Support services contractors in the resource and energy sectors must continually innovate to reap the long-term benefits of a thriving industry.

The outlook for GOM support services contractors near term is a mixed bag, according to a leading industry researcher, but that bag looks to be filled with great opportunity when you open it and peer deeper into the future.

After the Canadian professional services consulting company Deloitte released its analysis of the mining industry for 2013, I put a call into Glenn Ives, North American Mining Leader and Canadian Chairman for the company to get his take on how the resources market outlook would reflect on all GOM support contractors. His response to GOMC readers: Hang tight and continue to address several major economic challenges.

The 40-page Deloitte study, Tracking the Trends 2013, involved interviewing 50 major mining companies about their top concerns for this year. Not surprisingly, controlling costs remained the most critical issue for the second straight year. The companies report somewhat blunted demand for resources, meaning the mining companies are watching costs like hawks.

Related: Editor's Notebook: Playing it Safe


Cost pressures are delaying some projects now, Ives reports, but he sees good things down the road.

"We see mining companies cutting back and reducing expenditures," Ives says. "Our view is that commodity demand is going to continue to grow, particularly in Asia and China.

"The longer-term message to your guys is that this is a good business to be in," he continues. "There will be a little bit of choppiness near term rather than the unadulterated good news they've been used to hearing the past few years."

Related: Safety First: It’s Serious Business

The Top 10 issues for 2013 (presented from the bottom up) are:

10. At the IT edge: Getting the most out of emerging — and existing — technologies

9. Playing it safe: Using analytics to generate insights and improve safety outcomes

Related: Safety First: CPR Revisited

8. Plugging the talent gap: Skills shortages still loom

7. Climbing the social ladder: A new level of responsible behavior

6. Combating corruption: Miners are being held to higher standards

5. Governments eye the mining prize: Resource nationalism remains

4. Preparing for the M & A storm: Market indicators point to rising deal volumes

3. Capital project deceleration: Quality trumps quantity in the project pipeline

2. Managing demand uncertainty: Conflicting market indicators magnify volatility

1. Counting the costs: Paying the price of bullish behavior

In the report, Ives sends a message to mining-related companies in the face of lagging demand at present:

"Despite near-term tapering demand, the world remains at risk of long-term supply constraints. This danger will grow as companies halt production in the face of capital cost increases and growing shareholder demands for more immediate returns," he writes. "Although companies are hesitant to invest aggressively, one thing is clear: failure to replace depleting assets will result in higher future commodity prices. Significant rewards will be available to the companies that invest today."


What does this mean for support services contractors? Ives says they will be challenged at every turn to cut costs, while at the same time improve service delivery on the job site. Those who can master this difficult task will be well-positioned when demand kicks in full-throttle again.

Ives also predicts that support services companies will continue to be held in good favor by mining and energy companies that would prefer to hire freelance help on jobs rather than hire permanent workers with particular areas of expertise, pay high wage and benefits costs, and then try to keep them busy.

"In many cases, they'll look to subcontract work out that they may previously have wanted to do in-house," Ives says. "If you can deliver the people to do the specific job that the mining company needs to get done, that might be a growth opportunity."

Based on the report's Top 10 list, Ives suggests several initiatives support services contractors should consider when competing for work. Among them:

Tackle the skills gap.

The shortage of skilled labor in the mining – and gas and oil industries, for that matter – is startling, Ives says. A significant number of knowledgeable field workers are retiring, but few qualified people are in place to take on supervisory roles. There aren't nearly enough workers in the 35- to 55-year-old range.

"Not many people joined the industry in the 1980s and '90s. There were a lot more sexy places for them to go – high-tech, real estate, investment banking – higher-paying jobs and the talent gap exists today," he says. With a shortage of front-line supervisors, companies are getting poorer performance out of their workforce. He said one mining company reported getting 20 to 25 percent utilization out of skilled labor due to ineffective supervision.

"Contractors who can plug that gap and assist companies by providing service effectively and efficiently can actually do quite well with this market," Ives says. The challenge is letting solid young workers know that the support services area can provide excellent career opportunities, high wages and great benefits. Get into the tech schools to develop a new generation of top-notch workers and offer skilled apprenticeships to land good prospects.

Go green.

Finding ways to help mines or energy companies build their environmental footprint will be a major selling tool for support services companies moving forward. Lots of companies can provide a basic service, but Ives says it's the rare contractor who can complete the job and show everyone they're working with a cleaner environment in mind.

"Sustainability is huge and doing things with less environmental impact is a growth industry," Ives says. "If you can figure out how to appeal to the mining company by making things more environmentally efficient, they're always going to be listening to you."

Stress safety.

In the 2013 report, safety moved up as an issue of importance. Ives chalks that up to factors like recent headline-creating mining mishaps and the Gulf oil spill. Perceived safety lapses wax and wane in the industry, but when they emerge as a concern, it's a big concern and the mining and energy companies are looking for an edge to improve the record.

"A bit of complacency crept in and safety became less of an issue," Ives says. "Some accidents have woken everybody up to it. For any contractor that wants to do anything in the resource industries, safety has to be top-of-mind. It has to be right up there as an issue. There's zero tolerance."


Any way contractors can differentiate themselves from competitors gives an edge for landing contracts. According to Ives, safety, top workers and an environmental message can help you land work in a crowded and hungry marketplace. "You may not get a higher price, but you may get the work," he says.

Looking further out into the future, Ives remains optimistic.

"I think the industry is poised to move forward and do quite well," he says. "We're not finding new, very rich (mineral) deposits anywhere, which means prices will stay higher rather than lower. I fundamentally believe the economies in the U.S. and Canada are doing better than the press might suggest, and Asia is growing. I don't see Europe falling off the cliff. Put those things together and demand is going to grow longer-term, which means prices will go up and mining companies will invest and do more and more things."


After overseeing GOMC for its first two years, I'm turning over the reins to fellow COLE Publishing editor Luke Laggis. I've been fortunate to observe and report on the growth of support services for the dynamic energy and mineral resources industries since the magazine launched in January 2011. The stories I've read about hardworking contractors are an inspiring testament to U.S. and Canadian business ingenuity.

Thanks go out to every contractor I've had the pleasure of talking to while shepherding the magazine through its infancy. The same thank-you goes out to the product manufacturers who serve the GOM service providers. Your thoughtfulness and willingness to share information has helped me every step of the way.

As I look back at the past few years, I'm struck by the entrepreneurial spirit shown by companies working in this industry. They continually make tremendous investments in equipment, labor, research and development to extract natural resources that drive North America and the world. Without this commitment, we'd be much worse off in so many ways.

Please join me in welcoming Luke to his new position.

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