FROM THE EDITOR
Mining Enters a Summer
of Discontent
The tracks behind the runaway mine car known as the
super cycle are littered with former mining executives and
their good intentions. Hindsight is 20:20 and, with the
mine car cruising downgrade at the moment, no one knows
what lies in the darkness ahead. People speculate about
the house of cards that is the U.S. economic recovery, a
Steve Fiscor/Editor-in-Chief Chinese hard landing, resource nationalism in emerging
markets, and recession in Europe. For the pessimists
among us, the other shoe has dropped. For the committed mining crowd, these are
headwinds in a secular bull market. Who knows? Maybe they should be committed.
No matter what E&MJ; readers are digging out of the ground and processing in
the plant, odds are the market value for that mineral has declined in the last year.
In some cases, such as precious metals (See Markets, p. 88), prices fell dramatically during the last quarter and the industry is just now coming to grips with the
"new normal." Similarly, readers who work for publicly-traded mining companies
have seen the value of their company's stock drop, exploration programs and ambitious projects tabled, and layoffs at marginal mines.
E&MJ; opens this month with a PricewaterhouseCooper report detailing the profitability of the top 40 mining companies. Spoiler alert: The news is not good and it
looks like it might get worse before it gets better. The report says investors have lost
confidence in the mining business and its ability to control costs. They are also
unsure of the new leadership and its ability to deliver returns on investment. They
are also concerned about topics beyond the control of most mining engineers and
metallurgists, such as resource nationalism and metal prices. The report offers an
interesting assessment of our business from the outside looking in.
Similarly, readers should not overlook South African Gold Enters Survival Mode
(See p. 40), written by Gavin du Venage, E&MJ;'s reporter in Johannesburg, which
details the situation on the Rand. At a time when other gold producers were investing in equipment and technology, they opted for "cheap labor," which as it turns
out isn't really that cheap. Oscar Martinez, E&MJ;'s Latin American editor, based in
Antofagasta, Chile, filed a report on copper this month, All Ships Headed to China
(See p. 68). While copper prices have softened (along with the other non-ferrous
base metals) recently, they have a long-term, ace-in-the-hole: urbanization in China
and India. The problem is that copper producers have to cost effectively mine and
process more ore because of declining grades.
The industry has witnessed firsthand how huge profit margins lead people to
make questionable decisions. Time will tell if that decision to invest in iron ore in
Brazil or sell the Canadian diamond mines was foolish or brilliant. Those deals and
many others are being evaluated in today's dollars by impatient investors. A disciplined approach to projects based on reasonable metal prices that holds costs as
low as possible is an equation that works during good times and bad. The approach
and costs are parameters that can be controlled; reasonable is the free-floating variable. This is the time for engineers and project managers to shine. Make the best
of your summer of discontent and enjoy this edition of E&MJ.;
ENGINEERING AND
MINING JOURNAL
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2 E&MJ; • JULY 2013
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