Commodity price recovery is inevitable - mining guru

The global mining industry is resilient and will rebound despite concerns of market volatility, a top miner has said. The Chief Executive Officer of Botswana Chamber of Mines, Charles Siwawa, struck this optimist chord this week when he said underlying uptrend remains intact despite two mining firms shedding in excess of 1000 employees in a space of four weeks as a result of challenging trading conditions in the mining industry.

“The mining industry always recovers after such hiccups. (This is) in line with improvement in commodity prices. We have seen it happen before,” he said, adding that turmoil is nothing new to the industry. Teemane Manufacturing Company was the first to break under the stress of subdued precious metals prices when it threw over 300 diamond sorting and polishing employees onto the street on the eve of the Budget Speech last month. Australian developers of Boseto Copper Project followed closely by when the company sent shockwaves across the mining industry by announcing that it would be closing its multimillion Pula mine in Toteng. The decision by Discovery Metals Limited affected over 800 employees.

Siwawa admitted that the extractive industry is dependent on global price performance, saying prices of all commodities have been plummeting lately. Copper is one of the day’s major casualties as the price of the metal sank to its lowest level since the financial crisis of 2008. Current copper prices stand at $2.67/LB, a slight improvement from the $2.57/LB recorded last month. According to InvestmentMine, copper price charts remained stagnant at $2.57/LB last month.

As a result, Siwawa said, companies are forced to reduce their operations or, in the case of the mining junior DML, stop operations and hope that commodity prices will recover so all will go back to normal. However, the sharp fall in the price of copper might have scared investors due to concerns over the parlous state of the sector overwhelmed by oversupply of many more key commodities like coal. The downside that DML might be facing, as Siwawa admitted, is that the copper miner has for the past six months been trying to source funding to no avail. “The company is in business and cannot afford to operate at a loss,” he said.

Hence its termination of operations.  Siwawa said the financial constrains and falling prices could also be associated with the sudden closure of the diamond polishing company, Teemane. That happened despite the company’s decades of operations; it simply reached a state where it could not make a profit. “The industry is driven by commodity prices and we are not the only country going through this,” Siwawa said.He pointed out that many mines across the world have also shut down their operations due to the same challenge.

Therefore, he emphasised, the current exodus of mining companies does not mean that the country has failed to run better operations. The declining commodity prices will also put a halt to the much-anticipated boom for coal mining companies. Botswana’s prospecting companies have scaled down their activities and will remain that way until they can see a light at the end of the tunnel.