The Mining Report: How are the fundamental challenges facing the global base metals markets likely to play out in 2014?
Joseph Gallucci: There are several long-term issues that impacted copper and the other base metal spaces in 2013, and those long-term issues will persist for the foreseeable future. Allow me to explain the basics via a few examples:
Indonesia recently stopped the export of intermediary products, such as pig iron nickel. The country's leadership is increasingly practicing resource nationalism by restricting mining firms to in-house processing and to shipping only finished products. It is also unsettling that Intrepid Mines Ltd. (IAU:TSX; IAU:ASX) lost control of its project this year to an Indonesian partner!
In terms of supply chain disruptions in 2013, Grasberg and Bingham Canyon were two of the biggest issues, but we are still well below the annual average of a 5% supply disruption. This year has been an anomaly and quite low in that regard. Supply chain disruptions will definitely pick up going forward and they are impossible to predict.
For problems with mining infrastructure, Chile was the hot button. It has port access and infrastructure issues, and there are still no power agreements in place for many of Chile's mining development projects. These types of long-term issues will continue to impact the base metals sector into the future.
TMR: Were declining ore grades an issue in 2013? Continue reading "Zinc or Swim: Do Base Metals Have a Future?"