2012: The year of mining CEOs turnover
Cynthia Carroll, Aaron Regent, Marcelo Awad and Diego Hernández. Four top executives that at the beginning of this year were in the top position of the most important mining companies: Anglo American, Barrick, Antofagasta Minerals and Codelco, respectively.
What do they have in common? Besides their wide experience in the mining world, neither of them is currently in the same position they were early this year.
A newcomer to the group is Miguel Ángel Durán (who has recently announced his separation from Anglo American Chile), Giancarlo Bruno (former Collahuasi CE0), and finally, Marius Kloppers, who could be leaving the highest position in BHP Billiton while the company is in search of Kloppers’ successor.
Where are these winds of change coming from? Notwithstanding each case has its specific characteristics (the “personal reasons” explanation repeats constantly), there are some common factors affecting the whole large-size mining industry which have been pointed out by some experts as the triggering factor for these movements.
“It is a fact that lately the wind of change has been concentrated in top executive positions in mining companies”, the Executive Director of Cesco (Center for Copper and Mining Studies), Juan Carlos Guajardo, told El Pulso.
And then he adds: “Reasons are many, however some agglutinating elements may be recognized mainly in the way the companies are facing the super-cycle pace of commodity prices and how they are adapting to new times in the mining industry, particularly regarding their relationship with stakeholders (other companies, energy companies, communities, native peoples, political world, amongst some other factors)”.
Indeed, mining companies had to fit a new scenario where costs have experienced a very strong rise. Profits have dropped between 20 and 40% if compared against last year’s figures in the mining sector. Some mining companies are working with costs exceeding US$3 per pound. A slight down trend in copper price would wipe out the margin.
Lack of professionals
To improve margins, costs are to be reduced. However, the problem is that there is not much to be undercut: energy is extremely highly priced and there is no replacement available; supplies prices are rising and plans to improve productivity must struggle against rock hardness and low ore grade. In this scenario, the key for many companies is in being extremely selective as to their executives recruitment, but that is not an easy task.
“In Chile there is a large gap in between the executives that are currently running these companies and the new generation to take over their positions. There is no one who can take the baton or take the turn and that is a serious problem. The same situation repeats worldwide. CEO of Barrick, Igor Gonzales, took over from a Canadian in Vancouver, so Canada is experiencing the same as BHP. Manuel Viera, CEO of Metaproject and former director in Enami, said that “this is a first-line executives shortage world crisis, they are too few and are badly needed”.
In Viera’s opinion Chile doesn't have executives to take high positions over and from those who are today working, more than 60% should be retired, while the younger ones do not have the same good sort or just do not make the cut neither do they have enough experience.
“This is an issue for the companies because they have not implemented programs or plans to train their own executives. This is a serious matter. Collahuasi has not accomplished the production program for six years and that is a primary function of a first-line executive”, he points out.
Viera states that an executive must firstly get acquainted with the mine, that is 85% NPV of business, without that competence the executive will not fully understand the mining industry and he will not be able to accomplish production, environmental and sustainability programs.
“Without completing that path it will be impossible to meet all quality standards and will bring trouble to shareholders”, he concludes.
Originally published in Spanish at El Pulso.cl