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 May, 2009.
Amidst the doom and gloom of present economic times, it can be difficult to find signs of optimism that could generate light at the end of the proverbial tunnel. While economic predictions can be easily contradicted, it seems evident that there are some positives emerging from the present recession and that, more importantly, mineral prices are destined to rebound in the not-too-distant future.
Sanity is returning to input costs and waiting lists
The business environment that existed until mid-2008 was one of frenzy, cost explosion and waiting lists. Companies seeking to buy mining equipment were assigned lengthy delivery times. Basics such as large tires for mining trucks carried a one-year or longer delivery lead time. As noted in 2005 by the president of a Virginia machinery company, “there are eight people trying to get the same tire.”
Capital projects that began with cost budgets in the hundreds of millions ended with budgets in the billions. Companies reported that capital investment cost projections were doubling or more during the 2005 to 2007 timeframe. The need for $16 per hour fast food workers in oil sands country was going unmet. Marine shipping costs and timelines were expanding rapidly.