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State of outsourcing in the mining industry : an overview

University of British Columbia

There is limited research on the topic of outsourcing in the mining industry. The purpose of the study is to fill this gap and gain a general understanding of the state of outsourcing in the mining industry. The study seeks to answer basic questions such as how prevalent is outsourcing, what activities are being outsourced and why they are outsourcing. Upon surveying the upper management (e.g. CEOs and COOs) of 106 primarily Canadian mining companies with global operations, it became evident that outsourcing is widespread among both juniors and large mining companies. Some 89.7% of mining companies outsource or have outsourced in the past. Mining companies outsource mining more than mineral processing because mineral processing is a revenue generator and require large investments, which outsourcing suppliers generally do not have. Other popular activities for outsourcing include construction during mining operations. The biggest reason for outsourcing is access to specialized competencies, including skilled labour, followed by flexibility such adapting to seasonality, changes in geology and commodity prices. According to the criteria created by Quinn and Hilmer (1994), mining and mineral processing are not core competencies for mining companies and should be evaluated carefully for outsourcing although some 92.1% of mining companies perceive these activities as being core competencies. The seven traits of core competency put forward by Quinn and Hilmer were that they are: based on skills and intellectual property in the company; create flexibility; one of the top three capabilities of the company; fills a gap in the industry; performed better than providers; shareholders/customers care about them; and embedded in company processes. None of the traits reached the 92.1% agreement (to match the mining companies’ perception) necessary to be a core competency and therefore, mining and mineral processing are not core competencies for mining companies.

Text

2017-01-20

Attribution-NonCommercial-NoDerivatives 4.0 International

http://hdl.handle.net/2429/59849

Mining Engineering

University of British Columbia

UBCV

http://creativecommons.org/licenses/by-nc-nd/4.0/