Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
If you’re making long term bets with billions of dollars even your worst-case forecast has to be pretty positive.
And if you’re talking spades of money and eye-watering lead times few things come close to building an iron mine from scratch.
Sandy Chim, CEO of Century Iron Mines, is making exactly these bets with a greenfield project in the Labrador Trough.
The iron ore business is all about China.
It consumes close to 70% of the world’s seaborne trade in the steelmaking raw material.
The Chinese building boom has sent the price skyrocketing from $16 a tonne in 2004 to $155 today.
To use a well-worn phrase if China were to sneeze now iron miners will catch pneumonia.
Which is why Century Iron needs China to keep growing. And fast.
And Chim is convinced it will.
China only has to emulate the success of tiny neighbour South Korea to keep going gangbusters for the next two decades.
And why wouldn’t it?
And if you believe the Chinese will one day match the incomes of Americans; well you make the sums:
Big league mining is all about iron ore.
The commodity represents 66% of the world’s top five diversified miners earnings, up from only 24% five years ago.
This chart suggests it may even go up in future:
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