Good times in the mining sector, eh? The Gold and Silver Index (XAU) is holding steady above a hundred and twenty, having reached a high above 156 in January, a level it had not seen since September 18, 1987. The spot uranium worth is greater than it’s been since January 1980. Crude oil? Filling up your gasoline tank ought to remind you that oil costs are nonetheless painfully excessive. So all of this should mean mining companies are thrilled with their good fortune? Improper! There is a snowballing crisis within the mining sector, which has been stored off the typical investor’s radar display. This new emergency might drive commodity costs to even larger ranges over the coming months, and possibly until the top of the decade.
The 2-decade lengthy bear market drove many geologists, and other qualified technicians, out of the mining sector. Drilling corporations went bankrupt. Even with the latest explosion of exercise within the mining sector, exploration within the sector is lower than one-third of its peak in 1981, when greater than 5,500 drill rigs have been operating.
The mining sector’s labor and drill rig shortage has gone previous the “we’re in a disaster” stage. Without certified geological workers and drill rigs for exploration and development packages, firms could fail to get their tasks online fast enough to satisfy the worldwide demand for his or her metals, whether or not it is gold, silver, copper, or uranium. The Baker Hughes North American rotary rig count is an efficient barometer of how strongly the commodities growth has impacted the sector. In 1999, the U.S. and Canadian drill rig rely reached its nadir of 488. On March seventeenth, the number stood at 1546 and climbing. Over the past seven years, the count jumped 316 %. In comparison with a 12 months ago, the North American Rotary Rig Rely is up by practically 20 p.c. Internationally, the identical rig depend rose nearly 60 %.
During the course of our three-month investigation, we discovered the labor and equipment scarcity utilized not solely to uranium but also to coal, oil and gas, coal mattress methane and valuable metals exploration. Ed Calvert, who runs Nucor Drilling Inc in Wyoming, exclaimed, “There just aren’t any rigs obtainable in the U.S. Chances are you’ll discover one, but it’s a problem finding the fitting rig at the suitable time.” His company began looking for a drill rig in September for drilling scheduled to commence June 1st. Calvert explained that the large oil companies had signed up rig contracts in order that they wouldn’t get caught brief, including, “Whether the rigs are getting used each day or not, they are paying the charges to carry them.”
Vancouver-primarily based Max Sources introduced in early January of this yr they had acquired permits to drill on their Thomas Mountain uranium prospect in Utah. They hoped to drill in late January, depending upon drill rig availability. We interviewed the corporate’s uranium geologist Clancy Wendt, who complained in early February, “I believed I had a rig lined up. Now we do not know when we’ll get a rig.” Max Sources not too long ago introduced it planned to start out drilling on or concerning the middle of March. Norman Burmeister planned extra properly, asserting in mid January Kilgore Minerals would drill the company’s Idaho gold property in July. But Burmeister bought stumped in shifting his uranium property’s permitting process ahead, “I am nonetheless trying to find an archaeologist for my Nevada property. They simply aren’t accessible.” Until he finishes that step of the permitting course of, Burmeister can’t lock up a drill contractor to help delineate his uranium prospect.
The drill rig scarcity pales when in comparison with the frighteningly tight labor market within the mining sector. According to the February 2006 Employment Scenario Abstract, revealed by the U.S. Department of Labor, “Mining continued its upward pattern in February, adding 5,000 jobs.” Cynthia Pomeroy, Director of Wyoming’s Department of Employment confirmed the crisis, “There is certainly a labor scarcity.”
Matt Grant, assistant director of the Wyoming Mining Association adamantly introduced, “There are 800 direct job openings within the mining business that may very well be stuffed right now.” He shortly famous another 2400 indirect jobs to service the mining business stay empty, begging for bodies to satisfy those positions. Starting geologists make between $35,000 and $50,000 yearly. High geologists command $200,000 and higher. Mining consultants get $800-1000/day. Even day helpers on drill rigs can cost $22/hour or extra. Wyoming state and county growth associations have attended job fairs in Michigan earnestly making an attempt to fill the growing job vacancy by recruiting laid-off auto staff.
David Michaud, president of TheJobPit.com, finds jobs for geologists, metallurgists and others in the mining sector. A mining engineer and consulting metallurgist, having graduated from Queens College in Kingston, Ontario, and till recently the operations manager for Corriente Resources in Ecuador, he began his internet employment agency for the mining sector because the demand was overwhelming. “Headhunters who’ve been around for twenty years say they’ve by no means seen a market like this,” Michaud careworn. “For the last ten years, the mining trade fed mining graduates to the wolves. Now they want them. All are busy with no takers to these far away places.” Michaud lambasted the mining firms for their lack of foresight, “Mining companies need to expect the demand for professionals, akin to manufacturing geologists, will go up with the value of metals. There were no jobs for the past eight years.” He added, “It takes two to five years to prepare them.”
For example, Michaud is desperately trying to fill a South American mining company’s job opening for an skilled metallurgist. “Free housing, two cars, four weeks off yearly, two airplane tickets, mainly no residing expenses, and a salary beginning at US$150, 000,” Michaud sadly explained because no one has jumped at the provide. “In the sphere of metallurgy, including mill managers, metallurgical engineers, techs and operators, about 150 new jobs are supplied every month.” Solely about one-half shall be stuffed. Michaud warned the copper mining corporations have been in particularly dire straits to fill new job openings.
Uranium Sector Struggling to keep with Demand
The U.S. Power Information Administration announced in its most not too long ago revealed annual report, “The U.S. uranium manufacturing industry initiated a turnaround in 2004. All U.S. uranium drilling, mining, manufacturing, and employment activities increased for the first time since 1998. Extra corporations conducted exploration and improvement drilling than in the prior 2 years. Employment in the U.S. uranium manufacturing business totaled 420 particular person-years, a rise of 31 p.c from the 2003 complete. Wyoming accounted for 33 % of the full 2004 employment, whereas Colorado and Texas employment almost tripled since 2003. Total, $86.9 million went to drilling, production, land, exploration, reclamation and restoration activities in 2004.” And that was in 2004. Think about what the employment snapshot seems to be like right now?
Whereas the spot uranium worth continues rising, exploration companies could discover it more durable to recruit veteran uranium geologists, to signal contracts for drill rigs, and to operate those rigs. Nucor’s Calvert laughed, “Finding and holding staff is definitely an issue.” Michaud defined, “Finding a metallurgist is tough enough. Discovering one with uranium experience is sort of impossible.” David Miller, president of Strathmore Minerals, lamented, “Expertise within the uranium business started with geologists who made discoveries within the late 1940s through the late 1970s. They trained the next technology, which coincided with the 1970s uranium boom. That growth was quick lived and fizzled out by 1981. A very small quantity of execs continued in the uranium trade, in the course of the twenty-yr bear market. Now that the variety of uranium companies has skyrocketed to greater than 420, there’s a probably catastrophic scarcity of uranium experience.” The technology gap has come to haunt the business.
What’s the solution? Many, corresponding to Michaud, imagine, “Retired baby boomers are coming out of retirement to fill the generational hole and trip their final steel rush into the sunset.”
Bloomberg News ran a story on December 8th discussing developments in the oil sector, “U.S. producers and contractors corresponding to Ryder Scott, which assesses drilling tasks and oil and natural-fuel reserves, are working more durable to maintain their oldest employees and recruit faculty graduates as a result of there aren’t enough new engineers to go round. Engineers who help discover petroleum deposits are in demand…”
UR-Vitality Chief Govt William Boberg showed off the company’s recent hire, Daybreak Schippe, during our tour of his offices, “She’s an engineering graduate of the Colorado Faculty of Mines,” he stated. “Her experience in uranium is now two weeks.” Others in his firm have a long time of uranium experience, however are thrice Dawn’s age.
Aging expertise has found its method again into the uranium sector. Aging geologists resembling Dr. Boen Tan, who helped uncover two of the key Lake uranium deposits in Canada’s uranium-rich Athabasca Basin in the early 1970s, is now helping Forum Development discover for brand new uranium deposits at its Costigan Lake, Key Lake Road and Maurice Level tasks in Athabasca. Uranerz Vitality’s entire advisory board consists of former Uranerz professionals, together with high geologists, Dr. Franz Dahlkamp and Dr. Gerhard Ruhrmann. Respectively, they have 45 and practically 30 years expertise in the sector. Strathmore Minerals geological team consists of former Pathfinder Mines workers, a subsidiary of Cogema, together with board member Dieter Krewedl, President David Miller, and vice president of technical providers, John DeJoia. A few of these corporations convey greater than 200 years of experience, collectively, to their new ventures. But without ample new mining school graduates to mentor below them, future exploration and development may turn into stalled. Michaud announced a chilling statement, “Yearly, Canadian universities produce lower than 10 new metallurgical engineers.”
What the longer term Holds
What is troubling in regards to the uranium market, particularly, is that the soaring spot uranium value reveals no indicators of abating. The disaster comes at a time when President Bush introduced his nu initiative, as extra U.S. utilities plan so as to add to the nation’s nu fleet, and as China and India clamor for a reliable supply of uranium to gas their aggressive nu vitality packages. Without uranium for these reactors, the facility plants won’t produce the electricity required to fulfill their demand. As an aside, uranium mining is the stage in the nu gas cycle the place the environmentalist fanatics are baring their teeth. This past November, an workplace manager at Albuquerque’s Southwest Analysis and knowledge Middle, an anti-nu activist group reportedly funded by Mott’s Applesauce and Ben & Jerry’s ice cream, advised us after we went undercover, “We want to cease the entrance finish of the nu gasoline cycle, which is uranium mining.”
Do not say the warnings weren’t made well upfront. At the World Nu Association (WNA) Symposium in 2004, Dr Moukhtar Dzhakishev, a Russian physicist and a former deputy minister of vitality and mineral assets, introduced his conclusions, “Firstly, natural uranium mining capacities can not satisfy reactor necessities. Secondly, accumulated uranium inventories might be exhausted sooner or later. Thirdly, the spot value does not reflect the precise issues and, quite the opposite, is able to misleading all of us about the urgency of investments to be made in the development of recent mining amenities.”
In his speech, Dr. Dzhakishev emphasised to the WNA, “Judging by these details, the conclusion is obvious: at some point nu energy plants will face a natural uranium scarcity and it isn’t essential to be a prophet to foresee this. It is obvious as we speak that the key to the answer of the main problems of the uranium market lies with the event of the potential of the uranium producers.”
This previous August, Angela Jameson reported in the web model of The London Instances, “A global shortage of uranium may jeopardise plans to construct a new technology of nu energy stations in Britain… a latest report by the Asia Pacific Basis of Canada stated that there was prone to be a forty five,000-tonne scarcity of uranium in the following decade, largely because of growing Chinese demand for the metallic.”
The upward spiral of the commodities increase is racing ahead at full speed. Relying upon whom you discuss to, the labor and drill rig scarcity is both very unhealthy or worse than you possibly can probably think about. If there are commodity inventory shortages right now, what occurs by the tip of this year, or later this decade, if current exploration efforts get grounded because corporations lack the trained personnel, the right gear and the expertise to discover and/or develop their properties? You cannot run a drill rig if you can’t get your hands on one. You cannot drill the property if you cannot discover drillers to run the rig. Whereas commodities prices soar to levels not seen in twenty or thirty years, the tight labor and equipment market may ratchet costs to much increased levels. And junior uranium development companies, with proven pounds-in-the-ground assets, ought to become sought-after acquisition targets by those who have the staff and drill rigs to deliver the tasks on-line.
For buyers, the labor and drill rig shortage has a silver lining. As inventories dwindle decrease, commodity prices will proceed rising. For junior uranium traders, this may sometime be realized because the “hidden reason” why spot uranium prices continued rising past $40/pound. If you do not drill for the commodity, you cannot discover it and develop it. This strengthens the case for $50/pound uranium within the close to future. Now we understand why Strathmore Minerals’ David Miller warned us in November, “I wouldn’t be stunned to see uranium costs double again. ALL RIGHTS RESERVED.
