SNAPSHOT SURVEY FOR NORTH AMERCIAN-BASED MINING COMPANIES SURVEY RESULTS OCTOBER 2013

Transcription

1 SNAPSHOT SURVEY FOR NORTH AMERCIAN-BASED MINING COMPANIES SURVEY RESULTS OCTOBER 2013

2 Introduction During September, Mercer conducted a snapshot survey on key compensation, retention, and recruiting trends within the mining sector in North America. The survey was conducted to obtain a pulse on what organizations are doing to cope with the challenges facing the mining industry, as well as the continued volatility in financial markets. The findings from the survey are presented in this report. Thank you for your participation! MERCER 1

3 Market Pay Context The declining trend in commodity prices creates challenging business conditions and sets the landscape for pay decisions Source: MERCER 2

4 Snapshot Survey Results Participant List Thirty-seven organizations participated in the survey: Agnico Eagle Mines Alliance Coal LLC Allied Nevada Gold Corp. Arch Coal, Inc. Atna Resources Ltd. AuRico Gold Inc. Barrick Gold BHP Billiton Canada Inc. BNI Coal, Ltd. Cameco Corp. Capstone Mining Corp. Claude Resources Inc. Detour Gold Corp. Doe Run Dundee Precious Metals Inc. Eldorado Gold Corp. Freeport-McMoRan Copper & Gold Goldcorp Graymont Ltd. Hecla Mining Company IAMGOLD Corp. Intrepid Potash Kinross Gold Corp. Lake Shore Gold Corp. Luck Companies New Gold Inc. Newmont Mining Corp. NovaCopper Inc. NovaGold Resources Inc. Pan American Silver Corp. PNG Gold Corp. Potash Corporation Of Saskatchewan Rio Tinto Silver Wheaton Teck Resources Thompson Creek Metals Company Uranium One Inc. MERCER 3

5 Participant Demographics A balanced mix between Canadian and US headquartered companies with varying revenue and employee counts Corporate Office Location (N = 37) Revenue Size Number of Organizations (N = 37) US 41% Under 50M 50M < 99M 100M < 499M 500M < 999M 1B < 5B Over 5B N/A Canada 59% Number of Employees Number of Organizations (N = 37) Less than to to 1,000 1,001 to 5,000 Over 5,000 MERCER 4

6 Participant Demographics Strong representation of gold companies along with base and other precious metals; average number of mine sites ranges from three to six in Canada, the US, and International locations Gold Commodity Mined Number of Organizations (N = 37) Number of Mine Sites (N = 32) Base Metals 10 7 Other Precious Other Minerals %ile Average Industrial Minerals %ile Coal %ile Not applicable 1 0 Canada US International MERCER 5

7 Projected Salary Increases Median 2014 projected base salary increases are 3.0% in Canada and the US across job categories; median projected increases in other geographies range from 3.0% to 5.5% Question 1 What is your organization s projected base salary increase for 2014? Canada US From Other Geographies To N P50 Avg. N P50 Avg. N P50 Avg. N P50 Avg. Senior Executives Other Corporate Employees Mine Site Employees MERCER 6

8 Prevalence of Salary Freezes Only 11% of participants are considering salary freezes in 2014; no participants are considering salary reductions Question 2 Are you planning any salary freezes or salary reductions for 2014? Salary Freeze (N = 37) Yes 11% (N = 4) Sub-question: If yes, what jobs/job families will be impacted? Number of Organizations (N = 4) Top Executives Senior Management 4 4 Other Management Mine Site Other 3 3 No 89% (N = 33) Administrative Support Mine Site Management Professional/Technical Note: No company reported any salary reductions for MERCER 7

9 Headcount Reductions in 2013 Challenging business conditions have caused almost 40% of participants to reduce headcount in 2013; exploration, finance/administration, and human resources roles were most affected Question 3 Has your organization reduced headcount in 2013 compared to 2012? No 62% (N = 23) Yes 38% (N = 14) Sub-question: If yes, what jobs/job families will be impacted? Number of Organizations (N = 14) Exploration Finance & Administration Human Resources Mine Site Staff Executives/Top Management Information Technology Mine Site Employees Legal & Compliance Safety Scientific/Engineering Sustainability Marketing/Sales Other MERCER 8

10 Anticipated Headcount Reductions in 2014 Close to 60% of participants do not anticipate headcount changes in 2014 for corporate or mine site employees Question 4 In fiscal 2014, do you plan to increase or decrease headcount in the following areas? Corporate Employees (N = 37) Mine Site Employees (N = 35) Increase 22% (N = 8) Increase 23% (N = 8) No change 59% (N = 22) Decrease 19% (N = 7) No change 60% (N = 21) Decrease 17% (N = 6) MERCER 9

11 Expected 2013 Corporate Performance Results Due to current business conditions, 52% of participants expect that 2013 corporate performance results will be below target Question 5 For the 2013 annual short-term incentive program, what is the forecasted corporate performance versus established goals? At least threshold but below target Percent of Total (N = 35) 43% At least target but below maximum 37% Other 11% Below threshold 9% 52% Near maximum 0% MERCER 10

12 Anticipated 2013 Bonus Payouts The majority of participants expect 2013 bonus payouts to be within + or 10% of 2012 awards; a sizeable proportion expect 2013 payouts to below 2012 levels Question 6 Please indicate the expected trend for 2013 bonus payouts relative to 2012 awards. Below 2012 Flat Above 2012 N Down more than 30% Below 20% to 30% Below 10% to 20% +/- 10% of 2012 Above 10% to 20% Above more than 20% Senior Executives 33 9% 21% 15% 42% 6% 6% Other Corporate Employees 32 6% 22% 13% 50% 3% 6% Senior Mine Management Personnel North America Other Mine Management North America Senior Mine Management Personnel Outside of North America Other Mine Management Personnel Outside of North America 29 10% 10% 17% 59% 3% 0% 29 7% 17% 14% 59% 3% 0% 22 5% 9% 23% 64% 0% 0% 21 0% 14% 19% 67% 0% 0% MERCER 11

13 Use of Negative Discretion 29% of participants expect negative discretion will be applied to formula results in determining bonus awards to better align payouts with shareholders views of overall 2013 performance Question 7 Due to low commodity prices, asset write-downs and the resulting negative impact on share price performance, do you anticipate the use of negative discretion in determining annual incentive payouts? Yes 29% (N = 10) Sub-question: negative discretion may reduce annual incentives by up to: >30% (N = 3) 0% - 10% (N = 3) No 71% (N = 25) 11% - 20% (N = 3) MERCER 12

14 Performance Results for PSU Performance Cycles Ending in 2013 Close to 60% of participants expect that performance on metrics in PSU plans will be below target Question 8 For 2013 LTIP awards, what is the expected performance versus established goals? (This question is applicable to LTIPs with a performance cycle ending in fiscal 2013.) At least threshold but below target Percent of Total (N = 31) 48% At least target but below maximum 19% Other 19% Below threshold 10% 58% Near maximum 3% MERCER 13

15 Determination of 2013 LTI Grants The vast majority of participants plan to determine LTI grants in accordance with standard grant guidelines, despite share price declines Question 9 Due to low commodity prices, asset write-downs and the resulting negative impact on share price performance, do you anticipate making LTI grants in accordance with your standard grant guidelines? No (1) 6% (N = 2) No (2) 12% (N = 4) Sub-question: what is the anticipated reduction in LTI awards? 0% - 10% (N = 1) 11%-20% (N = 1) Yes 82% (N = 27) >30% (N = 4) (1) No, due to share dilution it is anticipated that LTI grants will be below current grant guidelines. (2) No, due to reduction in share price it is anticipated that LTI grants will be below current grant guidelines. MERCER 14

16 Link Between Compensation and Risk Management Risk is managed through the use of balanced performance measures and multi-year performance periods; only 19% of participants have adopted claw-back policies Question 10 What (if anything) has your organization done to link compensation and risk management? Percent of Total (N = 36) Balance of measures, financial and non-financial 53% Measure performance over a multi-year period 36% We haven t done anything 28% Increased use of discretion 28% Increased share ownership requirements 22% Introduction of claw-backs 19% Payouts aligned with risk time horizons 6% Other 3% MERCER 15

17 Changes to Compensation Policy Changes to LTI design/vehicles and STI plan design were the most common compensation policy changes reported for the last 12 months and anticipated in the next 12 months Question 11 Has your organization implemented any of the following changes to its remuneration policy in the last 12 months, or does it plan on making changes in fiscal 2014? Percent of Total Last 12 Months Next 12 Months Long-term Incentive design / vehicles (N = 37) 32% 26% 58% Short-term incentive design (N = 37) 19% 27% 46% Mix of pay between salary, annual bonus and long-term incentives (N = 36) 8% 19% 27% Communication policies (N = 34) 12% 9% 21% Employment contracts (N = 33) 6% 9% 15% Severance Policies (N = 34) 6% 9% 15% Mandatory deferrals (N = 32) 6% 3% 9% Other 0% (N = 6) 0% MERCER 16

18 Pay Mix For select respondents the proportion of LTI in the overall pay package is increasing with the use of stock options decreasing Question 12 If your organization is planning to make changes to its pay mix in fiscal 2014, please indicate in which of the following areas changes will be made. Decrease in Pay Mix (N = 30) Increase in Pay Mix (N = 30) Stock Options within LTI Mix 5 LTI 4 Annual bonus 2 Annual bonus 2 Base salary 2 Base salary 1 LTI 2 Mandatory deferral 1 Benefits 2 Benefits 1 Mandatory deferral 0 Stock Options within LTI Mix 0 MERCER 17

19 Retention Strategies Almost half of the participants do not plan to implement retention strategies Question 13 Has your organization implemented any retention strategies for key employees in the last 12 months, or is it planning to do so in fiscal 2014? Percent of Total (N = 35) We have no plans to implement a retention strategy 46% Other 26% Introduce cash incentive (e.g., 18 month stay bonus) 17% Enhance existing severance policies Off cycle LTI grants 6% 6% Enhance existing retirement program(s) 3% MERCER 18

20 Mandatory Bonus Deferrals Mandatory bonus deferrals are not common and generally not being contemplated Question 14 Does your organization have a mandatory bonus deferral program? Yes 3% (N = 1) Question 15 Is your organization planning on implementing a mandatory bonus deferral program in fiscal 2013? Yes 5% (N = 2) No 97% (N = 36) No 95% (N = 35) MERCER 19

21 LTI Plan Changes Changes to LTI plan designs/structures and performance measures were the most common changes reported; the introduction of internal metrics to complement external, total shareholder return metrics in PSU plans is a trend. Question 16 Has your organization made any of the following changes to its LTI plan in the last six months, or does it plan on implementing changes in fiscal 2014? Percent of Total (N = 35) No changes 51% Revised LTI plan design / structure 34% Revised performance measures 23% Revised eligibility 20% Revised number of LTI plans 9% Revised target / max values 9% MERCER 20

22 Other Compensation Actions Reported Question 17 Are there any other compensation actions that you are planning in light of the current economic conditions? Considering granting restricted share units for manager positions and above and discontinuing stock option awards for levels below executive. Introducing PSUs to the LTI program for senior executives. Considering changes to LTI plan vesting period. May defer base salary increases to MERCER 21

23 Contact Information For Questions or Additional Information Ailsa Forsgren Partner Vancouver Andrew Duffy Principal Toronto Raphael Katsman Principal Seattle MERCER 22

24 Mercer (Canada) Limited