2015

56%

25%

19%

H2 2014

59%

21% 20%


The proportion of candidates describing themselves as actively looking for a new role seemed to plateau in 2015 (56% in H1 and 55% in H2). The last half of the year did, however, see an increase in the proportion of people reporting themselves as immediately available and a corresponding decline in the proportion of professionals who are not seeking to move.

This suggests that mining firms are still in the process of getting leaner, despite widespread predictions that the market has reached the bottom. At corporate headquarters, most companies have reduced headcount to the bare minimum of staff needed to support site operations and projects, and we have seen a number of instances where former corporate technical leadership and junior executives have moved back to site-based leadership roles. Several miners cut the last of their fat earlier in the cycle and are now forced by circumstance to let business-critical staff go.

The upshot is that, at the moment, there has been an increase in the number of experienced and talented senior mining professionals with immediate availability. Miners with the resources

to take on staff in anticipation of the upturn, and those companies who have managed to secure funding for project development, are in a position to attract talent they might have struggled to secure during better times.

As is so often the case, we find many of the top-tier operational leaders, especially site-based leadership, remain in high demand and presently offer the least immediate availability, because they either are still in full-time employment or are providing consulting services to contacts in their network who are building and developing new junior mining companies, or to PE firms needing a hand in due diligence.

H2 2014 – H2 2015

CANDIDATE MARKET OVERVIEW DATA


MARKET METRICS CLIENT ACTIVITY

January

Feburary

March

April

May

June

Hiring activity H1 2015Hiring activity H2 2014

Hiring activity H2 2015

July

August

September

October

November

December

July

August

September

October

November

December

21%

12% 11%

42%

7%

7%

14%

8%

27%

23% 17%

11%

14%

11%

33%

14% 11%

17%

CLIENT ACTIVITY OBSERVATIONS

Following a particularly strong H1 2015, the second half of the year was more subdued, with the middle of the period ten per cent down on the same period last year. December, however, saw an intense period of recruitment activity. This partly reflects the familiar trend of miners needing to replace those people who had secured new roles or planned to retired in the new year.

But with two-fifths (42%) of hiring over the period occurring in December, we also believe there was a degree of ‘making up for lost time’. Miners who had adopted a cautious approach to recruitment for several months finally broke ranks. It is not possible to judge whether this reflects a growing confidence or a pragmatic recognition that the battle for talent will be most intense for those miners awaiting incontrovertible proof of a recovery.

From our perspective, there is some exceptional talent available right now for firms willing and able to invest.



Mining (major)

Mining (mid tier)

Mining (junior)

EPCM 0%

Consultancy 0%

Service

Trading/PE

Mining (major)

Mining (mid tier)

Mining (junior)

EPCM 0%

Consultancy 0%

Trading/PE

Mining (major)

Mining (mid tier)

Mining (junior)

EPCM 0%

Consultancy 1%

Trading/PE

Client sector hiring activity H1 2015Client sector hiring activity H2 2014

Client sector hiring activity H2 2015

9%

31%

55%


Producing juniors continue to be the most active recruiters of senior talent, a trend we first noted in late 2014. Their focus is on hiring the best operational leaders to achieve operational efficiencies and squeeze the greatest value from existing assets. Collectively the mid-tier and juniors account for more than two-thirds (69%) of hiring activity that Stratum assisted.

We believe there might also be a continuation of 2014’s strategy of replacing people recruited when talent was in shorter supply with more experienced professionals. That said, there can be few below par performers left in their posts and we certainly know of several excellent candidates who have lost roles because of unprecedented economic circumstances.

2015 saw Stratum increasingly build and solidify our relationships with private equity firms. As well as executing a number of C-level executive, project and operational searches for PE firms’ current assets, we also conducted research projects, provided advisory services around talent acquisition and team formations, and conducted executive referencing as part of due diligence processes throughout the year.

It is also interesting to see activity in the service sector, which in this case relates specifically to drilling. Given the relative inactivity in exploration it is encouraging to see clients positioning themselves for more drilling in 2016; a sign, we think, of confident clients making an early move and taking advantage of current high levels of equipment availability rather than a response to any market indicators.

Anecdotally, we sense confidence for the future amongst the juniors, many of whom have exciting plans (including potential mergers and acquisitions) and who tell us they will increase senior level hires in the future. But, they tell us, these plans and related recruitment depend on getting the funding to proceed. And at the moment there is no clear idea of where that funding will originate.

25%

5%

18%

8%

44%

4%

18%

6%

20%

56%



Mine operations is, once again, the dominant discipline into which our clients are hiring. However, for the first time since we started writing these reports in 2013, it represents less than half of overall recruitment activity. Nevertheless, demand for best in class operational mining leaders remains high, both at executive and asset level, and these individuals still command a premium. This is particularly the case on operational gold and base metal sites where production efficiencies are paramount.

Although project development hiring was less active in 2015, we still introduced five Project Managers or Directors in gold, and two more into copper projects amongst others. As with operations, activity was almost exclusively in the junior and mid-tier space. We believe this highlights the large number of nimble and entrepreneurial companies that are able to survive, and even thrive, in this market. Some larger businesses with higher cost bases may well be watching them with a degree of envy.

Predicting the next wave of activity is not easy. Our firm’s Partners currently spend the majority of their time talking with global clients about their future needs to ensure we are well placed to respond to emerging mandates.


Mine Operations

Project Development

Exploration

Executive/Board

Other (finance, commercial, services)

Mine Operations

Project Development

Exploration

Executive/Board

Mine Operations

Project Development

Exploration

Executive/Board

Discipline activity H1 2015Discipline activity H2 2014

Discipline activity H2 2015

16%

63%

8%

13%

45%

10%

10%

25%

10%

68%

15%

6%

11%



Hiring in Africa was broadly consistent throughout the year. We saw an increase in the proportion of recruitment in Europe and Australia in the last six months of 2015, and a corresponding decrease in activity in Asia and the Middle East.

For 2016 we anticipate greater opportunities in site management and general manager roles in Africa, while gold miners in Australia, their operating costs reduced by the weakened Australian dollar, are also positive.


Africa

Australia 3%

Asia 2%

Europe

FSU/Russia

North America

South America

Africa

Australia

Asia 0%

Europe

FSU/Russia

Middle East 0%

North America

South America

Africa

Australia

Asia

Europe

FSU/Russia

Middle East

North America

South America

Geographic spread of positions H1 2015Geographic spread of positions H2 2014

Geographic spread of positions H2 2015

8% 59%

8% 5%

11%

4%

48%

12%

20%

5%

5%

10%

47%

8% 6%

11%

6%

6%

3%

13%


CLIENT ACTIVITY CONTINUED

COMMENTARY

General Manager recruitment accounted for a third of all mine operations activity in the latter half of 2015, up from 25% in the first six months of the year, a trend offset by a decrease in Mine Manager hires. Other operations roles were broadly consistent throughout the year, including finance and commercial roles. This first emerged as a significant sector for us in late 2014, demonstrating miners’ increased focus on operational costs and Stratum’s growing reputation in the strategic space.

This is also demonstrated by the increase in the proportion of CEO and COO roles for which we have been asked to conduct executive searches.

Although we experienced a small decrease in project development mandates compared with the first half of the year, all were at a more senior level. Indeed, every project development hire in H2 was for a project management role.

Project development

Mine operations Executive

Project Management

Engineering 0%

Construction 0%

Project Controls 0%

15% 5%

10%

50%

17%

17%

17%

100%

35%

10%

25%

General Manager

Mine Management

Technical Services/Mine Geology

Process and Metallurgy

Engineering and Maintenance

Finance

CEO/COO

VP Projects

VP Operations/Technical 0%

VP Exploration

VP HR 0%

Note: Totals 101% due to rounding


REMUNERATION INFORMATION – AVERAGE SALARIES 2015

OperationsExecutives

Project Development Management

VP Operations General Management

Project Management

VP Projects Mine Engineering and Geology

Engineering

314,595 294,475

208,743

269,373 209,401

201,780

VP Exploration Processing and Metallurgy

Construction

190,560209,323

199,815

VP/Director HREngineering and Maintenance

Project Controls

208,197

201,100

180,209

COMMENTARY

With the exception of a small number of companies reducing salaries for all staff as a strategy for seeing out the downturn, average salaries have remained static compared with the previous six months. It is an indication of the importance clients attach to attracting the best talent that they maintain salaries at a time when many discretionary costs are being cut.

The information on this page represents the average net salaries for senior and expatriate professionals during H2 2015. This data does not include bonus, benefits or stock or share options and is based on net US$. Please refer to the end of the report for definitions.

Please note that this data is only a snapshot in time. Stratum clients are able to access our searchable real-time salary data tool in the secure login area of our website www.stratum-international.com to see the latest salary trends and data.


Functional areas by %

CANDIDATE DEMOGRAPHICS

Operations

Australia

Africa

Chile

North America

USA

Europe (West)

40%

19%

24%

4%

15%

10%

10%

15%

15%

Projects

Finance/Commercial

Exploration

Brazil

Australia

South Africa

Middle East

Peru

Europe (Balkans)

5%

3%

12%

19%

3%

3%

3%

Executive

Canada

South America

UK

Asia Pacific

Other

Russia, CIS

Other

25%

18%

16%

15%

9%

9%

3%

5%

Candidate nationality

Regions (candidates currently working)


Interestingly, if we base Stratum’s review of the year not only around our financial performance, up 10% on 2014, but around the success of our clients in 2015, many of whom are producing or developing gold assets, it’s a much brighter picture for many in the industry.

That said, Mines & Money 2015 London was a sombre affair, but we detected a distinct feeling of acceptance of the current situation and positioning for the upturn. This optimism has been reinforced since then with significant funding being made available for junior mining companies such as Euromax Resources and Lydian International, demonstrating that good projects will get funded in any market.

We anticipate bulk materials will continue to have a hard time in 2016. Macquarie Research backed these views in a release published in

February in which they predict 2016 will see destocking, divestment and desperation, but little change in demand. “We may be close to bottom,” analysts are quoted as saying in Business Insider Australia, “but the bottom can persist for a long time, and certainly through 2016.”

This situation, of course, is driven by oversupply in the face of greatly reduced demand from China, which currently shows no sign of changing.

But it’s certainly not all bad news. When we interviewed Entrepreneur and fund manager Jim Mellon at Mines and Money London, he reaffirmed our view that gold, silver and copper offered potential in 2016. Jim is worth in excess of $1 billion, and sold Uramin for $2.5 billion after setting it up two years earlier with $100k.

“I do think we are scraping the bottom of the cycle at the moment and I would say smart investors are laying down their bets now – so I think we are very, very close to the bottom. Very close. In fact we may already have seen it.”

Even the pessimistic Macquarie Research analysts predict price stability, and even increases, for zinc, silver and palladium. Jim Mellon adds lithium to the list. And according to Rajalakshmi Nirmal, writing in the Hindu Business Line, silver production last year dropped by 20 per cent in Canada and more than seven per cent in the US. With more unviable silver mines due to shut down in early 2016, the resulting deficit in supply will begin to push prices.

As for gold, the yellow metal experienced a ‘safe haven bounce’ in the first few days of 2016. We

OBSERVATIONS AND PREDICTIONS

As we enter Q2 of a new year, a seemingly irresolvable sentiment remains in the market that the mining industry is still so deep in the doldrums that it’s proving a challenging prospect for even the most optimistic contrarians. Yet gold, silver, zinc and copper recently offered quite a needed dash of hope for 2016, with many predicting the market is finally at the bottom of the cycle, where significant upside will be made once the market starts advancing, including a 100%+ rise in many mid-tier and major miners. Even iron ore had its largest gain in a single day recently.

Continues...


anticipate uptrend in gold sentiment will continue. Many gold companies were up in 2015, with some, like Endeavour Mining, seeing a near 100 per cent increase in their stock price in 2015. We feel this is just the beginning of gold’s recovery that will see gold prices stabilising around $1,250 in 2016 before trending upwards.

Copper’s rally in December lost ground in the first few weeks of the year as prices tumbled in the face of weak demand from Chinese manufacturers. Bob Harberkorn, a senior broker at RJ O’Brien quoted in the Wall Street Journal, maintained “Copper has nothing but headwinds facing it right now.” Nevertheless, we feel sentiment is already well down past any logical analysis, and we see a rebound in major copper stocks this year. Indeed, we have already witnessed a small recovery from those early lows.

We also predict a further increase in M&A deals, particularly in gold and especially in Africa, as evidenced by the recently announced deals involving Perseus buying Amara, and Endeavour buying TrueGold.

Many of the larger and major producers are up from 50 - 90% in the last three months in equity markets, technically indicating a bull environment, though time will tell if this was merely a correction of the desperate lows faced at the end of 2015. We believe the gold majors will recover well in 2016, with gold mid tiers doing best. In the junior space we anticipate a much better 2016, although we doubt that will reflect in the project hiring space just yet.

We also confidently expect significantly greater private equity investments in the market in 2016. A number of our PE clients are raising second funds that will close today, and we know three Stratum clients will raise more than $1 billion in different mining-focused funds in the next six to nine months alone. At the Mining Indaba in February we spoke to a number of PE firms who expressed frustration that they have been unable to advance their plans. We are told a raft of deals are being held back because distressed miners don’t want to admit defeat or hold out for unrealistic prices.

In some ways it’s an understandable position to take. Mining has been said to be on the cusp of a

turnaround quarter after quarter and it would be a bitter blow for a miner to sell up within sight of a recovery.

Jim Mellon is characteristically forthright in his views on the role of private equity.

“I’m not an expert in private equity in mining but I do know that a lot of them have… already invested, probably at the wrong prices… So I wonder how much firepower is left in their hands. The recapitalisations will really come through shareholders, large funds or smart private investors but I don’t think it will come from private equity to any large extent.”

Wherever the funding may come from, might the recovery happen in 2016? It’s always worth remembering the old Danish witticism: “It is hard to prophesise, particularly about the future.” Like others, we can only speculate, but we do believe the most pessimistic predictions for 2016 are grossly exaggerated.

You can read the full Jim Mellon interview in our blog here: http://www.stratum-international.com/blog/jim-mellon-interview/

OBSERVATIONS AND PREDICTIONS

http://www.stratum-international.com/blog/jim-mellon-interview/

http://www.stratum-international.com/blog/jim-mellon-interview/


DEFINITIONS Executive – operational, projects, exploration and human resources executive level positions which may include junior, mid-tier and large companies. Note we do not report on salary averages for CEO level due to exponential differences in package structures depending on company size, objectives and development/operational strategies.

Project Management – project leadership (manager/director) role of full cycle project lifecycle or specific phase including study, construction, commissioning or completion. Leadership of group or executive function. Projects may include greenfield and brownfield expansions across mine infrastructure, civil and processing facilities and are typically in the range of $300m upward to $1bn+.

Project Controls – Leadership or senior discipline roles across project controls, including Project Controls Management, Estimating, Cost, Scheduling and Planning. FEL1 – FEL4 typically with leading EPCM or Owner’s teams on projects $300m to more than $3 billion.

Engineering Management – engineering leadership of full cycle project lifecycle or specific phase including either study, construction, commissioning or completion. Leadership of group or executive function. Projects include greenfield and brownfield expansions across mine infrastructure, civil and processing facilities and are typically in the range of $300m upward to $1bn+.

Construction Management – leadership of full cycle project lifecycle or specific phase including mainly construction and commissioning, but may also include studies. Projects include greenfield and brownfield expansions across mine infrastructure, civil and processing facilities and are typically in the range of $300m upward to $1bn+. General Management – leadership of operational mining site with multiple discipline subordinates. Includes multi site but not executive/board level responsibility. Also includes mine operations management.

Mine Engineering & Geology – may include senior operational and leadership positions including Principal/Chief Mining Engineer, Senior Mine Engineer, Geology Manager, Senior Production Geologist etc.

Processing & Metallurgy – leadership of operational mining processing facility. May include multi site but not executive/board level responsibilities.

Engineering & Maintenance – leadership of teams within the E&M function which includes fixed and mobile plant. May be multi site but is typically single site.

Exploration – includes exploration management and chief geologist seniority across geographies including all asset sizes across all sizes of exploration and producing companies.

WE WOULD BE DELIGHTED TO RECEIVE YOUR COMMENTS ON THIS REPORT AND WHAT YOU’D LIKE TO SEE IN FUTURE EDITIONS.

Please get in touch with your Stratum International contact or use the details below.

T +44 (0) 20 3627 3271 E [email protected]

2015 half year market report...

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