The Unspoken Supply Constraint: No Miners, No Metals, No Energy Transition

August 16, 2023, marked the first anniversary of President Biden’s signature of the Inflation Reduction Act (the “IRA” or “Act”). One of the Act’s specific areas of focus is critical minerals, especially supply. In our forthcoming white (green?) paper on green metals, we at VanEck will outline the importance of the supply narrative and the factors affecting it (security, together with dependency and intensity). We still believe there will be no energy transition without green metals.

Recently, another, potentially quite serious, threat to supply has, once again, reared its ugly head: a dearth of talent available to mining companies. This may not be a new story, but the problem is now even more acute. While the IRA may seek to secure the supply of critical minerals in any number of ways, if there isn’t anybody to dig them out of the ground, then that really is a problem. Irrespective of whether the result of a shrinking pool of suitable young talent or a rapidly aging (and, consequently, retiring) workforce.

The figures illustrate just what a huge problem this is. In a recent article on Mining.com, Walter Copan, VP, Research and Technology Transfer at Colorado School of Mines, noted that in the U.S. alone, in a “gray tsunami,” some 221,000 workers, or more than half the country’s mining workforce is expected to retire by 2029.¹ If we are going to see that number in the U.S. resulting just from retirement, what about the likes of Canada and Australia? By 2030, Canada will be facing an estimated shortage of between 80,000 and 120,000 workers, while, by 2026, Australia will need some 24,400 new workers.²

To put things bluntly: There will be no energy transition without green metals. And no green metals without miners.

With input from mining industry leaders and other authorities, we at VanEck have been tracking this issue for well over a decade.

Some Background

Back in November of 2010, following the spat over rare earths between China and Japan, my friend (retired Air Force Major General) Dr. Robert Latiff (then chairman of the National Materials Advisory Board of the National Academies here in the U.S.) and I penned an OpEd piece for DefenseNews entitled “Strategic Materials and the West: Solve the Right Problem.”³ We noted, “When China acted as an export cornucopia for raw strategic materials and many goods manufactured from them, domestic processing and production of those products dwindled or ceased. In many instances, the ability to manufacture domestically has been lost.” Furthermore, “The problem is even worse when one considers that along with the retreat from processing and manufacturing, the U.S. and its allies lost much of their materials and manufacturing education and know-how.”

Fast forward nine years later to June of 2019. During the VanEck Natural Resources Conference near Pittsburgh, I discussed the whole issue of education and innovation with (amongst others) Mark Bristow, President and CEO of Barrick Gold Corporation, and the then SVP, Finance and CFO of Teck Resources Limited, Ron Millos. The same message came through loud and clear from both. Dr. Bristow saw the mining industry as being not only “bureaucratic,” but also bad at both recruiting and developing human resource assets and, hence, there being a real problem with skills. And Mr. Millos talked about the challenges of convincing young people about the opportunities to be found in mining.⁴

Where We Stand Now

Now, in 2023, amidst the energy transition, of which the success is so dependent on the availability of mined materials, the problem appears only to have gotten worse. In a recent piece, “Has mining lost its luster? Why talent is moving elsewhere and how to bring them back,”⁵ McKinsey & Company paints a bleak picture of where things currently stand.

The piece notes that “mining companies are experiencing a talent squeeze: 71 percent of mining leaders are finding the talent shortage is holding them back from delivering on production targets and strategic objectives” and “86 percent of mining executives said it was “harder to recruit and retain the talent they need versus two years ago.”⁶

This is not surprising when you look at enrollment and graduation figures for mining-related degrees. In Australia, according to McKinsey, mining engineering enrollment has fallen 63% since 2014. In the U.S., “mining graduations” have fallen 39% since 2016, according to the Wall Street Journal. In Canada in 2020, “geology and earth-sciences graduates were nearly 25% less than in 2015” and its “mining and mineral-engineering enrollment was down 10% in 2020 compared with 2016.”⁷

Determined to find out more, I spoke with both colleagues and some of our friends in the industry. The first person I spoke with was John Gladston, Director Corporate Affairs at the mining company First Quantum Minerals, one of the world’s top copper producers. Did the McKinsey story ring true? He replied that it really did: “There is a shrinking pool across the board, in all jurisdictions, of appropriately motivated and qualified STEM graduates.” He illustrated this with a chart.

Mining-Graduate Numbers

Number of graduates from four-year mineral and mining engineering degrees

Source: Mining Journal; July 2023.

He went on to say, “There are top-level graduates out there, but you have got to put more effort into finding them,” and, when you do find them, then, there’s the competition for them. However, encouragingly, when asked whether current STEM graduates were any better, or worse than their predecessors, he replied, “When you can get them, they are as good as they have ever been. There has been no depletion in their standard. There are just fewer of them!”

First-hand Experience Shapes VanEck’s Perspective

Since its founding in 1955, VanEck has always sought investment team members (whether portfolio managers or analysts) with relevant industry experience. This has been true particularly for our Global Resources Strategy and Gold Strategy teams in which we have both qualified geologists and engineers.

In our Gold Strategy team, I chatted with Portfolio Manager Ima Casanova, Gold Strategist Joe Foster and Senior Analyst Adam Graf. While Ima trained as a mechanical engineer, Joe and Adam were both trained as geologists (with Adam working in the copper industry in the ‘90s and Joe in the gold mining industry). All of them expressed little surprise at the pass in which the mining companies are finding themselves.

Following up on something that both John Gladston of First Quantum Minerals and Adam Graf said about mining schools closing and the number of mining engineering graduates falling, I discovered that the number of mining engineering graduates has decreased by around 43% since 2015 in the U.S. alone.

Mining Engineering Program Graduates by Year

Source: SME 2021 - B.S. and M.S. degrees conferred.

Also, concurrently, “the number of accredited mining engineering programs has decreased from 25 in 1982 to 14 in 2020,”⁸ with most of those remaining also experiencing a decrease in state funding. In addition, 12 schools have closed their mining programs. Amongst these was Columbia University, which, in the ‘50s, had received some $16 million from mining magnate Henry Krumb to ‘“make the School of Mines one of the best known and largest schools of its kind in the world.”’⁹ According to David L Kanagy, executive director and CEO of the Society for Mining, Metallurgy, and Exploration, “This corresponds with a decline in the U.S. faculty, to about 112 in mining engineering in 2020.”¹⁰

Source: SME & ABET (formerly Accreditation Board for Engineering and Technology).

This contrasts strikingly with China which boasts “over 38 mineral processing schools and upwards of 44 mining engineering programs”¹¹ and whose China University of Mining and Technology alone has “more engineering students than all U.S. mining engineering programs combined.”¹²

Echoing what Mr. Gladston said, both Ima and Joe said that many young graduates and post-graduates appear just not to be interested in going off into the wilds to work in a mine, preferring the bright lights and proximity to other people. The same could not be said for either of them: Ima, who said she “loved the challenge” worked on an offshore oil rig in her native country Venezuela and Joe spent quite some time in the “depths” of Nevada—not Las Vegas!

All three also talked about the fact that far fewer universities are now offering geology or mining engineering courses. Adam explained that, in both the ‘80s and ‘90s, such institutions just didn’t get the industry backing that they needed.

As to further reasons why there’s currently such an obvious dearth of talent available, both Adam and Joe mentioned two in particular: 1) a lack of job security (tied in with the cyclicality of the industry; and 2) Historically poor pay—except in “boom” times (this may have changed a bit recently.)

Finally, there is always the issue of ignorance. In some respects, the mining industry has only itself to blame; it has been, and remains, woefully inept not only at “selling itself,” but also at explaining how vital mining is to the success of energy transition. As Mr. Gladston succinctly put it, “There is a fundamental lack of understanding of what the extractive industries are about. And their value: everything is either farmed, fished, or mined!”

Possible Ways Forward

It could be argued that things aren’t all that bad and that more automation is the answer. As Adam pointed out, “some skilled labor is being replaced/thrifted by technology.” But the operative word here is “some.” - certainly not all. There will always be a need for humans who think, not machines that just do.

First Quantum has taken the approach of creating courses at their universities—something it has done in Panama—to help develop skills locally, particularly in jurisdictions without a mining legacy.” For example, it has created a master’s program that can turn a civil engineer into a mining engineer.

If mining companies are to attract the talent they seek, they need to do at least four things:

1. Pay competitively
2. Provide job security
3. Recognize the importance of training—and provide it
4. Better convey their narrative and dispel the misinformation around the “evils” of mining and the extractive industries

In his commentary for the Center for Strategic & International Studies, Thomas Hale mentions several further considerations. He offers the following three sensible suggestions.

“First, there must be an emphasis on early education and the way young people engage with natural resources and mining.”

“Second, there needs to be an investment in developing new mineral-security courses and training throughout government and international affairs programs across the country, especially in Washington.”

“Third, civil society will be critical for connecting with current voters and communities across the country.”

The good news on this front is that at least some people in government are thinking about the problem. Back on March 22, 2023. U.S. Senators Joe Manchin (D-WV), Chairman of the Senate Energy and Natural Resources (ENR) Committee, and John Barrasso (R-WY), Ranking Member of the ENR Committee, introduced the Mining Schools Act of 2023.

“This bipartisan legislation will increase and improve opportunities for university and college mining and geological programs, like those at West Virginia University, to prepare students to meet America’s future energy needs.”¹³

According to the release from The Senate Committee on Energy & Natural Resources, “[t]he Mining Schools Act of 2023 would:

1. Establish a grant program for mining schools to receive funds in order to recruit students and carry out studies, research projects, or demonstration projects related to the production of minerals; and
2. Establish the Mining Professional Development Advisory Board to evaluate applications and recommend recipients to the Secretary of Energy, as well as conduct oversight to ensure that grant funds are appropriately used.”¹⁴

Finally, it’s back to the IRA. Perhaps a useful adjunct to the Act and a precursor to the Mining Schools Act of 2023 might be some government-funded research into just what mining-related tertiary education is currently available and what needs to be offered to provide us with the skills we want.

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