Learn Mining News

There are over 100 base-metal mining companies listed in various U.S. financial markets alone. Adding also companies in precious-metal mining, non-metallic mining, and coal mining, the number is close to 500.

Furthermore, with the inclusion of mining companies from other financial markets around the world, the total number of mining companies in this seemingly old business could well be in the thousands.

That is no particularly less than what any other sectors or industries may have, say technology, financials, healthcare, or any other modern services groups. If the mining business is as old as the underground resources companies mine, it’s certainly not out of date in any way.

The Importance of Natural Resources

With the emerging-market phenomenon all across Asia, Latin America, and Russia and many other Eastern European countries showing no signs of ever disappearing, a big part of it is their continued demand for natural resources so to feed their hungry economies.

Someone may have said that the current commodity boom will be roaring further in time, as long as this historic, second wave of “industrial revolution” now taking place in all the emerging markets stays in its course.

As countries like Brazil, Russia, Indian, China, etc. keep on building more cars, buildings and bridges, airplanes, industrial equipments, and various household products, among many others, there will be persistent need for steel, aluminum, copper, zinc, lead, tin, and nickel, to say the very obvious.

Mining as a Stable Industry

Investing in mining stocks is to own or trade a very stable business for the most part. Prices of natural resources do go up and down, but also because of its cyclical nature, companies in the mining business can always make the next strike.

By comparison, investors of consumer-product companies, cyclical or non, and even some industrial companies, have seen over the years fierce competition from low-cost providers in the developing world and technological advances that are making some of what they do obsolete. Some of their businesses are gone and no coming back. But mining, over the centuries, has been always about discovering a ore hole and make it into a mine.

It’s world wide operations; already capital intensive, there is nothing like choosing a low-cost location, as mining companies must go wherever resources are potentially probable. And any new technologies are always used to a company’s advantage in exploration and production, considering that there are probably no two mines made the same to be the replacement for one another.

The Future of Futures Market for Metals and Others

Most of metals and other natural resources and their products are not traded on open exchanges, but rather individually and privately negotiated between parties. Precious metals of gold, silver, and platinum do have an futures market, but among industrial metals, only copper and aluminum do. One of the most widely used industrial metal, steel, as well as its product-making ingredient, iron ore, do not have futures contacts yet.

But the London Metal Exchange is in discussion with the steel industry to design and develop steel futures contracts for steel producers and users. And elsewhere, other exchanges in Asia, Europe, and North America are studying contracts for iron ore on behalf of miners and steelmakers.

Price transparency and the ability to manage price risk are vital to predicting cash flow and running the entire business more efficiently for mining companies and that’s what a futures market can provide for miners. Good for mining companies, good for mining stocks.