Why Are There Issues With Mining Pipeline
By Tshepo Magagane
…every other analyst wanted to avoid the mining team!
“dont be stupid, you are going to make your money in extractives” an Aussie MD to me as a junior talking about a rotation into the healthcare team (top notch team)…
…when Ken passed on, I knew that we were approaching Peak China Steel and thought…phew, this chance will not come again…but started to see what was happening with Copper – we were working on various projects you see producing today…and even a decade back would be saying to people “ZCCM has this huge library…that is the key to finding new tenements”!
NB: listen to Moxico Copper story – 2027 event (this is Zambia here).
Listen to a key one here – gold went to USD200/oz in the late 90s (even when I started, I used to use a price deck of USD400/oz – majors are easily coming in at AISCC of USD1,800/oz now – easily – Polyus at 700 and Thor at 900)!
All major mining companies just dumped their assets across the Copperbelt – DUMPED!
People paid to get iron ore assets off their books – no hyperbole there – see the Kumba / Mittal cost+ agreements (or why Mittal is effectively a huge iron ore producer – YEP, they are – even in Africa).
My first deals in Copper were effectively “earn-out structures” in the sector – they just didnt want to have anything to do with even slightly to the right of Quintile 1. NB: I learned about the structural progression of prices – in those structures, we used USD1.5/lb prices – which were outlandish by the market consensus then – why I always say “the only price predictor is replacement cost – PERIOD”!
Copperbelt Geos love this joke “I used to discard grades less than 7%” – now you have people ex-African hunting for 0.3% grades!
Why you need to have this reservoir of knowledge when it comes to mining!
“mining thing over, it is a rustbelt industry”
“there are no mines in HK…you cant get into trouble there…look after this fellow…you dont have to pay Aussie taxes”
“the world changed…China became the dominant force in the mining industry”
“Copper 2nd largest holding – 2027 event”
The opportunities are there – the capital is lacking!! A decade back, I realised “there is not Copper out there even for Intensity of Metal Use ie Economic Growth” – over the past 5yrs has been confirmed by production issues majors are experiencing with lower grades (this is all before electrification, therefore those who are positioned well to the right of the cost curve will be the Polyus / Thor when prices structurally move up to make lower grades economic from a capital intensity perspective)!
