BOOM BUST BOOM (2009)

(Published by the Geological Society of Australia, Inc. in The Australian Geologist, Newsletter Number 151, June 2009 pp. 43-44)

The Australian minerals exploration industry – as its practitioners have known it – has come to pass. In fact, the death knell was sounded in the late 1990’s though it wasn’t obvious at the time.

As society began rebuilding after WW2, the demand for raw materials gradually escalated until it outstripped supply, thereby rendering the mining business highly profitable. The industry was undoubtedly cyclical, as evidenced by the various booms: uranium in the 1950’s, nickel & iron ore in the 1960’s then nickel, uranium & coal in the 1970’s followed by gold in the 1980’s and early1990’s and then all commodities in the early 2000’s.

Starting in the 1960’s, Australia began needing geologists to find resources as well as engineers to exploit them. Mining companies were at the forefront of wealth creation and enthusiastically hired all specialist graduates from the various schools of mines, technical colleges and universities. The reasoning was straightforward: successful companies were run by people with engineering backgrounds and an engineer’s discipline requires a sound base on which to build an enduring structure; in this instance, knowledge.

Whilst prospecting entrepreneurs made some individual discoveries, well-funded companies made others. The bigger resources were subsequently harvested by a few and then developed into export operations. The lineage of the architects and drivers of these enterprises can be traced back to the discovery of the Broken Hill lead-zinc lodes in 1883.

But the business paradigm began changing in the early 1990’s with financiers replacing an aging generation of experienced mining men. Two things happened: resource operations were effectively consolidated into an oligopoly and exploration was abandoned. Suddenly, the raising of risk capital on the stock exchange became limited to modest amounts that precluded the formation of the most critical component: the foundational knowledge base. Unsurprisingly, discoveries slowed to a trickle.

The increased amplitude and volatility of the mining/exploration business cycle has produced a drifting away of seasoned professionals who still have mortgages to pay and families to feed. For most, capitulation acquires its own permanence and so subsequent booms sire progressively more chronic skill shortages. By fixating on instant gratification, the bottom line and Quarterly performance reviews, the long-term viability of resource producers has been compromised by the very same players behind the current global financial crisis.

But further down the track, why should dedicated professionals risk all by returning to the industry to make that next discovery? A smaller number of hardy souls with indomitable spirits will undoubtedly report for duty along with the next crop of rosy-cheeked graduates, but their fate is written in the stones: in the blink of an eye they will be consumed by a voracious, glassy-eyed omnivore.

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