Mining sector facing impacts of rising costs and macro pressures – MinterEllison report

3 minute read  03.10.2022

Mining executives discussed their concerns about rising costs, labour shortages, inflationary pressure, supply chain and global macroeconomic issues.


Key takeouts


  • Labour shortages for skilled and unskilled workers remains a critical industry challenge
  • There is more commitment and effort to prevent sexual harassment and create safe and inclusive workplaces
  • Escalating costs are contributing to capital expenditure blow-outs and shrinking margins – concern to boards

Recent research conducted by MinterEllison with executives in the Western Australian mining sector reflects their concerns about rising costs, labour shortages, inflationary pressure, supply chain and global macroeconomic issues. There is still an appetite for mergers and acquisitions. Businesses have long-term optimism but are bracing for short to medium term challenges.

Australia's mining and mining services sector is experiencing strong performance, with resource and energy export earnings forecast to rise to a record $419 billion in 2022-23. However, as organisations grapple with increasing cost, operational and reputational concerns, the research findings reflect that the outlook will become more challenging in the short term.

Three key issues facing the mining and mining services sector

  1. Ongoing impacts of labour shortages. Respondents noted that labour shortages were top of mind, and said that both skilled and unskilled workers were affected. They indicated shortages of geologists, mining engineers, drillers, jumbo operators, blast hole drillers, surveyors, auto-electricians, heavy diesel operators and shift bosses. Executives also highlighted the shortage of head office staff.
  2. Sexual harassment, diversity and inclusiveness in the FIFO sector. Recent and consistent publicity about sexual harassment in the FIFO sector indicates the importance of this issue. All executives indicated they were increasingly focused on creating safe and inclusive workforces in the FIFO sector.
  3. Escalating costs, supply chain and logistics challenges. Cost escalation is a significant issue dominating boardroom discussions. Wage escalation, supply chain and logistics, diesel, raw materials and 'access to all the things you need to build a mine' are leading to big blowouts in capital expenditure and eroding profit margins.

MinterEllison Partner Craig Boyle reflected on some challenges and opportunities the sector faces.
"Many of the executives we spoke with indicated that staff retention and attracting new employees were significant concerns for them. This is reflected in the issues they raised around labour shortages and inclusivity in the workplace," he said.

"A focus on creating diverse workplaces is an important step - greater diversity, more acceptance of people in workplaces, and where people feel comfortable to be themselves. The sector is already taking important steps in response to WA's Enough is Enough report, but respondents believe the work is ongoing and more action is needed," he added.

Prospects for investment

Respondents also reflected on M&A and capital raising activity in the market. After bouncing back from COVID-19 and seeing high levels of corporate activity, many respondents believe the sector is past the high point of market activity.

However, research indicates that the sector is still performing well.

In the first half of 2022, the materials sector comprised 80% of all new small-cap listings compared to 54% in the same period in 2021. Due to the predominance of the resources sector (made up of materials and energy companies), 71% of new listings came from Western Australia, reflecting the strength of these sectors in the state.

"We're seeing that many projects still offer attractive returns, such as those aligned with decarbonisation and renewable energy themes, and with a focus on meeting ESG requirements," said David Suttner, MinterEllison Partner.

Long term optimism

Long term, respondents were optimistic that the market would improve in the new year – noting the ongoing attractiveness of the sector.
"Factors such as Australia's stable regulatory environment and the increasing clarity around ESG expectations are important drivers for long-term growth," Mr Suttner said.

“Despite the pressure, the mining sector in Western Australia remains a leading jurisdiction for mining investment and is at the forefront of mining and energy innovation. We're seeing great prospects for the industry as it shifts its direction and tackles new challenges and opportunities," he added.

Read the full report

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