How will Covid-19 travel curfews affect the mining industry?
Covid-19 pandemic travel curfews are impacting mining team’s ability to reach their mines and while this is setting off alarm bells for some economists, there are several outcomes for mining companies and they are not all bad.
The shortage of commodities extracted through mining would ordinarily cause the price to rise, but a temporary fall in global demand could mean that any falls in production are offset by the fall in supply. Commodity prices may continue to fall with production shortages because of falling demand, but less quickly and perhaps less aggressively than they have over recent days. These prices may even be supported by production cuts and at least stay on a level or consistent trading range. There is probably still enough tension in the commodity market to lead to price rises, but it is still a tricky investment call right now.
Almost everything we make starts life in the earth’s crust, so it stands to reason the share prices of mining companies have been hit hard on the back of global growth concerns.
Government support in terms of fiscal policy – cheap loans, direct cash support, employee salaries, tax and interest payment holidays, may well be available to junior miners and explorers now or in the near future, but mining companies’ access to capital has pretty much been shut off because of extreme market volatility. This will pass, but junior explorers and miners are likely to find the current environment a very tense period. However, having weathered some very tough times in the last decade, they may well be better placed than other smaller companies in other sectors.
What is clear is that relying on people to produce such an economically critical set of resources is far from ideal. The problems of infection, accident and security of supply are suddenly under the microscope more than ever. Now is a time when mining companies could raise money to fully automate – the tech is almost all there.
The global communications infrastructure to provide real time remote management is in the process of being ‘installed’. Some remote regions already have the effective (and affordable) bandwidth via, for example, Space X’s LEO satellite launch programme, which started early in 2019, and which is planned to achieve global coverage by the end of 2020. Automation and real time data to HQ is a subject ACF has been briefing mining companies about for the last year because it seems timely.
In our view, the fittest, most agile and transparent mining companies have an opportunity to stand out in this crisis. There are a few things they must do, but we are of the mind that there is a positive opportunity.