By John W. Miller | The Wall Street Journal
Resources Boom Fuels Demand for Underground Labor, Spurs Skyrocketing Pay; a $1,200 Chihuahua.
MANDURAH, Australia — One of the fastest-growing costs in the global mining industry are workers like James Dinnison: the 25-year-old high-school dropout from Western Australia makes $200,000 a year running drills in underground mines to extract gold and other minerals.
The heavily tattooed Mr. Dinnison, who started in the mines seven years ago earning $100,000, owns a sky-blue 2009 Chevy Ute, which cost $55,000 before a $16,000 engine enhancement, and a $44,000 custom motorcycle. The price tag on his chihuahua, Dexter, which yaps at his feet: $1,200.
A precious commodity himself, Mr. Dinnison belongs to a class of nouveau riche rising in remote and mineral-rich parts of the world, such as Western Australia state, where mining companies are investing heavily to develop and expand iron-ore mines. Demand for those willing to work 12-hour days in sometimes dangerous conditions, while living for weeks in dusty small towns, is huge.
“It’s a historical shortage,” says Sigurd Mareels, director of global mining for research firm McKinsey & Co. Not just in Australia, but around the world. In Canada, example, the Mining Industry Council foresees a shortfall of 60,000 to 90,000 workers by 2017. Peru must find 40,000 new miners by the end of the decade.
Behind this need for mine workers is a construction boom in China and other emerging economies that has ramped up the demand for iron ore, used to make steel, and other metals used in construction, such as copper, typically used for wiring buildings.
The manpower dearth comes with a hefty price tag. “Inflationary pressures are driving up costs and wages at mining hot spots like Western Australia, Chile, Africa,” said Tom Albanese, CEO of Rio Tinto PLC the world’s third-biggest miner by sales. “You’re seeing double-digit wage growth in a lot of regions.”
The shortage is particularly acute in Australia, the world’s biggest source of iron ore and the world’s second-biggest gold producer.
The Minerals Council of Australia estimates the country needs an additional 86,000 workers by 2020, to complement a current work force estimated at 216,000. “It’s a tight labor market and difficult cost environment,” said Ian Ashby, president of BHP Billiton Ltd.’s iron-ore division. To attract workers, BHP and other companies are building recreation centers, sports fields and art galleries in hardscrabble company towns. BHP said rising manpower and capital costs reduced earnings by $1.2 billion during the first half of 2011, when the company posted profit of $11.2 billion.
Some workers in Australia commute from the Philippines and New Zealand. “It makes sense for me,” says 47-year-old Ricky Ruffell. The New Zealander, who drives a grader at Port Hedland in northern Australia, flies home once a month on a $1,200 ticket, paying for the fare himself out of his $120,000 annual income.
Mr. Ruffell’s employer, Welshpool, Australia-based NRW Holdings Ltd., said the company covers air fares only from within Australia. NRW declined to comment on individual workers but says it pays what the market demands.
The average salary in the Australian mining industry was about 108,000 Australian dollars, or about US$110,000, in 2010, which includes some part-time and lower-skilled workers and is well above the A$66,594 average for all Australians, according to the Australian government’s Bureau of Statistics.
William Boal, a professor at Drake University in Des Moines, Iowa, who studies the labor economics of mining, said the higher salaries reflect in part the higher expenses in isolated areas. “There’s also inflation because people have never seen this kind of money before, and they’re spending it,” he said, referring to further increases in local prices as miners purchase more homes, cars and consumer goods.
Mr. Dinnison went into mining solely for the pay. While in high school, he said, he broke somebody’s skull and teeth “in a bar fight that I deeply regret and have never repeated”. He said the judge in his case told him that he could spend a year in prison or pay a $10,000 fine plus $16,000 compensation for the victim. “I needed the money, so I went to the mines,” he said.
Barminco Ltd., a Western Australia-based mining-services company, hired him. Barminco CEO Neil Warburton didn’t return calls seeking comment.
Mr. Dinnison, who has mined copper, tin, nickel and gold, drills holes that are then packed with explosives to extract ore. He wears a $5,000 gold chain crucifix. “I’m not religious, but I am conscious that what I do is serious,” he said. “But then you come home and you have all that cash.”
Despite having earned roughly US$1 million since he started, he has no savings and doesn’t apologize. “The mines are so dull, that when you get back here, everything is stimulation and excitement,” he said. “The money I spend supports other businesses because of the [stuff] I blow it on.”
Mr. Dinnison proudly calls himself a Cub—a Cashed-up Bogan, a bogan referring to Australian slang for an uneducated blue-collar worker. Books and documentaries are coming out about this group, exploring the country’s unease with the thought that conspicuous consumption by undereducated people is what is helping to keep the country afloat.
“I have civil-servant friends who talk about giving it all up and going to the work in the mines,” says David Nichols, author of “The Bogan Delusion”, a sociological book about the riches of blue-collar Australians. Jules Duncan, who filmed a short documentary called “Cashed-Up Bogans” that he is hoping to turn into a feature, admits jealousy prompted his curiosity. “But I’ve come to respect these people who are just doing what I’d be doing if I wasn’t a self-indulgent filmmaker,” he says.
Mr. Dinnison hopes to be promoted to another underground job paying $1,400 a day, up from $800 a day. Lina Mitchell, his 28-year-old fiancée, said she is committed to teaching Mr. Dinnison how to manage his money. “The miners will spend the money on cars, bikes, parties,” she said. Mr. Dinnison, meanwhile, said he is committed to mining. “I’m qualified enough now that I’ll always have a job,” he said. “Without mining, I’d be an auto mechanic making $600 a week. I love mining, mate.”