Have worked in the mining industry for over the last 30 years it is always interesting to see the herd mentality that exists and how we all can easily get caught up in fads.  All it takes is a short term spike in a commodity price or a big discovery somewhere and then off we go running in that direction.  It doesn’t matter the rationale driving the event, all we know is that we need to be there and our investors want to be there too.
Based on my experience, the fads that grab us can include specific commodities, locations, or technologies. The industry is very flexible in that regard. I’ll give a few examples below and you probably have more examples from your own experience.

Commodity Fads

It seems that as soon as there is a price spike or positive market narrative, any commodity can take a life of its own.  The following are a few examples and when you think about them ask how many actually came into production or successful production.
  • Potash – a few years ago potash prices spiked and potash properties were all the fad no matter where they were located around the globe, be it Canada, Russia, Ethiopia, Thailand, Brazil, etc.
  • Lithium / Graphite – as soon as green technology started to be promoted in the news, miners couldn’t run fast enough to pick up the lithium properties, same idea hold for the graphite and vanadium and rare earth categories.
  • Uranium – years ago uranium prices spiked and Ur properties were hot everywhere.
  • Nickel; a spike in nickel caused a surge in nickel properties being it sulphide nickel, laterite nickel, or other forms.
  • Iron Ore – in conjunction with the Chinese construction boom, iron ore properties were hot around the globe, in high cost or low cost jurisdictions, it didn’t matter where the property was.
  • Diamonds – in conjunction with the first diamond discoveries in Canada, quickly diamond properties because hot, whether in the Canada or around the globe.  If you couldn’t get a property in Canada’s boom area, anywhere else was fine.
  • China in general – whereby every base metal project was thought of as either a potential supplier to China or a potential acquisition for Chinese companies.  As long as it could meet Chinese investor interest it was good.

Location Fads

We have all seen the staking rushes that occur when a world class prospect is discovered.  I’m sure we can all recall getting the large claim maps (as shown below) with their multicolored graphics showing the patchwork of acquisitions around a discovery. PDAC was great for distributing these and they were well done and interesting to study.
Mineral claim map example
Picking up properties in hot areas became the fad and share prices would move upwards regardless of whether there was any favorable geology on the property.  Who recalls the following?
  • Voisey Bay; with a mad staking rush around there, with nothing else really paying off in the long run.
  • Saskatchewan;  and the potash staking rush where almost every inch of the potash band was staked with only a couple of companies eventually moving forward and only one going into production.
  • Indonesia; during Bre-X people could get properties in Indonesia fast enough.
  • NWT;  where the diamond property staking rush was crazing in the mid 1990’s.

Technology Fads

Even mining or processing technology could get caught up in somewhat of a wave and become a fad for further study, a rationale often driven by suppliers or consultants.  Who can recall…
  • Paste Tailings; with numerous conferences and consultants promoting thickened or paste tailings technology as the panacea leading to numerous studies related to thickening, pumping, and disposal.
  • Block Caving; whereby in order to deliver high tonnages at low cost, bulk underground mining was being promoted.  Everyone wanted their underground project to be a low cost caving style operation.
  • High Pressure Grinding Rolls (HPGR); where process consultants would tout HPGR as the new replacement for conventional grinding mills.  I’m not sure this technology has taken the industry by storm as they were hoping.
  • IPCC; whereby inpit crushing and conveying was being promoted in many articles and global conferences as the solution to operating cost pressures.  I think implementation of IPCC technology isn’t as simple as envisioned.
  • Dot.com; in the early 2000’s many junior miners left exploration behind and transitioned to the dot.com boom, a fad with generally poor results.
  • Medical marijuana; seems to be the hopeful target for some junior miners today. Unfortunately there is only so much marijuana you can sell.
  • Pre-concentration; this seems to be a growing technology fad that may be gaining momentum, with a few consultants pushing for it to be studied more.  This isn’t new technology and will have its benefits but a big stumbling block is how many deposits are actually suitable for its application.
My bottom line is that over the years it has been interesting to watch the mining industry react to events.  Sometimes it seems like we’re passengers on a boat running from one side to other side and then back again.  Unfortunately that doesn’t necessarily make for smooth sailing and can result in upset stomachs.
What’s the next fad? I don’t know but if you could predict it we can probably make a lot of money.

 

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One thought on “43. Mining Fads and the Herd Mentality

  1. hardrockminer

    Voisey’s Bay….based on no new discoveries, probably true, but the best place to find a new orebody is next to an orebody.

    Saskatchewan Potash – Early mines had troubles producing. Several have been lost over the years. I lost a job when Cominco flooded back in 1970. Nevertheless there are quite a few mines in production right now.

    Bre-Ex – it was a scam and it entrapped a lot of people.

    Diamonds – up until Chuck Fipke came along they were a pipe (no pun intended) dream. Now that we know they are there…why not look for more?

    Paste fill – definitely a winner for geotechnical reasons, although it took quite a bit of time to sort out the transportation issues. Kidd Creek would be closed without paste.

    Block cave – Afton is an example of a mine where block cave has renewed its life. My first exposure to block cave was San Manuel, where they took 650 million tonnes of 0.6% copper from underground. That’s a huge economic and logistical success!

    HPGR – maybe the jury is still out, but conventional technologies have not helped Mt Milligan, or Copper Mountain. Hard ores are especially difficult and SAG may not be the best process.

    IPCC – agreed that it’s complicated, but it works and reduces truck fleets considerably.

    Dot.com – right on! Most companies were destined to failure. Even today we have some highly overpriced ones like Amazon or Netflix, but at least they have a business plan and earnings.

    Medical marijuana – it’s a “growth” industry!

    Pre-concentration – with low grade orebodies it may be a way to keep mining in BC. We need someone with the courage to try it.

    Here are a couple of my bugaboos.

    Consensus metal prices – everyone uses them but no one believes them, particularly banks.

    Government’s demands for consultant opinions – companies hire professionals who then hire consultants to do the dirty work. It’s a growing trend, yet companies usually possess the requisite skills in house.

    For future articles…why not do something on the high cost of mining software? It’s driving the little guy right out of the business.

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