Paul Stothart is vice-president, economic affairs of the Mining Association of Canada. He is responsible for advancing the industry’s interests regarding federal tax, trade, investment, transport and energy issues. www.mining.ca This column was originally published November, 2009. This column was originally published in February, 2009
To mining company managers, an economic downturn is old hat. Typically, a few years of economic growth lead to a year or two of stagnation and low mineral demand and prices. Mining projects are put on hold until the price and availability of labour and materials return to a sound
footing. Other variables, such as wars, strikes and technological shifts can exacerbate or mitigate this cyclical movement of mineral prices.
The current economic turmoil, however, is not a traditional business cycle. Yes, the real economy is slowing in a traditional manner. Manufacturing is in recession and high overheated costs have dampened investment in natural resource development. Falling mineral and stock
prices have made the raising of new equity capital and exploration financing unfeasible.
In Canada and overseas, mine development has been postponed or cancelled and companies have entered a “batten down the hatches” mode. Credit Suisse estimates that $50 billion in capital spending in mining — two-thirds of announced global commitments — would be delayed in 2009. Beyond this cyclical slowness, though, two new variables make the present downturn tougher to gauge and recovery time frames more difficult to predict.