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New confidence in thermal coal, zinc, nickel, copper, cobalt as demand lifts

9th December 2016

By: Martin Creamer

Creamer Media Editor

  

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Mining companies need to be marketing companies as well.

A major lesson of the downturn since 2008 is that mining companies need to be right up there with the top trading brains if they are to optimise their businesses and the economies of the countries in which they operate.

Knowing the market means knowing what to mine, how much to mine and when to mine it.

Having this knowledge is essential if mining companies are to be the proper custodians of the metals and minerals they mine.

After all, these resources are a national patrimony.

With that in mind, companies owe it to host countries to ensure that they neither oversupply nor undersupply.

Oversupply leads to lower prices and lower profits and less taxes and undersupply causes prices to rise too high and causes loyal customers to seek alternatives.

Currently, the price of platinum, one of South Africa’s key metals, is too low because it is available in quantities that give buyers confidence to offer prices that are below cost.

The only way to stop this is for producers to reduce production, and, in the South African context, they would have to do that without retrenching workers.

Chrome mining companies did just that a few years ago and used the spare time to retrain their workers.

Perhaps there could be arrangements of production ceasing for one day a week until better prices return.

There seems no point in selling platinum at a loss to buyers in New York, London and Tokyo, who need to be sobered up and not allowed to deprive a struggling country of a fair return.

The cutback story has been played out successfully in thermal coal, zinc, nickel, copper and cobalt to a point where the prices of these commodities are perking up, for the benefit of host countries.
Moderate cutbacks in the production of these metals have ensured that developed countries do not get away with forcing developing countries to subsidise their businesses.

Once the right balance has been reached, mining companies should adopt comprehensive cost-out/margin-up initiatives to keep their businesses in steady state for the benefit of all their stakeholders as well as the economies of host countries.

At the same time, intense knowledge of markets and marketing must be gained and the lack of understanding about the way buyers of metals and minerals think and act on international bourses reversed.

Exactly where platinum is being stored in vaults and the extent of the recycling of the metal must be known.

After all, this country and Zimbabwe host more than 80% of the world’s platinum- group metals and an intimate knowledge of the way the metal is marketed and used is of paramount importance.

The secret manner in which platinum companies conducted themselves in the past has gone and so must the little-understood workings of those who buy and sell the metal.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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