As this edition of Engineering & Mining Journal (E&MJ) was going to press, many mining companies were filing midyear financial reports or end of year financials depending on where they are headquartered. At the same time, prices for most mined commodities had declined across the board, placing miners in a difficult position. During July, gold and copper reached multiyear lows, $1,088/oz and $2.38/lb, respectively. For the week ending July 24, the world’s largest gold miner, Barrick Gold, saw its market capitalization drop $2.2 billion or 17%. Similarly, Freeport-McMoRan, a large publicly held copper producer, saw $3.7 billion (or 23%) of its market cap erased during the same week. Mining companies were openly announcing plans to assess options.

The financial press pounced with outrageous headlines tied to metal prices and slowing growth in China. A couple read something along the lines of: Mining Company Axes 53,000 Jobs. Those articles were referring to Anglo American’s mid-year report. A quote from Anglo American’s report was taken out of context and blown out of proportion. In Leading Developments (See p. 5), E&MJ publishes what Anglo’s CEO Mark Cutifani actually said regarding the company’s plans to realign itself. The company has reached the midpoint of a three-year plan and it hopes to sell a large portion of its assets. The jobs associated with those mines would shift to another company, but not disappear. Anglo posted an 11-minute video on YouTube that explains the situation even better.

Shrinking profit margins are obviously having an impact. Seeing relief in low oil prices offset by lower metal prices, miners are taking measures to optimize performance. This has been the case with the mining business for about 18 months or more. How the mining industry reached this point is not a mystery, but a report from Wood MacKenzie (See Markets, p. 88) explains some of the differences in business models. If metal prices were to remain at this level for an extended period of time, the approach to capital projects will become much more prudent. Similarly, a report by the Boston Consulting Group (See Operating Strategies, p. 74) explains why some groups are more successful than others. While the authors are talking about exploration programs, the reasons for success—operating as a profit center and retaining a diverse group of professionals—could be applied throughout all aspects of operations.

Some of the mining companies that have been hardest hit are coal and oil sands operators. They haven’t given up hope—quite the contrary. Readers should note what Alliance CEO Joe Craft has to say about the situation in the U.S. (See This Month in Coal, p. 26). The U.S. will continue to rely on coal for electrical power. Some companies will not survive, while others will thrive. Similarly, E&MJ’s annual update from Alberta (See Oil Sands, p. 32) profiles an industry that appreciates higher oil prices. Some projects are moving forward while others are not, and transportation issues remain unresolved.

Many economists tie softening demand for commodities to China and rightfully so. They consume the most of almost everything today. Many wrongfully associate the recent collapse in the Chinese stock market with declining growth figures. Chinese growth is also based largely on global economics. Economies are gradually improving worldwide. Longtime E&MJ readers know that times have been a lot worse, and markets can improve quickly. Let’s hope for the latter. Enjoy this edition of E&MJ.

Steve Fiscor, E&MJ Editor-in-Chief,
[email protected]

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From the Editor

Steve Fiscor, Editor-in-Chief, EMJ, Engineering Mining Journal
Steve Fiscor heads a world class group of writers and editors serving the mining and construction markets. He has served as editor-in-chief for E&MJ since 2003 and Coal Age since 2001. He writes articles on mining and processing, organizes the technical programs for several conferences, and produces many of MMI's ancillary products.

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