We have been looking for a solution to the mining industry’s global downward slide since October 2008.
I have been on a mission during the past months reading new theories, talking to experts, listening to our SAMSSA members and "googling" every day, desperately trying to find one consistent remedy that would provide some relief for mining suppliers, especially in our sector in Northern Ontario.
Every day brought more dramatic news that changed the direction of my research.
Like everyone else, I was in denial that this was a serious event, and hoping it would all fade away within a few months. That belief quickly disappeared in January when commodity prices bottomed and inventories were sky high, especially in the base metals sector. Then gold surfaced as a saviour and potash, uranium and energy (gas, oil & coal) investments began to shine as potential business opportunities.
Another key issue is that the media like the "disaster model" and overpower any positive stories. SAMSSA decided to send only upbeat news to its members outlining new market opportunities. There were a few bright lights still burning in the industry, but to ignore the reality of the mining sector’s major problems was unfair to our members and would create a false sense of optimism. Sound business decisions needed to be made based on the facts so companies could maintain their core business products and services in the long term.
An article entitled, "Rewards go to those with the courage to innovate" in Canada’s Globe & Mail on January 5 captured my eye. It began "What do nylon, synthetic rubber, the electric washing machine and the fluorescent lamp have in common? They all came to life during the Great Depression of the 1930s. These innovations and others unleashed a consumer and industrial revolution that helped to lift the United States from the deepest economic downturn of the last century."
Tom Nicholas of Harvard Business School said the 1930s, for all its hardships, was an unusually innovative period. "Although deep downturns are destructive, they also have an upside," he wrote last month in the McKinsey Quarterly. "The Depression-era economist Joseph Schumpeter emphasized the positive consequences of downturns: The destruction of underperforming companies, the release of capital from dying sectors to new industries and the movement of high-quality skilled workers toward stronger employers. For companies with cash and ideas, history shows that downturns can provide enormous strategic opportunities."
There is ample evidence that mining products are absolutely essential in our modern world and are needed to grow cities, automobiles and factories. To argue against that belief is a wasted debate. Rare earth metals, of which there are 17, are essential technology metals, but are rarely discussed. Zinc is the only source of 95 per cent of the world’s germanium, cadmium and indium. Copper is a source of 75 per cent of the world’s molybdenum and rhenium. Add to the list tellurium, selenium, gallium and look at their applications. Automobiles need copper and nickel, and metal hydride batteries are based on the rare earth metal lanthanum. Jack Lifton, editor of the Gold Report, said in a recent interview that copper, because of the rare earth metals that are often found along with it, will hit $10.00 a pound by 2012. So the news is better as you go deeper into the impacts of the present downturn. The mining industry will bounce back. In fact, optimists predict that it will all turn around within one year, so suppliers should be ready for the swing.
China is quietly looking at the supply and inventory of strategic metals and announced that it will allow tax-free imports of copper, nickel and cobalt concentrate from February 1, 2009, as long as the finished products are exported. China will also allow duty-free exports of refined copper, unwrought nickel and semi finished aluminum products.
In the meantime, mining suppliers pursuing business opportunities should be prepared to look aggressively to industry and mining sectors that are vital, and focus on non-traditional sectors such as oil and gas, construction and municipal infrastructure projects.
Patience, good business decisions and best practices are the best survival techniques until the markets begin their renewal.
