The Gold and Silver Index (XAU) is holding steady above 120, having reached a higher above 156 in January, a level it had not seen given that September 18, 1987. The spot uranium cost is higher than it’s been since January 1980. Crude oil? Filling up your gas tank should remind you that oil costs are nevertheless painfully high. So all of this must imply mining businesses are thrilled with their excellent fortune? WRONG! There’s a snowballing crisis inside the mining sector, which has been kept off the typical investor’s radar screen. This new emergency could drive commodity rates to even greater levels over the coming months, and possibly till the end with the decade.
The two-decade long bear market drove several geologists out from the mining sector. Drilling firms went bankrupt. Even using the recent explosion of activity in the mining sector, exploration within the sector is less than one-third of its peak in 1981, when much more than five,500 drill rigs have been running.
The mining sector’s labor and drill rig shortage has gone past the “we’re in the crisis” stage. With out qualified geological staff and drill rigs for exploration and development programs, companies might fail to get their projects online quick adequate to satisfy the worldwide demand for their metals, whether it is gold, silver, copper, or uranium. The Baker Hughes North American rotary rig count can be a good barometer of how strongly the commodities boom has impacted the sector. In 1999, the U.S. and Canadian drill rig count reached its nadir of 488. On March 17th, the number stood at 1546 and climbing. Over the past seven many years, the count jumped 316 percent. Compared to a year ago, the North American Rotary Rig Count is up by nearly 20 percent.
Throughout the course of our three-month investigation, we found the labor and equipment shortage applied not only to uranium but also to coal, oil and gas, coal bed methane and precious metals exploration. Ed Calvert, who runs Nucor Drilling Inc in Wyoming, exclaimed, “There just aren’t any rigs available within the U.S. You might locate 1, but it’s a problem finding the best rig at the best time.” His business began searching to get a drill rig in September for drilling scheduled to commence June 1st. Calvert explained that the big oil companies had signed up rig contracts so they wouldn’t get caught short, adding, “Whether the rigs are being used daily or not, they’re paying the fees to hold them.”
Vancouver-based Max Resources announced in early January of this year they had received permits to drill on their Thomas Mountain uranium prospect in Utah. They hoped to drill in late January, depending upon drill rig availability. Max Resources recently announced it planned to begin drilling on or in regards to the middle of March. Norman Burmeister planned a lot more wisely, announcing in mid January Kilgore Minerals would drill the company’s Idaho gold property in July.
The drill rig shortage pales when compared to the frighteningly tight labor market within the mining sector. According towards the February 2006 Employment Situation Summary, published by the U.S. Department of Labor, “Mining continued its upward trend in February, adding five,000 jobs.” Cynthia Pomeroy, Director of Wyoming’s Department of Employment confirmed the crisis, “There is definitely a labor shortage.”
Matt Grant, assistant director from the Wyoming Mining Association adamantly announced, “There are 800 direct job openings inside the mining enterprise that could be filled today.” He quickly noted another 2400 indirect jobs to service the mining industry remain empty, begging for bodies to satisfy those people positions. Starting geologists make between $35,000 and $50,000 annually. Top geologists command $200,000 and increased. Mining consultants get $800-1000/day. Even day helpers on drill rigs can charge $22/hour or more. Wyoming state and county development associations have attended job fairs in Michigan earnestly trying to fill the growing job vacancy by recruiting laid-off auto workers.
David Michaud, president of TheJobPit.com, finds jobs for geologists, metallurgists and others inside the mining sector. A mining engineer and consulting metallurgist, having graduated from Queens University in Kingston, Ontario, and until recently the operations manager for Corriente Resources in Ecuador, he began his internet employment agency for the mining sector because the demand was overwhelming. “Headhunters who happen to be around for twenty a long time say they’ve never seen a marketplace like this,” Michaud stressed. “For the last ten years, the mining industry fed mining graduates towards the wolves. Now they need them. All are busy with no takers to those people far away places.” Michaud lambasted the mining firms for their lack of foresight, “Mining businesses have to anticipate the demand for professionals, for instance production geologists, will go up while using cost of metals. There were no jobs for the past eight years.” He added, “It takes two to five a long time to train them.”
For example, Michaud is desperately trying to fill a South American mining company’s job opening for an experienced metallurgist. “Free housing, two cars, four weeks off annually, two plane tickets, basically no living expenses, and a salary starting at US$150, 000,” Michaud sadly explained because no a single has jumped at the offer. “In the field of metallurgy, including mill managers, metallurgical engineers, techs and operators, about 150 new jobs are offered every month.” Only about one-half will be filled. Michaud warned the copper mining firms had been in particularly dire straits to fill new job openings.
The U.S. Energy Info Administration announced in its most recently published annual statement, “The U.S. uranium production industry initiated a turnaround in 2004. All U.S. uranium drilling, mining, production, and employment activities increased for the very first time since 1998. More businesses conducted exploration and development drilling than within the prior 2 a long time. Employment inside the U.S. uranium production industry totaled 420 person-years, an boost of 31 percent from the 2003 total. Wyoming accounted for 33 percent with the total 2004 employment, whilst Colorado and Texas employment almost tripled given that 2003. Overall, $86.9 million went to drilling, production, land, exploration, reclamation and restoration activities in 2004.”
Whilst the spot uranium price continues rising, exploration businesses may find it harder to recruit veteran uranium geologists, to sign contracts for drill rigs, and to operate those people rigs. Nucor’s Calvert laughed, “Finding and keeping employees is definitely a problem.” Michaud explained, “Finding a metallurgist is hard adequate. Finding 1 with uranium experience is almost impossible.” David Miller, president of Strathmore Minerals, lamented, “Expertise in the uranium industry started with geologists who made discoveries in the late 1940s through the late 1970s. They trained the next generation, which coincided using the 1970s uranium boom. That boom was short lived and fizzled out by 1981. A extremely small amount of professionals continued inside the uranium industry, in the course of the twenty-year bear industry. Now that the number of uranium companies has skyrocketed to a lot more than 420, there’s a potentially catastrophic shortage of uranium expertise.” The generation gap has come to haunt the industry.
What’s the solution? Many, for example Michaud, believe, “Retired baby boomers are coming out of retirement to fill the generational gap and ride their last metal rush into the sunset.” Bloomberg News ran a story on December 8th discussing developments inside the oil sector, “U.S. producers and contractors for example Ryder Scott, which assesses drilling projects and oil and natural-gas reserves, are working harder to maintain their oldest employees and recruit college graduates since there aren’t adequate new engineers to go around. Engineers who assist locate petroleum deposits are in demand…”
Aging talent has found its way again into the uranium sector. Aging geologists for example Dr. Boen Tan, who helped discover two of the Key Lake uranium deposits in Canada’s uranium-rich Athabasca Basin in the early 1970s, is now helping Forum Development explore for new uranium deposits at its Costigan Lake, Key Lake Road and Maurice Point projects in Athabasca. Uranerz Energy’s entire advisory board consists of former Uranerz professionals, including top geologists, Dr. Franz Dahlkamp and Dr. Gerhard Ruhrmann. Respectively, they’ve 45 and almost 30 a long time knowledge in the sector. Strathmore Minerals geological team includes former Pathfinder Mines employees, a subsidiary of Cogema, including board member Dieter Krewedl, President David Miller, and vice president of technical services, John DeJoia. Some of these firms bring a lot more than 200 years of knowledge, collectively, to their new ventures. But without sufficient new mining school graduates to mentor below them, future exploration and development may turn out to be stalled.
What is troubling concerning the uranium marketplace, in specific, is that the soaring spot uranium price tag shows no signs of abating. The crisis comes at a time when President Bush announced his nuclear initiative, as a lot more U.S. utilities plan to add to the country’s nuclear fleet, and as China and India clamor for any reliable source of uranium to fuel their aggressive nuclear energy programs. Without having uranium for individuals reactors, the power plants won’t produce the electricity required to meet their demand. As an aside, uranium mining may be the stage in the nuclear fuel cycle in which the environmentalist fanatics are baring their teeth. This past November, an office manager at Albuquerque’s Southwest Research and Details Center, an anti-nuclear activist group reportedly funded by Mott’s Applesauce and Ben & Jerry’s ice cream, told us when we went undercover, “We desire to stop the front end from the nuclear fuel cycle, which is uranium mining.”
Don’t say the warnings weren’t created nicely in advance. At the World Nuclear Association (WNA) Symposium in 2004, Dr Moukhtar Dzhakishev, a Russian physicist and a former deputy minister of energy and mineral resources, presented his conclusions, “Firstly, normal uranium mining capacities can’t satisfy reactor requirements. Secondly, accumulated uranium inventories will be exhausted sooner or later. Thirdly, the spot price doesn’t reflect the actual issues and, on the contrary, is capable of misleading all of us concerning the urgency of investments to be created within the development of new mining facilities.”
In his speech, Dr. Dzhakishev emphasized for the WNA, “Judging by these facts, the conclusion is evident: 1 day nuclear power plants will face a organic uranium shortage and it can be not necessary being a prophet to foresee this. It’s clear today that the key towards the solution with the major problems with the uranium marketplace lies with the development from the possible of the uranium producers.”
This past August, Angela Jameson reported inside the online version from the London Times, “A GLOBAL shortage of uranium could jeopardise plans to build a new generation of nuclear power stations in Britain… a recent statement by the Asia Pacific Foundation of Canada said that there was likely to be a 45,000-tonne shortage of uranium inside the next decade, largely because of growing Chinese demand for the metal.”
The upward spiral with the commodities boom is racing ahead at full speed. Depending upon whom you talk to, the labor and drill rig shortage is either really bad or worse than you are able to possibly imagine. If you can find commodity inventory shortages right now, what happens by the end of this year, or later this decade, if current exploration efforts get grounded because companies lack the trained personnel, the proper equipment and the expertise to explore and/or develop their properties? You can’t run a drill rig if you can’t get your hands on a single. You can’t drill the property if you can’t discover drillers to run the rig. While commodities rates soar to levels not seen in twenty or thirty a long time, the tight labor and equipment market could ratchet costs to very much greater levels. And junior uranium development companies, with proven pounds-in-the-ground assets, should turn out to be sought-after acquisition targets by individuals who have the staff and drill rigs to bring the projects online.
For investors, the labor and drill rig shortage has a silver lining. As inventories dwindle lower, commodity rates will continue rising. For junior uranium investors, this may someday be realized because the “hidden reason” why spot uranium prices continued rising past $40/pound. In case you don’t drill for the commodity, you can’t locate it and develop it. This strengthens the case for $50/pound uranium in the near future. Now we understand why Strathmore Minerals’ David Miller warned us in November, “I wouldn’t be surprised to see uranium prices double once again.”
You can find more information about Canadian penny stock, cheap stock trading sites, and Barclays iShare sale
Leave a Reply