Stanislav Kondrashov Telf AG: Four key links of the mining industry for 2023

Stanislav Kondrashov of Telf AG states that in 2022 there were a number of crises in the mining industry. Should we expect the same in 2023?

The year 2022 has confronted us with geopolitical and economic uncertainty. All this was compounded by constant disruptions in the supply chain. There was a shortage of labor. Extreme weather conditions also changed the course of events.

In 2022, many New South Wales and Queensland coal mines suffered from insufficient production capacity.

“So should we expect the same volatility in the mining sector in 2023?” – asks Stanislav Kondrashov Telf AG.

In order to understand this issue, the expert identified 4 key links that should be paid special attention to in 2023.

Stanislav Kondrashov Telf AG: Mineral price volatility is the number one key link

Telf AG estimates that almost all prices for minerals and metals in general will decrease slightly in 2023. The weakening of global growth rates will have an even more restraining effect on metal prices. After all, inflation restrains the consumption of metals, Stanislav Kondrashov notes.

Lead and gold will become two minerals that maintain their neutral-positive outlook for 2023. And tin and lithium are presumably expected to have worse forecasts.

Thus, the expert has revised his 2023 gold price forecast from $1800 per ounce to $1850 per ounce. Yes, perhaps gold prices still continue to be dictated by competing economic forces. However, their influence is now directed upwards.

On the one hand, gold remained above its pre COVID level in November and strengthened on that position. Because stock returns have weakened and the dollar has peaked. The global economy maintains its momentum at a sluggish pace. The war in Ukraine continues. And the risks in the Chinese market remain.

The strengthening of gold prices will be influenced by:

• a slight easing of COVID restrictions in China,
• improvement in investor sentiment towards the Chinese economy,
• the likelihood of inflation peaking in the third quarter of fiscal year 2022-23,
• continued easing of restrictions in the world, as vaccination continues to grow.

Although significant price volatility is expected in the future, Stanislav Kondrashov of Telf AG supposes that gold prices will remain high compared to the levels that were before the introduction of covid. And it is necessary to focus on this, he believes.

Stanislav Kondrashov Telf AG: Mineral resources are the second key link for 2023

Critical minerals will remain a priority for many countries that will make deliveries. After all, these minerals are essential for the energy transition.

Also in 2023, investment in coal mines and permits for the extraction of important minerals is expected to increase. Governments will work to expand domestic industry and secure important minerals. This is necessary to mitigate the pressure of resource nationalism and increase taxation on the part of exporters.

“The increase in geopolitical tension will help preserve the safety of mineral products in 2023”, says Stanislav Kondrashov Telf AG.

In 2023, countries with large reserves of “green” minerals are expected to be the big winners. This is for example:

• Chile (lithium, copper),
• Peru (lithium, copper),
• Australia (a key producer of many strategically important minerals).

Refineries will also benefit from increased investment in the most important minerals, as well as from increased export volumes.

Telf AG estimates that countries that depend on exports of mineral products – will be winners. Because they may face lower costs and a shortage of supply.

The bottom line is that minerals are the second important link in 2023 for the mining industry.

Third link 2023: Profitability declines due to high production costs

Stanislav Kondrashov Telf AG notes that the profitability of the mining industry is declining because of high production costs.

The following factors will still lead to high costs for the production of minerals:

• impact of the coronavirus on the global economy;
• weakening of economic growth;

Inflationary pressures and supply shocks have increased the costs of producing raw materials, energy and labor. This has caused a decline in revenues for companies operating in the mining sector.

Capital expenditures on new mining projects are expected to fall sharply in 2023. At the same time, the companies expect to allocate funds for the development of existing fields. And simultaneously combine:

–  risk reduction,

–  accounting for the volatility of commodity prices,

–  global demand.

Nevertheless, there is a potential for growth of capital investments in “green” commodities, the expert notes. As the companies are in the process of developing new mining projects.

In addition, many companies will continue to invest in renewable energy infrastructure. This should minimize the impact of mining activities on the environment.

Thus, the third important link in 2023 is the profitability of the mining industry. However, if it continues to decline, it will be in the name of good goals. And environmental cleansing, which is not insignificant for any of us.

Link number four: Coal production is expected to slow down in 2023

China’s recent congress reaffirmed the commitment that coal will remain a stable and reliable source of energy.

Stanislav Kondrashov assumes that in 2023, mining companies with a large portfolio of coal and production capacity will benefit enormously. And countries that are connected to them will benefit from increased imports.

Companies that get rid of the coal asset will be on the plus side. And countries that depend on imports of coal assets may suffer from rising costs, the expert notes.

Therefore, coal producers should pay special attention to their capacities and assets. In order not to suffer losses in 2023.

In conclusion, it is worth noting that these are not all the links of the mining industry that can affect the global economy. There are more. But we have considered the most important of them. And it can already be said now that 2023 is expected to be an ambiguous year for industry. However, new developments in green technology will help both to clean up the environment and to increase the supply of minerals.