Webinar: Price Fluctuations in Raw Materials – Impact on the Mining Sector

Anya:
Hi everyone, I’m Anya, and I lead business development at K-Mine. Before we get started, I’d like to remind you to follow our LinkedIn page. It’s the best way to stay informed about our latest updates and upcoming webinars. I also want to thank you for joining us today—your support is greatly appreciated.

Today’s webinar focuses on how the price of raw materials impacts various aspects of mining companies. We’re excited to announce that we have a special guest joining us later: Amir Mirchi, who brings decades of industry experience. Amir has agreed to share his insights into the current state of raw materials and the global market overall.

Let me begin by giving you a brief overview of K-Mine. Our journey started in Ukraine in 1994, and we have since expanded our presence across Europe, the United States, and Canada. Our team is made up of a diverse group of professionals, including developers, geologists, and mining engineers, some of whom are qualified persons for NI 43-101 and JORC reporting standards. We cater to a wide range of clients, from small exploration teams to large corporations, with a focus on providing high-quality and cost-effective solutions.

Our bread and butter is our software, specifically designed for the mining industry, supporting every phase of a mining project—from exploration to full-scale production. It includes 12 versatile models tailored for both open-pit and underground mining. What makes our software stand out is its adaptability. Whether you’re a small operation or a large corporation, you can choose the models that suit your workflow or even opt for the full suite. These models cover everything from geological data processing and surveying to developing optimized mining plans for both short-term and long-term projects. By integrating our software with IoT devices or dispatch systems, you gain real-time monitoring that empowers you to make fast and data-driven decisions.

Our product is developed from real-world industry experience and is specifically designed to tackle challenges we’ve encountered in our consultancy work. We deliver reports that comply with NI 43-101, SK 1300, and JORC standards, customized for various project stages such as mineral resource estimation, PFS, FS, DFS, and PEA. Our expertise covers a wide range of hard rock commodities, including key critical minerals.

If you’d like more information about our services or how we can support your project, feel free to reach out in the comments below or use the contact form on our website.

Understanding Raw Material Price Volatility

Anya:
Today’s stream covers a broad topic. While we won’t provide specific solutions for individual situations, we’ll offer a range of suggestions and ideas to inspire action in different circumstances. We’ll begin by discussing commodity price volatility—the factors that drive it and its potential impact on mining companies. Then, we’ll delve into financial implications and explore technological innovations in the mining industry. Finally, our guest Amir will share his insights on price fluctuations, global demand trends, and risk management strategies.

Key Factors Influencing Price Volatility

1. Supply and Demand: As with any market, the balance between these forces largely determines the cost of raw materials.
2. Geopolitics: Global tensions, conflicts, and sanctions often disrupt supply, creating deficits that drive prices higher.
3. Social Factors: Protests, strikes, and consumer sentiment can significantly disrupt raw material extraction and supply.
4. Legislation: Environmental regulations and trade barriers can raise production costs, while relaxed regulations may lower prices.
5. Technological Advances: These can both reduce and increase costs, depending on the required investments.
6. Market Speculation: Traders and speculators can cause sharp price swings, even with stable supply and demand.
7. Natural Disasters: Events like earthquakes and floods can devastate extraction infrastructure, leading to shortages and price spikes.
8. Currency Exchange Rates: These impact international trade costs, influencing global pricing trends.

Impact of Price Volatility on Mining Operations

Operating Costs and Production Planning

Price swings significantly affect operating costs, particularly for input materials like fuel, labor, and equipment. For instance:

• Fuel Prices: Directly impact transportation and operational costs.
• Variable Costs: Falling raw material prices can lead to higher per-unit costs if operations remain constant, while rising prices can offset increased production costs.

Companies often scale back operations during downturns to avoid excess inventory, resulting in layoffs and reduced working hours. During periods of high prices, investments in new technologies and expanded operations are more viable.

Technological Solutions

Innovations like predictive analytics, IoT, and blockchain can mitigate the risks of price volatility. For example:

• Predictive Analytics: Analyzes historical data and market trends for better forecasting.
• IoT Sensors: Provide real-time insights into inventory levels and demand.
• Blockchain Technology: Enhances supply chain transparency.

Discussion with Amir Mirchi

Anya:
Let’s welcome our guest, Amir Mirchi. Amir is the CEO of Sarmin Metals and has decades of experience in the mining industry, including 28 years at Rio Tinto. Amir, thank you for joining us. What are your thoughts on current demand trends in the global market, and where do you think they are headed in the future?

Amir:
Thank you, Anya, for the comprehensive presentation. I cannot agree more with what you’ve described. Let me first provide a little insight from our perspective. Sarmin Metals is a Singapore-registered emerging mining company focusing on iron ore licenses in Africa, particularly Liberia. We’ve completed extensive drilling and are now in the feasibility stage.

Anya:
That’s fascinating! How do you see demand trends influencing the market?

Amir:
As countries undergo urbanization, industrialization, and electrification, the demand for raw materials will continue to rise. Materials like steel, copper, and aluminum are crucial for infrastructure development and consumer goods. This increasing demand drives market growth, encourages investment in the mining sector, and fosters innovation in extraction and processing technologies.

Anya:
How about price volatility? What are the main challenges?

Amir:
Price volatility is more complicated today due to geopolitical tensions, supply chain disruptions, and environmental factors. While the commodity trading industry’s prospects are strong, the ongoing energy transition and decarbonization efforts add layers of complexity. Flexible capacity to respond to changing market conditions is becoming increasingly critical.

Anya:
Do you think hedging is an effective risk management strategy for companies?

Amir:
Hedging is an excellent tool for maintaining cash flow and stabilizing revenue. However, it must be approached smartly. Emerging companies should involve experts to develop optimal strategies. It’s about balancing risk and ensuring the company remains resilient in volatile markets.

Anya:
What advice would you give to junior companies operating on tight budgets?

Amir:
Keep costs as low as possible. Start small, generate cash flow, and grow progressively. Leveraging technologies like AI and data analytics can significantly improve cost-effectiveness. Robotics might be more relevant for larger companies due to the high capital requirements.

Anya:
Thank you so much for sharing your insights, Amir. It’s been a pleasure having you with us.

Amir:
Thank you, Anya. It’s been a great discussion, and I look forward to future collaborations.

Anya:
Thank you to everyone who joined us today. We hope the insights shared have sparked new ideas and encouraged you to reassess your company’s financial strategies. Stay tuned for our next webinar, and we’ll see you soon. Goodbye!