Thanks for posting that. This is a very important topic.
It is a funny paper. These guys are looking gross averages of metal distribution, and some back of the envelope calculations of metal use per capita, and trying to get a useful conclusion - about when the sky will fall.
Let me harp on one point - their calculation and conclusion about Nickel. They missed THE major application of nickel - stainless steel pipe for energy - oil and natural gas.
For various reasons, nickel is more likely to be harder to develop than copper, but pretty easy to find. The Serpentine and ultramafic rocks that host nickle have a strong magnetic signature, and show up in aerial surveys. The rocks tend to be physically harder than much of the quartz based hydrothermal stuff we find for copper, zinc, silver and gold. So a lot more blasting and grinding to get nickel.
Also, to my limited knowledge, there is no commercial liquid way to get nickel out, like cyanide leaching for gold and silver, or solvent extraction for copper.
They have a pretty good point about increasing copper consumption - however, doing a linear interpetation over the 1930s-40s when there were large infrastructure projects like Hoover Dam, and rural elrctrification. Also a small amount of copper used for brass cartridge casings in World War II....
Copper is often associated with other valuble metals - gold, silver, zinc being the most common. Even small amounts of gold can make low grades of coppe rmore economic.
I do think there is a strong case for copper becoming a costly metal, and staying well above $2.50 for a long time.
But that case should be made by people with a much better understanding of metal usage and trade offs, in combination with geologists who are familiar with the characteristics of major mining districts. These guys miss out on the first criteria, and may be lacking in the second also.
I really wonder about their conclusions on silver and other metals. I suspect their zinc estimate of a shortage is wrong.
Lots of mines have zinc. The price has been so low, there has not been much incentive to mine it. If you are digging an open pit lead (or gold) mine in Nevada, and the west side tends to run towards copper, and the east side towards zinc, for the past 20 years you would have been digging towards the California coast... you may not have even drilled many rock cores on the zinc side.
There is a big price pop in zinc, as it can subsitute for copper and other metals to some degree, and there is more demand. But that just happend this year, and in 2-3 years we could see a strong supply response to better pricing.
I would like to see something from Colorado School of Mines, University of Nevada, Arizona, Stanford, Frieburg in germany - traditional big mining schools.
I am going to be a bit mean here -if this paper was submitted for a mineral economics class, this paper would get a "C" at best.
However, this is great news for everyone on SI, since if many people believe this, there will be some valuation disconnects -
they would go long zinc and short nickel, and we could go long nickel and then wait for zinc to peak next year before shorting.... |
