Supply Cliff?

Commodities supply shortfall looming following years of underinvestment

- Ilan Solomons

Several years of little or no investment in exploring for and developing new mining projects has resulted in the emergence of an impending commodities supply cliffin a number of resource sectors, says professional services firm EY Africa mining and metals transactions leader Quintin Hobbs.

Therefore, he contends that there will need to be more “brave companies” emerging that can break out of the “absolute general madness” of the ‘boom or bust’ mentality to push their boards to unlock funds for the development of new projects to ensure that miners do not miss out on the uptick that is occurring at this point in the commodity price cycle.

“If the minerals sector, broadly, waits for three years or more for the current global economic and political uncertainties to dissipate, they will almost certainly miss out,” Hobbs warns.

With regard to whether there is capital available in the market, Hobbs concedes that securing external sources of capital is difficult. However, he believes that raising capital needs to be done nimbly and creatively.