They say you can judge the health of the mining business by the escalators at the Toronto Metro Convention Center during the annual Prospectors & Developers Association of Canada (PDAC) convention. Among other things, it offers miners a chance to discuss their projects and prospects with bankers and investors. Empty escalators signal tough times ahead for the mining business, but that was not the case this year. Indeed, it was quite the opposite with security holding back the crowds at times.

In the PDAC press room, the mergers taking place with the gold majors created a lot of chatter among the business writers that cover the mining sector. Barrick Gold was making a play for Newmont Mining, who was trying to merge with Goldcorp. Barrick itself had just merged with Randgold. At the time, it looked like four gold majors could soon become one. The Barrick and Newmont CEOs were trading barbs and these writers finally had some juicy quotes, but they couldn’t answer one of the five W’s: Why?

The mining companies explained repeatedly how shareholders would benefit, but they didn’t explain why they really need these economies of scale. One answer could be the loss of leadership and expertise, or the brain drain, as many executives and midlevel managers in this business retire. The mining drought that was the 1990s has created a generational gap between the upper echelons and the young leaders brought on board by the supercycle that began in 2004-2005. Another answer could be the benefits of working together or the synergistic values, but that only really applies to mines operating in the same conditions in the same region. This would also explain why Barrick called off the Newmont takeover and settled for a joint venture in Nevada as this edition was going to press.

At the same time, the Brazilian iron ore industry was beginning to show signs of fallout from the dam failure at Vale’s Córrego de Feijão mine. The government has banned all tailings dams in the country built by the upstream method, which will take a significant amount of iron ore production offline. Several Vale executives in Brazil resigned. While this tragedy hasn’t impacted iron ore markets as much as most analysts predicted, the liabilities associated with tailings disposal has the attention of every mining executive.

Half a world away, South Africa is also witnessing massive changes. Much of it is detailed in the 2019 Indaba Report. Newly elected politicians recognize the opportunities tied to mineral resources and they have adopted a more pro-business approach to mining. Like turning a large ship, however, this will take time. A lot of damage was inflicted upon the mining sector by the previous Zuma administration, which also allowed thieves to gut Eskom, the national utility. It’s sad to see a country with vast coal reserves and a massive power generation network struggle to produce electricity. Without access to affordable, reliable energy, South Africa faces uncertainty.

What, if anything, can we learn from all of this? Values matter. Engineering expertise — the ability to recognize and solve problems — is incredibly important to any organization. Just as inspired leadership drives an organization, the lack of it will bring it to its knees. Enjoy this edition.

Steve Fiscor, Publisher & Editor-in-Chief, E&MJ