Major Drilling says scarce labor poses hurdle

NEW YORK (Reuters) - The scarcity of trained labor, not machinery or capital constraints, is the main hurdle facing the mining industry, said the head of Major Drilling Group (MDI.TO), one of the world's largest mine drilling companies.

"People ask us about machines. I can get all the machines I want. There may be a delay, and we have to order six months in advance, but that's not my issue," Chief Executive Francis McGuire said at the Reuters Global Mining Summit on Wednesday.

The spike in the prices of both precious metals and base metals has led to a wave of new exploration projects. Gold prices are nudging $1,000 an ounce, silver is at 27-year highs and base metal prices on average are up about 27 percent since the beginning of 2008.

"All the minerals that are easy to access have been found and are being depleted at a relatively quick rate. Therefore, what will happen over the next 10 to 15 years is that everything will be in areas that are difficult to access," McGuire said.

This means that the skills and technology will have to evolve quite substantially to meet the growing challenges, he added.

Major Drilling is focused on specialized drilling, which includes deep-hole drilling, directional drilling and high-altitude drilling.

"It takes 3 to 5 years to train a driller, and it is a very, very skills-intensive industry. Technology and capital play a somewhat lesser role," McGuire said.

Moreover, the scarcity of trained labor, coupled with the burgeoning of exploration projects, has put drillers in the driver's seat.

"The days, even 5 or 6 years ago, of sending someone out in the bush and having them take care of themselves ... Those days are gone," McGuire said.

Nowadays, you have to provide your crew with a camp, a washerwoman, three hot meals a day, along with Internet and phone access, or they just won't go, he said.

Major Drilling is the world's second largest mine drilling company, behind U.S. drilling services group Boart Longyear

(BLY.AX).

Labor constitutes about 30 to 40 percent of the company's annual costs and it actually plans its capital budget based on how many people it can train in a year. It is currently trying to expand its labor force by about 20 percent a year.

McGuire noted that half the people hired drop out in the first few months due to the tough working conditions, while only half of those that remain usually have the potential to be good drillers.

"You, unfortunately, have to learn on the job and how you learn is by making a lot of mistakes," he said.

The booming demand for drillers is particularly strong right now as both gold and base metal miners have stepped up exploration at the same time, and traditionally this has not been the case, McGuire said.

"There is so much demand out there, any drill and any crew that we can put out there is taken up immediately," he said.

(For summit blog: summitnotebook.reuters.com/)

(Editing by Walter Bagley)