Green pressures to impact bulk handling methodologies

An experienced investor in the resources sector has suggested that rising fuel costs and carbon concerns will likely
lead to a change in mining methodologies benefiting elements of the bulk handling sector.

Chris Bain, chief investment officer, Phillip Resources Fund, a
subsidiary of fund manager Intersuisse, noted at the recent
Paydirt 2008 Victoria Resources Conference that much of
Australias mining growth in the past 25 years has been based
on massive open pit mining using the economies of scale of ever
larger mobile equipment and cheap diesel.
In an increasingly carbon constrained environment, high carbon
emitting projects will be marginalised by investors just as environmentally
damaging projects have been over the past decade, he said.
Technology gains in mining are becoming incremental, and
as energy costs lower open-pit strip ratios, expect to see underground
mining going ahead sooner in the life of an ore body.
Traditional low-cost underground mining techniques, such
as sub-level open stoping and block caving where gravity does
the work, will replace some of these ultra-deep open pits.
Mobile equipment that is electric or air powered will
make a comeback with conveyor belts and shafts bringing the
ore to surface.
We are also likely to see more in-pit crushing and initial
beneficiation to reduce haulage costs.

Bain warned that the drive for energy efficiency would also
see more robotic miners reducing the need for people, reducing
underground ventilation costs and improving efficiency in open
pits and ore transport.
He went on to warn that current cost pressures on advancing
or expanding projects will progressively claim a number of
mining hopefuls.
Within this cycle, low exploration has meant a limited
inventory of new large mine developments; ongoing tight shortterm
minerals supply, rising development costs, greater hurdles
for project finance, higher operating costs and a squeeze on
margins despite high metals prices, Bain said.
Within this environment, there would be three outcomes:
Companies yet to complete the financing of their mining project
will suffer additional delay
Producers high on the cost curve face short-term difficulty and
some will not survive in their current form, and
Low cost producers will reap significant benefits from any shortterm
downturn for the resources sector.
Bain pointed to the savage turnaround for Australias resources
equities in the past two months.
These equities held early in the year against the meltdown
caused by the economic problems in the United States, he said.
Yet in the past eight weeks, the Metal and Mining Index has
crashed 28 per cent and masked within that are falls of up to
70 per cent for some of the more junior mining exploration and
development plays.
While I believe markets are overly pessimistic about the shortterm
outlook for commodities, this combination of falls in metal
prices and rises in costs has created a market nervousness that there
are more nasty surprises in store.
Longer term, we have a cycle that is not just the short boombust
of the past few decades but is more akin to the UK Industrial
Revolution that lasted around 65 years, he said.