Long live the Five-Year Plan!
While the US President makes known his displeasure that a Democratic Socialist gained primacy over a party hack in New York City’s mayoral race, perversely, the mining community are embracing the planned economy like comrades of old. Was Rosa Luxemburg a wannabe Woman in Mining before her time? One is coming to suspect that miners, with their new-found love of the planned economy, will next be advocating for a Five-Year Plan.
Of course, the difference between now and times of yore is that the thing they are loving is money with no strings attached. Hohoho… do they think the universe has changed that much. Will the lion lie down with the lamb?
In reality, little of the wished-for government largesse comes with no-strings-attached. The US DoD, long used to the complex mazurka it dances with the military-industrial complex, is suddenly besieged by a horde of supplicants from the mining industry. The M-IC is accustomed to military contractors proffering offers of pork-barrel in congressman’s districts, not dispensing funds to groups in the wilds of the DRC or Quebec. To the Pentagon’s demands of “show-me” they are instead being handed a freshly minted PEA on some advanced moose pasture, and little more, when they are used to seeing a gleaming jet engine plant in the mid-West. While this is a culture shock for the bureaucrats, it is even more of a wake-up call for mining promoters, when a sexy schematic no longer cuts it. The fall back from these churlish Washington nit-pickers is the Canadian government tasked with the unenviable duty of telling Vancouver promoters that their projects are camel-dung, while the Australian government babbles about price support schemes and stockpiles with scarcely any cognizance of the nature, import or lack of viability of the projects in question. The EU, in contrast, doesn’t particularly care about the project, or even the metal, as long as there is “circularity” mentioned somewhere in the RFP.
With this in mind we must return to the Soviet model of the “over-arching imperative”, i.e. the survival of the State and ongoing revolution, which could make any project worthwhile if it served the Greater Good. Unfortunately, in the far north-west of Western Australia the greater good consists of unskilled FiFo truck drivers getting AUD$250,000 per annum for their irreplaceable skills. Alas, Alexei Stakhanov (pictured right) they are not. Their bosses even less so.
While the politics of the Politburo may rule at the top of Rio Tinto, it does not in the hardscrabble world of BMO conference jaunts and lifestyle miners. What is the Soviet equivalent of a lifestyle miner?
With governments potentially wising up on some of the fakers in the mining scene, a breed that nary were seen in the halls of power, the danger is that governments might start getting wary of voter blowback, which can be far more fatal for a politician saddled with a slew of dud mining projects, than for any mining CEO faced with a requisitioned EGM from a dissident hedge fund.
Be careful what you wish for from government.
Christopher Ecclestone
Christopher Ecclestone is a Principal and mining strategist at Hallgarten & Company and is based in London.Prior to founding Hallgarten & Company in 2003 he was the head of research at an economic thinktank in New Jersey which he had joined in 2001. Before moving to the U.S., he was the founder and head of research at the esteemed Argentine equity research firm, Buenos Aires Trust Company, from 1991 until 2001.
Prior to his arrival in Argentina, he worked in London beginning in 1985 as a corporate finance and equities analyst and as a freelance consultant on the restructuring of the securities industry. Earlier, he worked for the Federal and State governments in Australia. He is a native of Melbourne, Australia. He graduated in 1981 from the Royal Melbourne Institute of Technology.
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