Inflation: Double-Edged Sword For The Mining Sector; Rising Input Costs Effect On Margins

Everyone agreed that Royal Road Minerals was deserving of the…


Everyone agreed that Royal Road Minerals was deserving of the award for all of the hard work it puts in at its South American ventures

However, demonstrators eventually congregated outside the Mines & Money conference venue and managed to create a lot of noise out of proportion to their numbers.

ESG credentials have been a requirement for all new and existing initiatives since only a few moons ago when Goldman Sachs made it a condition for all new and existing businesses to be ESG-compliant. Inflation may be a double-edged sword for the mining industry since increased input prices can affect profit margins.

On the other hand, inflation is mostly a matter of fiat currencies, and the market is aware of this.  To protect against inflation, it is best to invest in hard assets such as commodities or the firms that create them.

This dynamic may also provide an initial boost.  Because the rise in metals spot prices is primarily a US dollar-related phenomenon, inflation is driving up metals spot prices.  The cost of raw materials may not change for miners who pay in foreign currencies.  As a result, profit margins will rise.  If there is a war in another country or a dangerous virus is made in a lab in China, these factors could change at any time and impact the market.  To ignore inflation, which is currently at its highest level in the United States in forty years, would be to make half-blind judgments.

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Several government entities across the nation have announced new spending plans for infrastructure projects around the United States.  President Biden’s trillion-dollar spending ambitions are no longer hypothetical; money is being allocated and planned for accordingly.  There’s no denying that the country’s infrastructure is in dire need of repair.  President Biden’s strategy is more disputed, and it is still the subject of much debate in the US media.  However, the money is on its way, and most of it will purchase the raw materials needed to build the infrastructure.

However, due to the weird covid-enchantments still coursing in all directions, employment isn’t a significant concern in the United States.  At the present moment, it is challenging to locate qualified personnel to fill all open jobs.  Natural resources, on the other hand, are a different story.  As usual, most of this material will have to be imported from elsewhere, and the large mining firms will reap the benefits.

Everything else, however, is already factored in.  The significant gains will come from small businesses, which will move initiatives from the discovery stage to profitability.

Copper, nickel, and other metals are desperately needed across the globe to build new products.  The majors’ known and owned deposits are being exhausted.  The need for new ones is inevitable.  Whether this indicates that junior and mid-tier miners will experience boom times again in 2022 is an open issue.  As far as we can tell, the horrible circumstances that have defined the previous six or seven years are unlikely to reoccur.

A fresh wave of limitations may sweep the globe once the omicron covid version becomes recognized, driving more dread and greater outrage into those who are less afraid.

Overall, the miners’ collective reaction to Covid has been positive.

When residents of low-income neighborhoods were unable to go to work because of a lack of available jobs, numerous corporations offered covid assistance programs in the years 2020 and 20201.  It wasn’t long before the miners themselves instituted their testing and safety procedures.

Furthermore, the show went on despite a few shutdowns and some uncertainty regarding supplies from some of the world’s largest copper and nickel mines.  Despite the travel limitations on top-level decision-makers, exploration continued without interruption.

Covid contamination of indigenous populations was a concern for a short time among Canadian exploration crews.  The mining industry is moving forward despite the rising constraints placed on it by the rest of Canada’s population.

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