by Michael Arbow MBA
Partner, RSD Solutions Inc.
With the re-opening of mines to extract what was once considered the then remaining uneconomical deposits of minerals and metals, the mining world is confirming that we have entered a new era where the terms "peak" gold/copper/nickel/etc will soon be a common catch phrase. The mining industry and perhaps a year of two before it, the oil industry, have confirmed that all the world's "cheap" raw resource deposits have been found and are being exploited. The key corporate behavior confirming this fact is the increased high number and dollar amounts that are taking place through mining sector merger and acquisitions. This behavior is similar to that witnessed in the 1950's in the United States when the key to survival for US railroads faced with a shrinking market (supply of customers) was to become a bigger railroad operator. Sadly when the market is gone the market is gone.
For senior executives steering commodity users and producers, a volatile world lies ahead in the supply of materials and in the stock prices of their companies; potential acquisitions of both resources and target companies can prove to be difficult to price and cash flows from acquisitions difficult to determine. In the mining sector, risk has been a way of life but it was always been; Is there a market for the materials discovered? The risk now is, is there enough supply for the market? For some this is an example of "up-side" risk, that is until an uber multi-national looks at your reserves.
Article from the Globe and Mail on the rebirth of a BC copper mine: http://tinyurl.com/4whc9k2
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