Structural changes

In other words, measures taken in the past decade in order to survive were made necessary because of management’s bad planning. They were in respo nse to som ething beyond management’s control.

The cyclical nature of the mining business is something that management is expected to deal with. It should know that there’s only two good years for five bad ones. If a company fails to allow for that, management is held accountable.

It’s quite another thing when management fails to predict fundamental changes in the industry. No one can foresee those structural changes in the industry, so no one can be held accountable when a company suffers as a result.

But in response to those structural changes, the mining companies themselves have altered the landscape of the global metals industry. In effect, their resp onse to one set of structural changes in the early 1980s has changed the world a gain as we enter the 1990s.

The first change was the rationalization of the industry: the layoffs, the shutdown of unused or high-cost capacity, the drive to improve producti vity, the focus on research and technology to provide better final products and to increas e potential end uses.

By 1986 commodity prices had not budged since the beginning of the decade although input costs and inflation had climbed dramatically. These pain ful actions , however, meant that companies still in the business were getting by. Profits w ere not large, but the flow of red ink had been stanched.

Then, when it seemed that business had adjusted to the new realities of metal mining, the world changed again. This time, however, the change w as in produce rs’ favor. In 1987 the world realized that copper, zinc, lead and nickel we re still basic materials in a buoyant economy. By then, however, inventories wer e low, unused capacity was limited and the economy was booming. It was no longer a buyers’ market, but a sellers’ market.

There was a delayed reaction, but eventually prices for all major metals reached their highest levels in years. Today, mining companies are thri ving and, pr ovided that the economy’s “soft landing” after six years of economic growth beco mes a reality, there’s no reason to believe the industry will not be in robust h ealth for the next several years.

The protracted battle for ownership of Falconbridge shows just how much things have changed. A few years ago, mining in North America was consi dered on its last legs. Today, an international battle for control of one of those North Amer ican mining companies and the orebodies on which it is based is accepted as perf ectly reasonable.

The business is still cyclical and no one really expects that to change. Now , however, there are few who predict nickel prices falling back to less than $3 per pound, copper to much less than 90 cents a pound or zinc to less than 45 cents a pound. And all of those prices are just fine for Canadian miners.

The need to adjust to changes in the 1980s has been a hard lesson, but is it one that has been learned well? It is easy to grow complacent as we leave the r ecession of 1981-83 farther and farther behind. The truth is, however, that there are other challenges ahead that threaten to decimate Canada’s min ing industry unless steps are taken today.

Perhaps the most serious problem is the decline of ore reserves. There is a growing awareness of the problem facing Canada’s mining companies in the twentie th century if new ore reserves are not discovered now to replace those being dep leted.

Now, while established mining companies are enjoying their well-deserved prosperity, the search for tomorrow’s mines must be conducted with even greater vig or.

The alternative is to watch the mining industry in Canada truly enter its sunset years.

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