Geopolitics And Resource Nationalism Are Choking The Commodity Supply

Building a mine is a notoriously difficult endeavor. It is a long, often multi-decade process involving prospecting, soil sampling, environmental studies, and billions of dollars worth of capital expenditures before production starts. For companies involved, it is a generational commitment that sometimes sees staff spend their entire careers on a single project.

Thus, when a large mine with significant reserves shuts down while still in full production, the consequences are twofold: the firm loses revenue, but the industry loses valuable supply, driving prices up and sometimes spilling over into higher costs of numerous associated products.

As gold climbs toward its historic milestone of $3,000 per ounce, such a situation is notable in Mali, where one of Barrick Gold's GOLD largest gold mines, the Lolo-Gounkoto complex, has been shut down amid disputes with the government.

The latest round of talks with the military-led government has collapsed, with the junta seeking a $197 million settlement, while Barrick sought a phased payment plan. The mine, which produced almost 700,000 ounces in 2023, accounts for 15% of the firm's output.

Meanwhile, the final hearing for the Cobre Panama mine has been moved to 2026. The mine's operator, First Quantum FQVLF, reported the news, stating that the government of Panama sought an extension after replacing its legal counsel.

The mine, shuttered in November 2023 after Panama's Supreme Court declared its contract unconstitutional, is one of the largest copper mines, producing 350,000 tons in 2022. Its output accounted for 5% of Panama's GDP.

First Quantum also suffered in Australia, where broader market conditions forced it to close its Ravensthorpe nickel mine. The rise of low-cost, Chinese-backed nickel production in Indonesia has flooded global markets, driving prices down from over 30,000 per ton in early 2023 to around 15,000.

This price collapse has rendered many Australian nickel operations unprofitable, leading to widespread job losses and mine closures.

Even BHP, one of the world's largest miners, suspended its nickel operations in Western Australia, cutting around 3,000 jobs. Meanwhile, Glencore's Murrin Murrin mine, the largest remaining nickel operation and the nation's biggest source of cobalt is teetering on the edge of profitability.

"Murrin Murrin is a terrific operation, and credit to our workforce. However, current market conditions are very challenging," CEO Gary Nagle said for The West Australian, clarifying that the firm may not continue subsidizing the mine if market conditions do not improve.

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