dwot (99.55)

Business Reacting Fairly Quickly

October 23, 2008 – Comments (1)

Surfing around I notice quite a few mines closing.  I wonder how many have been operating in the hole burning through their cash reserves.

Copper $1.82, peaked around $4.40.

Nickel $4.07, peaked around $22.  What China was doing in response to high nickel was a different nickel production process that was highly energy dependent.  The price has to be around $8 for that process to break even so that process is wiped out along with the energy it was using.

Zinc $0.50, peaked around $2.10.

Lead $0.52, peaked around $1.60 or $1.80.

Uranium $44, peaked over $100.

What is interesting to me was that I thought looking at an open pit mine with metal values under about $50/ton was nuts and I was looking for about $80/ton.  Well, it seems that even that level will be a challenge with today's metal prices.  I was looking minimum $300/ton for underground mines and that level also appears to have been wiped out.  I was extremely vocal that you were nuts even considering a mine with metal values below that.  Probably longer term properties that meet the criteria I was thinking will be mined, but it won't happen until prices recover.

This is a post I did over a year ago on Bingham, in Utah, owned by Rio. Their metal values in 2006 were $90/ton.  With grades of 0.54% copper, 0.043% molybdenum, 0.32 g/ton gold and 2.59 g/ton silver today's metal values per ton would be about $58, but a huge chunk (more then half) of that is from molybdenum, which tends to only have about 50% recovery and it is nuts to suggest that molybdenum price is going to continue to stand up through this mess.