Commodity price sees scaling down of investment

Commodity price uncertainty will continue to affect mining operations in 2015 with many big projects expected to see significant slowdowns or even be put on hold. According to Duncan Bonnett of Whitehouse & Associates, the mining industry across southern Africa is not out of the woods yet after a difficult few months in which commodity prices have dropped significantly. “And it’s the key base metals and minerals that have been affected the most,” he told FTW. “The price of coal, iron ore and copper has dropped while at the same time the production costs have seen an increase. Margins across the board are being squeezed in the sector.” As a result Bonnett said less funds were being channelled into exploration and development of new mines, while projects were either being shelved or put on hold for the time being. “There are definite areas where projects are still taking place but there has been a scaling down of the investments and so the timelines have been extended and the deadlines are further away.” Bonnett said with commodity prices having dropped by 30-40% in some cases and analysts forecasting that prices will not recover in the next three to four years, there is also less inclination by mining houses to invest in infrastructure. “In Africa of course the situation is compounded as there is already a lack of infrastructure and investing in the necessary facilities to move resources is not feasible in this current economic environment,” he said. “Another key cost that has to be taken into account at all times in Africa is power. Companies are having to contend with these increased costs and so you are seeing mining houses starting to sell off shares in projects in Africa that are just not viable in the long run.” Paul Runge of Africa Project Access says keeping costs down will be the key focus in the next year. “It is going to be quiet on the mining front and we don’t expect to see any big announcements. With the commodity prices so low mines are going to be focusing their efforts on keeping costs as low as possible while one will also in all probability see some role-players rethinking their situations and re-strategising.”