This publication focuses on how commodity prices are cyclical and are largely determined by supply and demand.
Commodity prices are cyclical and are largely determined by supply and demand. Investment decisions and corresponding life-of-mine price decisions should therefore be taken taking these basic facts into consideration.
However, as the recent cycle has shown, a number of mining investment decisions, on the up and the down, were taken with reference to much shorter-term price expectations resulting in procyclical behaviour. There is a real challenge to determine a realistic, not overly optimistic or pessimistic price for investment decision purposes.
In our annual SA Mine publication we have, for some time now, maintained that the rand platinum price is unsustainably low. We’ll either see a recovery in prices or mines will continue to close. Unfortunately, it is currently the latter that’s occurring.
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