[miningmx.com] – IN the early 1680’s Isaac Newton codified his
Universal Law of Gravitation. This was built around his three Universal Laws of Motion.
The second of those laws became known as gravity: Newton’s Universal Law of
Gravity.
But even though this law is well known by everyone inhabiting the earth, people
dealing in commodities, especially metals and minerals, seem to forget it whenever
there is an abnormal run up in commodity prices.
This forgetfulness comes from hypoxia – a lack of oxygen that greatly effects the
brain and causes blackouts and amnesia. Hypoxia comes from sky high metal prices
where the air is thin. Thankfully – gravity fixes that.
For hundreds of years, metals and minerals were mined, refined and sold by specialist
mining people. Prices were fairly stable as these people dealt in reality and there were
no central banks.
But with the creation of debt and financial services all that changed.
Now metals were being mined, refined, sold, bartered, traded and borrowed by
“financial people’. Even worse – “unions and governments are now calling the shots as
well. And so we now have the era of occasional periods of sky rocketing prices
followed by depth-charge type “bottom prices’.
And the “financial, government and unions people’s hypoxia has now infected “mining’
people’s brains.
Everyone seems to have forgotten that increasing production actually leads to falling
prices. This is the problem we have today. Too much debt and cheap money gave
“everyone’ hypoxia.
Fortunately Newton’s Law of Gravity is “not’ man made nor temporary; it is universal
and always present. So metal and mineral prices are now returning home.
Newton should have written a fourth law: “An abundance of money and people will
lead to an abundance of metal and mineral production.” And so it has.
Production today of all metals continues to hit new highs every year. As a result –
metal prices are falling, although fortunately, not forever.
While most are now back to their long term averages, this doesn’t stop them from
temporarily falling “below’ their averages like we saw from 1982 to 2002. Those were
20 long years. If people keep populating and easy money remains available, more
metals will continue to be produced, further weakening prices.
So what can mining companies do? Easy. Go back to mining. Forget about mingling
with and acting like financial people. Strike a truce with unions and government or
close down.
And quit pretending you’re an asset manager who can out guess the market by
buying and selling companies, projects and orebodies.
Get back to mining the assets you have productively, paying regular decent dividends
and innovate, modernise and increase your productivity every year like every other
industry in the world does … and like “you’ used to!
The computer, IT, manufacturing, farming and even dreaded financial services
industry does that every year. And mining companies did too: from 1872 to 1973, and
from 1983 to 2003. More ounces and tons per man every year and at a lower cost as
well. Enough said.
