Is the Supercycle over? I believe it is. But others think otherwise. Mining.com says:
Don’t sound the death knell just yet: The resource ‘supercycle’ may not be breathing its last breath. The resource sector’s period of sharp price rises and heightened volatility is “alive and well,” say analysts of the business and economics research arm of McKinsey & Company. “Rumors of the supercycle’s death are greatly exaggerated,” authors of the 2013 Trends Survey write. “Despite recent falls, commodity prices are still near their levels of early to mid-2008, just before the global financial crisis hit.” By historical standards, resource prices are still high – even as the global economy slowly pulls itself out of recession.
Let us look at copper to see who is correct. I have as my authority a PowerPoint by Jennifer Leinart of CostMine and Jan Pfeifer of InfoMine. I cannot possibly do their presentation at the Australian Copper Conference due justice. I write here about it, but contact me if you want the full presentation and all its controversial conclusions.
They start by noting: In due diligence and strategic mine planning, it is important to consider:
- Are projects in the pipeline good enough to replace current conditions?
- What are the obstacles to building mines?
- When should costs be considered?
- How did cost evolve over time?
They proceed to answer these ambiguous questions thus:
- Robust copper prices are: lowering cutoff grades; and extending the life of current mines.
- The easy deposits have been discovered a long time ago and have been mined
- Lower grade deposits are all that is left.
Then they warn that it all about location, location, location. Remote places with poor access are bad; no point in going to hostile places where the climate and politics are lousy; no point in seeking to mining where there is no infrastructure or skilled labor.
They proceed to ask and answer the obvious: is bigger always better? But you know the answer: it is no. It is all about grade, infrastructure, finance, and management expertise. As witness, see news reports today about Pascua Lama in Chile. Depressing, but sobering. Those Chilean regulators and courts are coming into their own and going after mining companies. Only the best will survive.
For it is all about water. I have previously written that as a mere investor in mining, I avoid places where the mine will affect water. Seems no mine that potentially affects water is a good investment. Go where there is lots of water to dilute the mining pollution or go where there is no water so no people and nothing to pollute. Of course this is investment advise for simple folk like me—it is not a philosophy of mining in general—a much bigger subject where the rich may expound. I am but a blogger and small investor. I share this opinion with similar folk and leave you to decide.