Mining is a notoriously cyclical industry and the events of the last two years seem to have done everything possible to reinforce that reputation. Having soared to record highs in March 2008, the subsequent worldwide financial crisis provoked a price collapse that was to see metal values tumble by more than 40% within less than 15 months.
The description ‘volatile’ has been used a lot, but that hardly begins to portray this particular roller-coaster. With prices rallying again, it would appear that the ride is far from over.
Go deeper with GlobalData
Most metal analysts foresee the rebound continuing through 2010 – though many expect it to be a bit of a bumpy road – and while there has been some concern expressed over the effect of China’s tightening fiscal measures, other commentators see this as overly pessimistic.
For example, Fairfax economist Dmitry Kalachev predicted a strong upsurge in Chinese imports of base metals, a view echoed by David Wilson, metals research director of Société Générale, who forecasts an average copper price of slightly over $7,400 per tonne for the year. If so, that would represent an increase of more than 12% on the 2009 average – and about two-and-a-half times its value at the start of that year.
Despite this rising tide of optimism, a recent Deloitte report on the trends facing the industry for 2010 made the point that, "new mine development remains a shaky proposition". With the prospect of renewed opportunities opening up, some operators are asking what scope is there for upgrading existing mines and bringing some of those that were postponed as demand declined back into service.
Rumours and mine revivals
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataIn May 2009, rumours began circulating that one of Western Australia’s mothballed nickel mines could soon be resuming production. Three months later, Mincor said that Miitel, which was placed on care and maintenance in December 2008, might restart in the first half of 2010.
At the end of 2009 Norilsk Nickel’s CEO Vladimir Strzhalkovsky announced plans for a $1.5bn upgrade of its assets in the Russian Arctic, while in January, Aditya Birla Minerals began a review of re-opening the Nifty Oxide and Mount Gordon mines.
This trend is not, however, one restricted to base metals alone. At the end of 2009, state-owned Coal India, the world’s biggest coal miner, announced a plan for reviving 18 abandoned mines, allowing foreign players to operate in the country for the first time.
Earlier this year the Chinese Government was rumoured to be encouraging the country’s small coal mines to reopen and though the story turned out to be false, given the impact of coal shortages on power generation, many observers saw the sense of the idea. China’s burgeoning growth, and de facto monopoly in rare earth metals, has also driven the current efforts to reopen mines such as the Mountain Pass Mine in the Mojave Desert, described as "the greatest deposit in the world" by operations manager John Benfield.
Mining technology and innovation on the frontier
Although it is inevitable that any recovery will be largely price-led, particularly given the scale and duration of the recent economic downturn, there is an obvious danger in relying completely on a reactive response.
Planning for the medium-term and beyond prohibits forever looking over your shoulder; at some point, you have to look ahead and if international demand continues to gather momentum as predicted, that could make an even more appealing climate for updgrades.
"Now that mining companies have cherry-picked the easier deposits to mine and process, they will have to cast their eyes towards harsher geographic climates and overcome rising metallurgical challenges," said Deloitte’s Perth-based partner Dr Eric Lilford.
Many of the necessary technologies exist to assist mines to achieve product upgrades and, as industry consultant Koos Vandenberger says, "some of the developments coming down the track will make exploiting currently marginal deposits commercially feasible in the near future – especially as the economic incentive gets a bit bigger. It could see mining pushing new frontiers in hostile environments, and maybe even under the sea."
It is a point that the Deloitte report echoes: "As this innovation continues, extreme mining is bound to become more mainstream."
Nevertheless, other barriers must be overcome first.
Vital skills and equipment shortages shortages
Even as the industry begins to climb out of recession, there are signs that the skills and equipment shortages that plagued the last boom could re-emerge to play a seriously limiting role in the recovery. Back then, mining companies adopted some ingenious solutions – purchasing cheaper Russian and Chinese equipment, recruiting retired senior personnel to mentor younger trainees – but these strategies seem unlikely to be sustainable given the challenges ahead.
On the equipment side, there has already been moves by South Africa to source supplies from India, and a deal in Zimbabwe between government and miners to overcome the shortages that have seriously hampered small and medium-scale mining in the country. Clearly, no one wants to see a return to the long lead-in times for everything from trucks and tyres to draglines and longwalls that so bedevilled the industry’s recent past. The skills shortfall, however, seems more recalcitrant.
Importing labour is one solution. In February 2010, Australia’s Federal Immigration Minister Chris Evans announced reforms that will permit individual states to prioritise their own choice of skilled migrants. Though this may solve the likes of Western Australia’s looming shortage of mining engineers and could even help fill some of Queensland’s estimated 41,000 new jobs by 2020, it is only a short-term fix.
Comprehensive approach
For the long term, global investment in training will prove essential and without it, the whole sector could soon face the spectre of persistent skills shortages – the worst possible news as world mining ramps up to meet predicted rising future demand.
"If we’re going to meet the challenge, we’re going to need new blood, as well as hanging on to the experienced guys we’ve already got, otherwise it’s like cards – we’re always shuffling the same pack," Vandenberger explains. "But that’s going to need a lot of joined-up thinking from governments, universities and the industry, too."
