I think the business section of the paper is consistently the most interesting; there is always some article which catches your eye. Today’s point of interest has a mining basis which relates to one of the major Northwest Territories diamond mines, Diavik. In short, Rio Tinto is looking to sell its stake in the mine in order to focus on “expanding into more scalable and profitable commodities such as iron ore, copper and uranium” as their investment in diamond mining amounts to less than 2% of total profits.
They are not the only major mining company that is trying to get out of mining for diamonds in the area. BHP Billiton is also selling up and putting Ekati up on the market. According to the article, both companies produce only 7% of the world’s diamonds each, which amounts to a third of each of the world’s top two producers.
From the newspaper reader’s viewpoint, this all looks very logical. Employ your capital more effectively elsewhere and let the other interested parties buy you out of an industry you are only a relatively small player in. However, what if the BHPs and Rios of this world have caught on to something ahead of the pack and this is an harbinger of things to come?
Logistics in a mine are of obvious importance, so we can all appreciate the enormous effort that must go into getting equipment to the mine in a short window in the depths of winter. This article talks of the ice roads operational days being reduced from an average of 70 to 50 days in one particular season, and the measures put in place to overcome this climatic hurdle. This put severe strain on supplying the mine with everything it needs, especially diesel which is the sole source of power for the mine, threatening to halt operations.
That case was in 2006 and if you believe in global warming, then this is set to become more frequent in the future.This is hardly a new idea and much has been written about what climate change means for the industry. This article on Adapting to Climate Change offers some perspectives on this issue.
Have these companies weighed up their options, looked at their capital employed, relative profit return, and the future difficulties they expect to encounter, and decided to get out before the tenuousness of their operations in the light of impending global warming? Could these mines be global warming’s first mining casualty? Or do British and Australian miners just not like the Northwest Territories?