LARGE SCALE CHILEAN MINING WORKFORCE REPORT Forecast and recomendations

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1 Executive summary LARGE SCALE CHILEAN MINING WORKFORCE REPORT Forecast and recomendations An initiative of: Prepared by: 1

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3 Executive summary LARGE SCALE CHILEAN MINING WORKFORCE REPORT Forecast and recomendations An initiative of: Prepared by:

4 Executive summary The present study is an initiative of the Consejo Minero s (Chilean Mining Council) Mining Skills Council (CCM). Its purpose is to gauge the gaps in human capital that the major copper, gold, and silver mining companies in Chile will face as a result of the investments projected for the upcoming years. Eleven large-scale mining companies and 20 contractor companies participated in this study, providing detailed information of their current work-force. The study projected the demand for human capital according to 15 entry profiles key to the extraction, processing, and maintenance processes ( main value chain ). These estimates were based on information from 23 investment projects that are to start operations by Only mining operation personnel was considered; engineering and construction was not a part of this study. The information collected confirms that during the upcoming years there will be an important demand for qualified human capital: 37,638 workers, including the replacement of 12,373 workers who will reach potential retirement age. These 37,638 workers represent an increase of 24.5% with regards to the current workforce operating within the main value chain (internal personnel as well as contractors). Even though this figure is lower than the one projected in the first edition of the study published in 2012, it is a number of individuals that far surpasses the projected flow of graduates and qualified workers from training programs in their various levels and different methods/modalities. Therefore, this remains a crucial challenge for the mining industry - as well as an opportunity for those being trained in accordance to industry needs. Accumulated demand over the study period 4 Demand due to Replacement (potential retirement) Demand for projects

5 Accumulated demand over the study period Demand due to Replacement (potential retirement) Demand for projects Total demand Internal Suppliers Total Internal Suppliers Total Internal Suppliers Total 1,458 1,202 2, ,478 1,949 1,929 2,680 4,609 2,033 1,530 3, ,938 3,883 2,933 4,513 7,446 2,634 1,831 4,465 2,301 6,974 9,275 4,935 8,804 13,740 3,295 2,226 5,521 2,930 9,059 11,989 6,225 11,285 17,510 3,989 2,658 6,647 3,854 10,104 13,958 7,843 12,762 20,605 4,696 3,158 7,855 4,678 12,001 16,679 9,374 15,160 24,534 5,446 3,702 9,148 5,407 15,518 20,925 10,853 19,220 30,073 6,227 4,371 10,597 6,992 16,520 23,512 13,218 20,891 34,109 7,064 5,310 12,373 7,537 17,728 25,265 14,600 23,038 37,638 Gaps by profile (in number of persons, includes potential retirement) Total annualized demand by profile Total Gap Geologist Mine extraction professional Processing professional Maintenance professional Engineer-extraction specialist Engineer-processing specialist Engineer-maintenance specialist Extraction supervisor Processing supervisor Maintenance supervisor Mobile equipment operator Fixed equipment operator Mechanical maintenance Electrical maintenance Other geology occupations , , , , , , , , , , ,530 1, ,390 1,276-1,242-8,589-3,856-12, ,354 Total -3,128-1,085-4,237-1, ,378-2, ,813 Among the most relevant human capital gaps detected in the study are the cases of profiles associated with maintenance and fixed plant and mobile equipment operators (post-secondary studies not required). This is due to a combination of elements: In the case of Maintenance, the fact is that the number of undergraduate degree study programs increased by only 1% over the past year, a highly insufficient number to close projected gap by In additional, graduates of these programs have the possibility of a wider spectrum of work other than large-scale mining, a sector that attracts a marginal number of these professionals and technicians. In the case of Mobile and Fixed Plant Operators, the nonexistence of a robust supply of courses based on labor skills relevant to the mining industry translates into a low availability of potential workers possessing basic field qualifications. The supply of graduates from technical education institutions and professionals from programs focused on mining (geology, mining engineers, and metallurgy) seems adequate to satisfy the projected demand. Nonetheless, it is clear that companies restrict their search for mining technical staff and professionals to a select group of Institutions. 5

6 The information collected allows for a detailed characterization of the current workforce employed by the large-scale mining industry, providing key information on where to focus training initiatives, as well as attracting and retaining workers. Finally, the challenge of mitigating the detected gaps requires a significant increase in the efforts of both the public and private sectors in the implementation of trade and undergraduate programs; thus ensuring that Chile will have the necessary human capital required for world-class mining. Conclusions Demand trends Large-scale Chilean mining is preparing to execute a portfolio of investments, comprised of projects whose purpose is to renovate the productive capacity of current mining deposits or to initiate the exploitation of new copper, gold, and silver deposits. These projects are currently in the feasibility phase and, according to information reported by the mining companies, have a high probability of execution. The start-up of these investment projects involves the creation of 25, 265 new jobs within the main value chain, which represents an increase of 24.5% with regards to the current workforce, considering internal as well as contractor staff. Considering that in addition to these new work-posts there will be a need to replace 12,373 workers over 60 years of age in the period spanning (eligible to retire from the industry), it is concluded that the companies of this sector (mining and permanent contractors) must recruit a total of 37,638 individuals for this period. This last figure represents 36.6% of the current workforce in the main value chain. Net demand in study period 6 Demand internal (Projects + Retirement) Demand suppliers (Projects + Retirement) Total demand

7 Total annualized demand by profile Total Geologist Mine extraction professional Processing professional Maintenance professional Extraction supervisor Processing supervisor Engineer-maintenance specialist Mobile equipment operator Engineer-extraction specialist Fixed equipment operator Mechanical maintenance Engineer-processing specialist Other occupations-geology field Maintenance supervisor Electrical maintenance , , , , , , , , , , , , , ,021 8, ,856 15, ,654 3,483 Total 4,609 2,837 6,294 3,770 3,095 3,929 5,540 4,036 3,529 37,638 The numbers reported from the 2012 study were larger, estimating that demand would total 44,256 workers. This relative drop in demand for human capital can be explained by a number of factors. First, the global mining scenario has resulted in the postponement of the construction and implementation phases of some projects. Second, the companies participating in the study adjusted the planning of their workforces, applying more demanding parameters to labor productivity within their operations, which translates into fewer individuals per ton produced. A third factor that explains the difference between both estimates of demand is that the present report considers the projections that span from , whereas the previous study analyzed the period. In any case, these figures show that, should projected investments through 2020 be maintained, then an important increase in the demand for qualified workers in occupations linked to extraction, processing, and maintenance processes will be observed. Finally, it is important to underscore that this demand has a qualitative as well as quantitative dimension, given that companies of this sector require access to a supply of employees who have the specific technical work skills required to productively occupy the available work positions. Trends in the offer of graduates This report s estimates suggest that the supply of human capital with skills orientated towards mining will grow, as a result of expanded enrollment in training and education programs focused on mining specialties, such as geology, mining engineering, and metallurgy. The abundant information publicly circulating regarding the growing demand for mining workers and the positive return rates for study programs leading to technical and professional degrees, have estimulated professional institutes, technical formation centers and universities to open up new areas and vacancies for this specialty. 7

8 Higer education enrollment; programs related to mining (in thousands of people) Universities Profesional institutes Technical Training Centers * Only trend presented for 2011 The situation is completely different. In the case of Maintenance specialties, where according to this report s estimates enrollment for undergraduate programs will only grow marginally, around 1%, for the period analyzed. For the case of training in trades related to operators of fixed and mobile equipment, in the maintenance of equipment and plants, it can be observed that there is an insufficient supply of programs and courses. As a consequence, mining companies and contractors are obliged to develop on-the-job training programs, which lead to an unnecessary increase in the size of their payroll and the number of supervisors, as well as eventual problems with the quality of their tasks, greater exposure to risks, etc. Supply of graduates 8 Supply of graduates attracted by mining Total supply of graduates

9 Supply of graduates by profile (accumulated as of 2020) Given that Chile has no official recognition of trade programs, nor is there an official universal register of programs available, it is difficult to collect information regarding the number of workers who have had this experience. This makes it difficult to estimate the evolution of the adequately qualified workforce. The existence of a labor skills certification would surely contribute to reducing this asymmetry of information within the mining labor market. 9

10 Key gaps and the eventual excess offer of graduates This study concludes that the greatest gaps are found in professionals and technicians in the Maintenance specialty, as well as entry-level specialties for mobile and fixed plant operators and mechanical and electrical maintenance staff. Projected supply and demand Supply of graduates Total demand 2012 (includes potential retirement) When observing gaps per profile, theoretically one can verify that there are sufficient technicians and professionals who graduate from careers associated to mining. This situation suggests that if adequate recruitment and retention strategies are implemented and if current information asymmetries are overcome, the supply and demand of work should converge, particularly in the case of specific technical and professional profiles, excepting that of fixed and mobile equipment operators. Gaps by profile 10

11 Nonetheless, it is necessary to consider that the recruitment criteria and standards used by mining companies and contractors usually incorporate perceptions on the quality of training institutes and of technicians and professionals they train. In this sense, even though the estimates carried out by this report indicate an adequate supply of graduates, which could even surpass the detected demand in the case of particular profiles, this does not necessarily translate into a reduction of gaps detected. As a matter of fact, companies frequently restrict their search for mining professionals and technical staff to a select group of training institutions; not necessarily including those that are increasing their number of programs and available openings. Profile Mobile equipment operators Fixed plant operators Electrical Maintenance Mechanical Maintenance Maintenance Supervisor Processing Supervisor Extraction Supervisor Engineer-Maintenance specialist Maintenance Professional Mine Extraction Professional Geologist Processing Professional Engineer-Processing specialist Other geology occupations Engineer- Extraction specialist Gap -8,589-3, ,587-1,242 1,201 2, ,183 1,201 1,356 2,530 Trade Training Trade Training Recruitment 3rd party training supply linked to the CCM s Qualifications Framework 3rd party training supply linked to the CCM s Qualifications Framework Recruitment Recruitment Adequate supply Necessary action 11

12 12 Some recommendations for the sectorial strategy of human capital The main proposal of the Chilean Large-scale Mining Workforce, Diagnostics and Recommendations report, was to count on a strategy, as an entire sector, to address gaps in the supply and demand for workers that have been identified. The proposed strategy centered on defining with the greatest possible precision the generic and specific labor skills for critical profiles related to the main value chain; defining referential quality standards for education and training of world-class miners; stimulating development of a more robust supply of educational and training programs within the short-term to address gaps detected by the study, in order to better promote the Large-scale Mining sector as an attractive employer. Aligned with these recommendations, during 2012 the Consejo Minero established the Mining Skills Council (CCM), which defined a strategic plan of action for the aforementioned recommendations over the next four years. One of the main outcomes in the advancement of this action plan is the Labor Ministry s interest in using the information provided by CCM to focalize resources for Trade Training Programs in this sector, giving disadvantaged individuals the opportunity to train as Maintenance staff and Operators. Furthermore, the assessment motivated important providers of Technical and Professional Formation Institutes to evaluate the possibility, and in some cases decide, to widen and strengthen their supply of programs related to specializations relevant to the mining industry. The conclusions of the present study have key implications for the successful development of the agenda that CCM is leading, which are described below. Attracting maintenance technicians and professionals The clear conclusion of this study is the need to focus efforts on the recruitment of Maintenance technicians and professionals. The current recruitment rate of for this select group of qualified personnel in mining is insufficient. Additional and better trade training for mining The training in trades, conducive to the development of work skills through training courses lasting from 300 to 700 hours, emerges as an indispensable need to be incorporated within the deadlines determined in this study, both for Operations as well as Maintenance Specialties. Due to its focused and modular character, the training of trades presents itself as a low-cost opportunity with high profitability to increase the employability of those who are interested in entering Large-Scale Mining but do not possess the formal technical or professional qualifications. Currently, there is no articulated supply based on standards that satisfies this requirement. Broad-based dissemination of the Mining Qualifications Framework (MCM) The need for a Mining Qualifications Framework is self-evident, one that organizes required profiles in occupational scopes and levels of complexity. The CCM recently developed this standard of reference to be available openly and publically to all current and potential training institutions/providers, as well as public authorities responsible for training in trades, especially those administered by SENCE. According to information collected by the present study, the trade programs most urgently needed correspond to the 1st and 2nd Levels of the Mining Qualifications Framework, in the following specialties: Mobile Operators, Fixed Plant Operators, Mechanical Maintenance and Electrical Maintenance/Instrumentalist. Additionally, the content of the Mining Qualifications Framework can contribute significantly toward improving the curricular pertinence of training programs offered by technical-vocational schools. An interested party for this feedback is the Labor Ministry, which must periodically present the curricular objectives of technical-vocational specialties to the National Education Council. The information provided by the present study and by the Mining Qualifications Framework can have a major impact on the pertinence of these programs.

13 Pertinence of technical training programs at post-secondary school levels Increase impact of programs that incorporate women into large-scale mining The training-educational market has responded rapidly to the signals communicated by the Large-scale Mining sector regarding the lack of post-secondary school technicians, but with an bias toward specialties that are inherently related to mining (geology, extraction processes) that are not in alignment with the empirical evidence collected by this study. The priority for technical post-secondary training should be programs for mechanical and electrical maintenance specialties, corresponding to levels 1 through 5 of the Mining Qualifications Framework. Various sources indicate that Chile is close to a fullemployment scenario. In the case of regions where there are mining sites, this situation is even more accentuated. However, women s participation in the labor market is still low, particularly in the mining industry. In this context, promoting the incorporation of women into the sector remains an excellent opportunity that carries both social and private benefits. The purpose of certifying work skills is to reduce the asymmetry of information regarding the supply and demand of labor, which increases transaction costs in labor markets with frictional unemployment rates. The full employment of mining regions and highly specialized demand for human capital on the part of mining companies and contractors make certification a particularly effective tool for the case of Largescale Mining. The sector must promote institutional adjustments that allow for the installment of a permanent supply of certification based on the Mining Qualifications Framework, with a methodology that incorporates a trade-off between maximum validity and cost-effectiveness in the evaluation and certification processes, with reliable quality seals for the sector s companies. Reduce impact of loss of talent due to early retirement The study demonstrates that a significant percentage of workers retire from the industry as of 50 years of age. Making efforts to retain workers that are over 50 and adjusting certain work conditions constitute a new necessity for the industry. Complementarily, and to the end of not losing the mining talent of workers who wish to retire early, there are abundant opportunities to contribute in roles such as technical mentoring, induction and labor instruction role or the evaluation of Work Skills, amongst others. Promote certification of work skills Recent evidence indicates that campaigns focused on attracting women to mining will have a low impact and scale if structural obstacles are not resolved to incorporate them into the sector. Investment in adequate infrastructure at sites and camps and promotion of a cultural change toward values and practices that favor the incorporation of women can be decisive to the success of any program to recruit, and in particular retain, female talent. 13

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