Mining Economics

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The economics of mining is at an inflection point.

For the last decade or so our focus has been on developing mines and bringing them into production.

Demand has outstripped supply, and commodity prices have reflected this. In this world, the winners have

been the ones who moved into production early; benefitting from uninflated construction costs and high

margins.

Now supply is coming into balance with demand, and will probably overshoot. Competition will drive

commodity prices lower. It is not production on its own that is important, it is how efficiently we can produce.

In this changed world the winners will be the ones who understand the economics of their mine and can

adapt and change to maintain and improve these economics.

My objective with this presentation is to map out the economics of mining and the implications of this

change.

The presentation is in two parts:

1. What is different about mining, and mining investments, and

2. What we will have to do differently in this new economic environment.

My message is definitely a challenging one. Inefficiencies that can go unaddressed in an environment of rising

prices become all too evident in an environment of declining prices. Profits can no longer be taken for granted.

However it doesn’t mean that we can’t achieve healthy returns.

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