IOS

CAN YOU WORK THROUGH DECLINE? IOS

The past few years have been far from kind to the global mining sector, as economic volatility, declining commodity prices and a catastrophic lack of investor confidence have all combined to create a perfect storm which has decimated the mineral ecosystem.

Canada’s own $54billion mining sector which, due to its size and scale, benefited hugely during the boom years, has suffered greatly at the hands of this crisis, which is unprecedented in its wretchedness, and long standing service providers, like IOS Services Geoscientifiques, are positioned to witnessed the far reaching consequences of the slump.

As the president of IOS said, “Less capitals were overall raised in 2015 by junior companies in Québec than our 2012 revenues!” “Everybody hopes we’re at the bottom of the trough, but we need to be realistic,” Rejean Girard, President of Quebecbased IOS Geoscientiques Inc, said quietly. “The whole industry is in a very, very difficult place now. Things have been challenging for a long time and still will be. We need to just stay calm and poised for opportunities to come.”

As an industry veteran with over thirty years of experience, twenty-three of which running one of Canada’s elite geological services firms, and with involvement in more than 1300 projects, Girard is experiencing his fourth industry downturn. And yet, despite the severity and doggedness of the present crisis, Rejean has been astounded by the resilience of the explorer against the situation, which has Endeavour Magazine | 61

slowly strangled the mining world in recent years. Massive layoffs, expansion delays and the indefinite shelving of projects has become depressingly commonplace in recent times. But thus far, IOS’ reputation and standing in Quebec, coupled with its team’s aversion to making the panicked kneejerk continued, “keeping your skilled workforce is what will set you apart from the rest of the pack when the cycle turns and the industry starts to pick-up again.

Hiring new workers does not instantly result in a coherent team; you have to build it through time, through tough times. At the onset of a rebound, it is too late! By losing our expertise, we are jeopardizing our industry as a whole in the medium to long-term.”

“Companies invest humongous amounts of money in exploration projects, and typically less than 10% of the total budget goes into paying their professionals; the geologists and those people who are needed to make decision and

such product development. If you try such in boom-time, you are wasting precious resources which needs to be dedicated to profitable production.

Furthermore, in Rejean’s view, “when you get into a recession whereof others divest their human resources - just seize their missed opportunity”. He continued: “In current time, it’s very easy to cherry pick top guys. Curiously, they are resilient and are less demanding than those of a lesser calibre can be. They know what they worth and they understand the industry. “It might be counterintuitive to invest in them, even if you are struggling to get work, but in two years, you will congratulate yourself!”

In the last recessions, two generations of geologists were sacrificed. About 50% of the active geologists leave the industry after each recession. This as lead to a situation now where only few geologist with ten to twenty years of experience are left, and the industry is being populated with old timers dedicated to corporate work, and younger employees with insufficient experience. Experienced geologists, who still have the passion to do fieldwork, are precious and will be the cornerstones of the next boom. Rejean explains: “You’ll have then a severe shortage of the very skilled people - not for the labour, not for the guys running the trucks, but the project managers. To train an expert geologist takes about ten years, and it will be necessary to rebuild this expertise. As industry, we shall capitalize on these guys. If we do nothing, they will exit the industry permanently, should the current cost-cutting policies continue.” The overarching problem when you sacri highly skilled geologists and engineers is that it is hard to entice them back into the inevitable instability of the mining industry. It goes without saying that this could impact heavily on the quality and capability of Canada’s world-renowned mining industry in the long-run. “When you’re young, you’re ready to travel, you take risks and can be mobile, but if you get a stable life for a few years then you build up your life accordingly. It is very difficult to then go back to working at the end of the world”, Rejean adds jokingly, “The wives learn what it’s like to have the geologists home.”

In addition, he adds; “When you hire somebody, it takes about a year before they are efficient in your business, no matter how skilled they are beforehand, so to be ready in two years for the next boom, you need to invest now.” The simple, forward thinking view of longserving industry veterans, such as Rejean, is this: despite the challenging economic climate, now is the opportune moment for investment and retention. “Don’t be scared to spend money to maintain the right guys at work. You shouldn’t see them as an expense, but as an investment.”

“An accounting system simply doesn’t show the true value of your investment in staff.” turn the project into success. The rest is mostly swallowed up by drill rigs, labours, analytical and logistic costs.

So when you try to save money on that 10% by swapping highly skilled and experienced guys for low-wage, less-trained people, you are at risk of seeing the project derailed and in danger of losing the other 90% of your investment. I’ve seen this happen again and again and again. Whatever they say, mines are not found by sheer luck; you need experience as well. The mining industry is competing against other industries to access the best staff. If we do not treat them properly, they reorient their career, and it’s a net loss for the industry… But I agree, the question is complex.”

This is perplexing stuff – doubly so, when you consider that the vastly higher machine costs are also the most elastic. Drilling cost has decreased by more than 50% in recent years, mostly by using experienced drillers who are simply efficient at work! Same logic should apply to the geologist, but it seems a quandary. An employee of a necessary calibre is the cornerstone to overall cost reduction, as Rejean reiterates.

Cost saving comes from innovations and head-scratching, not through undercutting workers. There are mechanisms available to spread the cost of manpower; they just need a more refined and innovative practice. So, what shall we do? Even a major recession as ruinous as this one can present great opportunities for those with sufficient vision to seize them – and the benefits of being ready for the next boom overshadow the risk currently taken. First, do not expect employees to be faithful if you are not faithful to them. Be benevolent of them and make sure they are both valued and appreciated. Secondly, have a contingency plan in place if projects dry up. For exploration companies, this means to have mining data, industry intelligence or compilation work always handy on the shelf. It does not cost much, and can be applicable as flow-through or exploration credits if properly managed. It provides you with both staffs and projects ready for the next ride. Sending staff to training programmes can also be hugely beneficial.

For a service company as IOS, this means reorganising the scientific and technical staff into research projects: we are scientist after all! There is plenty of subsidies and leveraging for such. Just with the tax credits, 80% of the salaries can be covered. Your money will stretch much further. Additional to this is the plethora of programs, where you partnership with universities and government organizations. For sure, R&D is risky, it may not work, but if it is successful, you are in a quantum leap! For example, there is way to send your employees fully subsidized back to university for master or doctorate studies, where their research is in direct relation with your in-house research.

Slow markets are beneficial in the sense they free the staff and the mind to conduct such product development. If you try such in boomtime, you are wasting precious resources which needs to be dedicated to profitable production. Furthermore, in Rejean’s view, “when you get into a recession whereof others divest their

human resources - just seize their missed opportunity”. He continued: “In current time, it’s very easy to cherry pick top guys. Curiously, they are resilient and are less demanding than those of a lesser calibre can be. They know what they worth and they understand the industry. “It might be counterintuitive to invest in them, even if you are struggling to get work, but in two years, you will congratulate yourself!”

In the last recessions, two generations of geologists were sacrificed. About 50% of the active geologists leave the industry after each recession. This as lead to a situation now where only few geologist with ten to twenty years of experience are left, and the industry is being populated with old timers dedicated to corporate work, and younger employees with insufficient experience.

Experienced geologists, who still have the passion to do fieldwork, are precious and will be the cornerstones of the next boom. Rejean explains: “You’ll have then a severe shortage

of the very skilled people - not for the labour, not for the guys running the trucks, but the project managers. To train an expert geologist takes about ten years, and it will be necessary to rebuild this expertise. As industry, we shall capitalize on these guys. If we do nothing, they will exit the industry permanently, should the current cost-cutting policies continue.”

The overarching problem when you sacrifice highly skilled geologists and engineers is that it is hard to entice them back into the inevitable instability of the mining industry. It goes without saying that this could impact heavily on the quality and capability of Canada’s world-renowned mining industry in the longrun. “When you’re young, you’re ready to travel, you take risks and can be mobile, but if you get a stable life for a few years then you build up your life accordingly. It is very difficult to then go back to working at the end of the world”, Rejean adds jokingly, “The wives learn what it’s like to have the geologists home.” In

addition, he adds; “When you hire somebody, it takes about a year before they are efficient in your business, no matter how skilled they are beforehand, so to be ready in two years for the next boom, you need to invest now.”

The simple, forward thinking view of longserving industry veterans, such as Rejean, is this: despite the challenging economic climate, now is the opportune moment for investment and retention. “Don’t be scared to spend money to maintain the right guys at work. You shouldn’t see them as an expense, but as an investment.”

“An accounting system simply doesn’t show the true value of your investment in staff.”