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Metals euphoria grips Diggers opening Posted: Mon, 07 Aug 2006 [miningmx.com] -- “THIS is not a bubble, this is the real thing,” declared Diggers and Dealers Mining Forum chairman Brian Hurley in his opening address to the conference which began on August 7 in Kalgoorlie, Western Australia. Hurley told delegates: “The world, and where the mining industry fits into it, has changed dramatically and fundamentally over the last 50 years. But the change has crept up on us incrementally and we have not noticed. “The past year has been an unbelievably good time to be a mineral producer. In fact, it has been a good time to be a miner since the beginning of 2003,” Hurley said. He pointed to a number of commodities such as nickel, copper, aluminium and zinc where 2005 consumption was between 6.6 times and 18 times the annual average consumption in the five year period to 1952. He believed the current fundamentals facing the mining industry were radically different from the 1970’s and 80’s which he described as “an era of profitless prosperity for the resources industry.” The reason was that supply exceeded demand during those decades as new projects were brought on line. Hurley reckoned that won’t happen again because of the slow-down in exploration and because current consumption for a number of commodities is so much greater. That means one major new project coming on stream will not have the same impact on the supply/demand balance and on prices that it did previously. "Today, based on 2005 figures, a new 30,000 or 40,000 ton/year nickel mine or a new 150,000 ton/year copper mine coming on stream would hardly cause a ripple – or even a 45 million ton/year iron ore mine for that matter. How things have changed,” he said. Turning to exploration Hurley said that the growth in production over the past 50 years had come from the “mineral exploration efforts and successes of our forebears – our parents and grandparents generations. “During the last 30 years – because of low and falling mineral commodity prices – I believe exploration has not kept pace with extraction. The situation is aggravated in many countries – but particularly in Australia – because of the need to get approvals, consultation with bureaucrats and whoever else before one can actually do exploration or bring a new mine into production.” Hurley pointed out that the current replacement numbers were huge. For instance, the industry needs to find 1.5bn tons of iron ore and 15 million ton of copper annually just to maintain the status quo. “Looking to the future, on the basis of current reserves and resources, the only base metal mine currently in production in Australia that will still be in production in 2036 will be Olympic Dam in South Australia,” Hurley said. “The ultimate effect of all these events is that the tide has now turned. The days of 65c/lb copper and $2.00/lb nickel are gone and, short of a 1930’s style depression, supply will fall short of demand. "But, of course, that does not happen. What happens is that commodity prices rise and that takes the edge of demand.” Hurley said prices of $8,000/t copper and $22,000/t nickel were unsustainable in the long-term, but he saw copper ranging from $1.50/lb to $2.50/lb compared with the previous range of 60c to $1.20/lb. The nickel price sitting between $9,000/t and $13,000/t.Free news alerts: click here to subscribe
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