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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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These Two Major Miners Are Giving Up On The Markets

How long will it take before metals prices start to rebound? No one knows for sure -- but one of the indicators to watch is when the world's biggest mines begin to shut down because of poor economics.

And we got not one, but two, examples this week of mine closures from some of the world's largest metals producers.

The first was base metal major Glencore. With the company saying Monday it will close two of its largest copper mines in Africa -- for at least 18 months. Related: Desperate Putin Not Giving Up On Asia Just Yet

The company said it will idle its Katanga mine in the Democratic Republic of Congo, as well as its Mopani mine in Zambia. Management noted that the 18-month shutdown at these mines will be used to upgrade site facilities, including installing a new whole ore leach at Katanga as well as new shafts and concentrators at Mopani.

Glencore is thus not giving up forever on these operations. But the move does show that management is thinking currently-lower prices make this an opportune time to close for maintenance. Related: Alberta’s Oil Companies Warn Government On Taxes

The loss of supply from the two mines will be significant. Amounting to 400,000 tonnes of copper metal -- or about 2 percent of global supply. The closures also represent 28 percent of production from the DR Congo, and 26 percent of Zambia's overall output.

And it's not just Glencore that's taking such action.

Major Peruvian silver-lead-zinc producer Volcan Minera also said that it is conducting a review of all of its mining operations. With management noting that "any operation that is unprofitable at current prices will be temporarily suspended." Related: One Long-Term Bet On The Future Of Nuclear Energy

The company hasn't yet announced any specific closures across its portfolio of Peruvian mining properties. But at today's silver, lead and zinc prices, it's more than likely the review will turn up several candidates for shutdown.

All of which suggests that metals prices are now squarely affecting project economics. Which should signal changes coming in the supply-demand dynamics of these markets.

Here's to low prices and cures,

Dave Forest

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