Episode Details

I went to a mining conference on Monday - the Mining Journal Select London. As well as being on a panel, I wanted to catch up with the management of a couple of companies I hold shares in and get a feel for the state of the industry.

Mining is cyclical. If there’s a shortage of some metal or natural resource, the price of that resource will go up. Rising prices encourage people to start looking for more said resource, investing in it and mining it. Suddenly there’s a mining boom.

This eventually leads to an increased quantity of whatever the resource in question is, and the price comes back down again. The price of mining companies comes back too. Investment goes away. Suddenly we have a mining bust.

In today’s fiat world of wild price swings, boom seems to turn to bust with increasing rapidity and violence. We are definitely not in the boom phase of the cycle.

“Look at the room,” an investor came up to me and said after the panel I was speaking on. “It’s empty. It’s a classic bottom-of-the-market sign.”

I can’t help thinking he may have a point. But I also want him to be right, as my own portfolio is so exposed to mining.

An analogue industry in a digital world

In our 21st-century world of billionaires, leverage, booming tech stocks and cryptocurrencies doubling overnight, value is digital and digital is quickly scalable.

Ten grand can be enough to be trading portfolios in the hundreds of thousands. Write a bit of code, upload it to the app store and it can be downloaded billions of times. Upload a funny video, watch it go viral and find yourself with a million followers.

And then there is old analogue mining. Getting to some remote and unexplored part of the globe. Sampling a bit of rock. Getting a licence. Sticking a drill into the rock. Hopefully, finding something. Sticking a few more drill bits in. Hopefully finding something more. Getting what you have evaluated. Persuading investors that what you have is meaningful. Getting more permits. Drilling more, evaluating more, persuading investors more and on and on for 20 years until you eventually complete the mine construction and start producing.

It takes an average of 16 years to take a mine from discovery to production, more if you factor in prior exploration. 16 years before the company is profitable. Who’s got 16 years in today’s fast-paced world? 16 years is a lot of time for something to go wrong. There could be a change of government, a change of local attitude to mining, a change in underlying commodity price or a change in the investment landscape to name just a few of the risks.

Mining is slow. Mining has not seen the breathtaking improvements in technology that other industries have seen. Yes, there are massive trucks, and huge machines, but the basic principles, extract metal from rock, are not far off what they were in the Bronze Age.

And yet mining is essential. We could not enjoy the world we enjoy without mining. The picture below is of a cabinet at the Camborne school of mines that shows the 70 different elements we need to make a typical smartphone: copper, silver, gold, tin, indium, tantalum, silicon, not to mention the gadolinium, europium and dysprosium.

These elements cannot be digitally created. Midjourney serves no purpose h