23/10/2007 - 22:00

People the missing ingredient

23/10/2007 - 22:00

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Australia’s skills shortage is, for most people, a nuisance rather than a serious problem. It frays tempers when people are waiting for service in coffee shops, or when encountering a receptionist who’s “only been in the job for a few days” (code for ‘‘I haven’t got a clue what I’m doing”).

But, last week, Briefcase saw how the skills shortage has the potential to be much more than a frustration, and how it could mean missed opportunities, or even wreck some bright business ideas.

Three case studies stood out. One involved a company struggling to complete a feasibility study into developing a new mine. The second, a remarkable business opportunity just sitting because there’s nobody to run it, and the third the apparent inability of Australia’s principal intelligence agency to attract future spies.

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Case study one

Vulcan Resources is an ambitious Perth-based explorer close to completing a feasibility study into a series of copper and nickel mines in Finland.

In theory, it should be easy. Finland might be remote and cold, but it has a deeply entrenched mining culture, a pro-mining government, and plenty of mining skills.

Why, then, is the feasibility study running late, and why is Vulcan’s normally good-natured chief executive, Alistair Cowden, banging his head against the wall (metaphorically speaking, of course)?

The answer is that Vulcan is small, its flagship Kylylahti project is small, and most of the skilled consultants are working for bigger companies with bigger projects.

According to Mr Cowden, a project like his would once have attracted the best engineers and technical specialists. Today, it gets whoever is available – and even then “you only get the team leader for 10 per cent of his time”.

Somehow, Vulcan will muddle through. It will resolve last minute and extremely annoying issues such as what to do with cadmium in its ore stream, and a question about how to handle iron residue from the mineral treatment process.

These are matters, which Mr Cowden believes should have been identified and resolved months ago; not now, just as the company gets ready to knock on the doors of its bankers for the debt required to finalise funding of the mine.

What Briefcase saw with Vulcan – a case of the skills shortage whacking a company over the head – is being repeated on a daily basis.

For management and investors, it is frustrating.

For Briefcase it’s the starting point for future stories, which will one day explain why a bright idea didn’t work.

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Case study two

Mercator Gold is redeveloping a gold mine at Meekatharra, a town once dubbed the end of the earth by Tamie Fraser, wife of former prime minister, Malcolm Fraser.

So far, Mercator has done a serviceable job and should do even better as the gold price rises.

But in a shed at its Meekatharra operations is one of the biggest assay laboratories that Briefcase has ever seen – and it’s not being used.

A previous manager at Meekatharra built the assay lab because he believed Meekatharra was the centre of the earth, not the end. He was wrong.

Roll forward to the current mining boom and consider (a) the two- to three-month wait for assay results from labs in Perth or Kalgoorlie, (b) that Meekatharra is only a short drive (by WA standards) from the Pilbara iron ore country, and (c) that mining companies flush with cash will pay top dollar for a fast turnaround on their assays – and then you can see how Mercator’s empty assay lab represents a brilliant business idea.

That is until you discover that there are not enough technical experts around to run an assay lab and, apart from that, no-one really wants to live in Meekatharra when life on the coast is so much more comfortable.

Mercator has spoken to at least one assay company and suggested that it open a Meekatharra branch using the dormant facilities.

The answer…too busy, too far, and no people.

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Case study three

Asio, the Australian Security Intelligence Organisation, has been running advertisements for months now seeking applications from prospective spooks.

There’s nothing wrong with that. In fact, it’s good to see such an essential government service, which is normally cloaked in secrecy, being more open in the way it relates with the public.

But as Briefcase read the latest advertisement, which was headed ‘The last ad I’ll ever write’ – because it was claimed the author would next be applying to join Asio – a few dark thoughts occurred.

Was the ad truthful, and why did it appear to be so desperate?

Firstly, it can only be assumed that it was truthful and that the author did really apply for an Asio job. Truth, after all, is what Asio is all about. Just ask Dr Mohamed Haneef.

Secondly, the desperation in the wording points to Asio struggling to fill its ranks which leads to the question of why, and the corollary question of why has the advertising campaign been running for so long.

The answer is almost certainly a combination of there not being enough skilled people, and no sensible person really wants to work for government.

•••

As a final thought, Briefcase trusts that all its readers made it safely past the 20th anniversary for the ’87 crash – and didn’t get too bored by the countless pages of newspaper and magazine articles raking over old coals.

However, since the topic was raised, it has become quite fascinating to look at the current business environment and see, if you look closely enough, the seeds of the next big correction.

What most worries Briefcase is a combination of…

1. Oil prices. Perhaps not a showstopper for energy-rich countries like Australia, but oil heading for $US100 a barrel is certainly going to slow global growth, and might even slow China.

2. Sub-prime yet to reach a crisis. That comes next year when low interest rate starter loans are re-set to higher rates and mortgage defaults bloom, and American consumers stop spending because they suddenly feel poorer because of tumbling house prices.

3. Currency adjustments. The falling US dollar will drive up inflation in that country, while its decline causes profits for Australian exporters to tumble. Central banks are walking a fine line and one slip could be a disaster.

4. China rediscovers its peasants. There’s trouble brewing in the back-blocks of China for the oldest reason of all – the rich in the cities are getting richer, and the poor on the land are getting poorer. At some point China must re-allocate its spending away from high-rise buildings and bridge in its cities and back to social services in the countryside. The effect on commodity imports, especially iron ore, could be quite dramatic.

Is this leading to a crash? Perhaps, but probably not until just before the 2008 Olympics in Beijing when this cocktail of trouble is mixed.

•••

 “Men make counterfeit money. In many more cases, money makes counterfeit men.” Sydney Harris

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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