The global mining community could well face a serious succession crisis as the current crop of senior level management and CEOs gear up for retirement.
The final nail in the coffin for mining?
The already beleaguered field of mining faces yet another challenge in the form of this lack of fresh blood. In the face of headwinds that include a decline in commodity prices, as well as unhappy rumblings from the shareholder community, this latest development could well be the final straw.
The world over, several mining majors have their CEOs and senior leadership due to step into retirement shortly. The ten largest public mining companies have senior leadership with median ages of 59, against 56 for the top 10 firms on the S&P500. Rio Tinto (NYSE: RIO), First Quantum, Freeport-McMoRan (NYSE: FCX) and New Gold have CEOs who are well over 60, but have refrained from commenting on retirement.
Yet, there are no clear successors in sight. The requisite combination of skills and experience it takes to head a mining operation seems sorely lacking. Those like Centerra Gold and Harmony Gold Mining (NYSE: HMY) who have articulated their CEO's’ retirement plans have had to cope with uncertainty and nervous shareholders.
Exodus of the 90s and 2000s to blame
The current gap of talent in the sector can be largely attributed to the economic downturn of the decades past that saw thousands move out to other sectors. Recruitment is always a challenge and with the cyclical nature of the industry, this pattern repeats with people exiting in the face of uncertainty and because of the lack of a clear career path.
According to some senior executives from the sector, the reason for this shortfall is that there hasn’t been sufficient investment in people. Instead of looking at the long-term and designing sound career paths with a view to succession planning, decisions tend to have a short-term view, linked to projects. This seems to be a view shared by analysts and investors as well, who echo the opinion.
Out of options
It seems now that there is little choice but to draw on talent from outside the sector even if it means running the risk of potential strategic errors by these new CEOs, who will lack familiarity with mining. Kinross Gold (NYSE: KGC) experienced this firsthand when their ex-investment banker CEO Tye Burt drove the acquisition of Red Back Mining for USD 7.1 billion. The result - unhappy investors, as the company saw USD 6 billion in write-downs. He was later replaced.
Others like Barrick Gold (NYSE: ABX) believe that this strategy will pay-off and the need of the hour is a fresh perspective.
As the world watches, analysts, shareholders and industry professionals are getting jittery as the crisis looms large with no clear solution on the horizon.