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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (27059)	10/8/2008 3:31:31 PM
From: LoneClone	Read Replies (1) \| Respond to of 193918

Rapid minerals expansion still needed to meet long-term demand – commentators miningweekly.com By: Martin Creamer Published on 7th October 2008 JOHANNESBURG (miningweekly.com) – Rapid expansion of minerals projects was needed, not curtailment, if long-term demand for commodities was to be satisfied, Venmyn mineral industry adviser Neil Mc Kenna said on Tuesday. Mc Kenna said that the sharp drop in commodity prices had been the result of factors largely unrelated to the commodities sector and had been caused principally by global financial crises and local political uncertainty. Mc Kenna’s comments followed those of Econometrix director and chief economist Dr Azar Jammine on Monday, that commodity prices would, in the long run, resume their upward trend, especially in light of the huge amount of liquidity that was being added to the world economy. Also on Monday, Investec Asset Management strategist Michael Power said the crisis was a warning that the US' economic model, which was heavily dependent on borrowing, would no longer be an option for South Africa. Mc Kenna noted that an increasing number of minerals projects were being put on hold because of financing constraints, even though demand fundamentals “must still be strong”. “I question from where the demand for commodities will be satisfied in the long term. This should really be the time for rapid expansion of minerals projects, and I certainly hope this current market crisis is only temporary,” Mc Kenna said. The commodities debate had been only around whether it would last another five, ten or 20 years, because the East was providing the fundamentals for an unprecedented resources boom. But the events in the last two weeks in particular had been “unprecedented in resource volatility”. Blue-chip mining companies like BHP Billiton had fallen from R320 a share four months ago to R187a share; Anglo American from R548 a share of four months ago to a 2006 level of R278 a share; Impala Platinum shares had lost 40% of their value; and Wesizwe Platinum’s 70%. Juniors like Petmin were trading at R3,20 a share from R4,50 a share of only two weeks prior and Wits Gold at R35 a share, off a 12-month high of R180 a share. “It is quite apparent that in times of great uncertainty, investors very quickly shy away from commodities, perhaps with gold as the exception,” he said. “The fundamentals of demand must still be strong, and as we see more and more minerals projects being put on hold due to financing constraints, I question from where the demand for commodities will be satisfied in the long term. “This should really be the time for rapid expansion of minerals projects, and I certainly hope this current market crisis is only temporary. ‘Cash is now certainly king, and companies that can progress projects without the need for financing will surely have a clear advantage,” Mc Kenna said. Jammine said that the fundamental underlying imbalance between demand and supply for oil and other minerals remained intact. “If you believe that the Chinese economy is going to continue growing at a rapid pace over the next few years, then the world’s economies ability to supply the Chinese economy with resources it requires will just not be sufficient,” Jammine added. Power said that the current global financial crisis had presented South Africa with an opportunity to dump Western-inspired economic policies that had proven to be disastrous. Power told the Cape Town Press South Africa's inflation targeting would have to be revisited, as it was not good policy for an emerging country with 25% unemployment. With a current account surplus of $300-billion and household income savings of around 45%, Power said the Chinese model should be emulated, predicting that China would emerge as the strongest economy in the aftermath of the current financial turmoil. "We are going to see a massive shift in the shape of the global economy over the next decade. We are going to see Asia move much more central into the global economy and they are going to become much more influential in determining what happens in the global economy," Power predicted.