We’ve had a good ride the last 5 or so years with mining giving investors a good, relatively safe return despite Trump, China flexing its muscles & Covid turning the world topsy turvey. But the last fortnight has seen mining stocks take a tumble, peak high, drop & then peak again although all with a downward trend.
So why this volatility?
The dreaded “recession” word. Global markets driven by inflation pushing up interest rates have drastically increased borrowing costs & thereby minimising cash flowing into mining, particularly speculative mining companies. This in turn reduces exploration drilling & risk taking & so we see mining enter a potential period of spending contraction. Expect to see your small Cap speculative shares take a hammering as explorers with optimistic drilling and mine development plans just months ago suddenly become a stagnant West Perth office slowly bleeding cash trying to wait out the recession. This in turn has investors sell up & move to low risk investments such as Blue chips, gold and cash leading to low share prices & market cap for speculative companies. And what happens then? The smaller companies get bought up by the larger firms who see the opportunity for acquisitions who ride the recession with little activity due to their large cash reserves.
Global recessions naturally see economic activity drop reducing demand for ferrous minerals and a reduction in metal prices but as noted last week, WA should be able to ride out this storm given our abundance of battery minerals & low sovereign risk. Lets just hope we don’t see a lazy mining super tax introduced to further hit mining investment at the big end of town
Whew! Who’s in for the ride?
On the upside, we can only look forward to the next mining boom as is the WA way
Farewell Black Tom’s
If only the walls could talk at Black Tom’s, there would be enough material for me to write this blog for the next 25 years. Yes that’s right, the iconic mining stalwart Black Tom’s has closed its doors after 25 years of more deals than a Diggers and Dealers conference in the 80’s.
Sadly 2 mining deaths in WA last week in quick succession highlights we have much work to do to make our industry safer. Condolences to family and friends but we need more than condolences!
62% IO Fines US$100/t
58% IO Fines US$90/t