Cost crisis as labor shortage emerges behind Australia’s closed border
Australia’s closed border as a defense of Covid-19 is starting to have an inflationary effect on the economy as a severe shortage of skilled labor leads to higher costs and lower production.
Mining companies in particular are feeling the pressure with a growing line of producers reporting production cuts due to a shortage of workers, even those with the most basic skills, like driving trucks.
St Barbara, one of Australia’s largest gold miners, is the latest to report operational challenges caused by a labor shortage.
The result is that the company’s main asset in Australia, the Gwalia mine in Leonora, is expected to produce at least 15,000 ounces less gold in the year ending June 30 at an additional cost of more. of $ 150 per ounce.
Investors were quick to sell St Barbara’s shares after this update was released on Tuesday, triggering a 14% drop in the company’s stock price even as the price of gold added 20%. $ / oz to $ 1,867 / oz.
St Barbara said in a statement to the Australian Stock Exchange that part of the problem with costs and reduced production expectations was a slower-than-expected change at a key mining service provider and a slow recruitment of experienced mining operators .
Less gold at a higher cost
“The 2021 financial forecast is now expected to be between 150,000 ounces and 160,000 ounces of gold, previously 175,000 ounces with the all-in sustaining cost (AISC) between $ 1,412 / oz and $ 1,517 / oz previously between $ 1,237 and $ 1268 / oz.
St Barbara is not alone in being affected by labor shortages and rising costs.
Large iron ore miner Rio Tinto has reported a shortage of skilled workers to handle routine equipment maintenance and Fortescue Metals has seen work on a new project delayed due to difficulties transporting workers from other states to its operations in Western Australia.
The impact on profits is particularly severe for entrepreneurs who lack access to high raw material prices, which helps miners weather the storm of rising costs.
Last week, Perenti Global, one of the world’s largest mineral exploration drilling companies, reported an encouraging increase in new work, but potentially lower than expected profit.
Perenti chief executive Mark Norwell said the continued strain in the Australian job market was having an impact on company margins.
Earlier this month, US specialty chemicals manufacturing company Albemarle described labor market conditions in Western Australia where it develops lithium processing assets as being in crisis.
Competition for skilled labor and equipment from other mining companies, especially those with record iron ore prices, is delaying plans to develop the Albemarle project, although it has sold lithium for the rest of the year.
The labor shortage is also starting to show up in wage rates with ANZ Bank reporting earlier today that the Australian wage price index rose 0.6% in the March quarter, just above market expectations.
“The annualized rate was 2.4% year-over-year, slightly above the pre-Covid-19 pandemic, indicating that wage growth is picking up faster than expected,” said the bank.
Chris Ellison, general manager of the iron ore mine and mining services provider, Mineral Resources, said that despite hiring an additional 1,400 people in the past 10 months, his mining plans were affected by the shortage. skills.
Ellison said last month that Mineral Resources had lowered its iron ore export expectations for the current fiscal year from around 20 million tonnes to between 17.4 and 18 million tonnes.
The central problem with mining companies is that they are competing for a limited supply of labor, made worse by the Australian border closed by Covid, at a time when prices for minerals and metals are record high.
“It becomes a problem, a big problem,” Ellison said.
“The pond we all draw from is drying up quickly.”