Share prices sink on mine suspension news
This morning Stockhouse blogger Diopside contributed a piece to the home page called Canaries in coal mine: Resource juniors feel effects of slowdown. In that piece, Diopside discussed the closure of Blue Note Mining’s (TSX: T.BN, Stock Forum) lead-zinc-silver properties in Bathurst, New Brunswick, and the closing of First Nickel’s (TSX: T.FNI, Stock Forum) Lockerby nickel mine near Sudbury, Ontario.
Today we have news that North American Palladium (TSX: T.PDL, Stock Forum) is putting its Lac des Iles Mine in Thunder Bay, Ontario on “care and maintenance” due to declining metals prices (350 employees will be laid off, according to the PDL news release.) Shares of PDL are down 20% to $1.44 in afternoon trading.
And that’s not all. FNX Mining (TSX: T.FNX, Stock Forum) has also announced that it has suspended commercial production from its Levack Complex (also located in the Sudbury Basin) because of “low commodity prices and low provisional metal accountabilities along with high operating costs,” according to today’s news release. FNX is down 17.6% to $5.60.
Now, under normal circumstances, we all know what it means for the price of a commodity when supply of that commodity shrinks through mine closures such as this: It goes up. But are these normal circumstances? How much supply reduction can the market absorb before it puts a floor under nickel prices – or any base metals for that matter? How much more can the input costs of producing a particular commodity rise before there is no one left to produce the commodity and still turn a profit?
An analyst on BNN is covering the story of the FNX and PDL mine closures as I type this: Expect to see “a lot more mine closures over the next two, three, six months… all over the place they are going to be shutting down if these [commodity] prices don’t recover.”
If any readers out there are holding shares of these companies that are shutting projects down, perhaps you could provide your thoughts below on whether or not mine closures are bolstering your long-term outlook for the companies in question or undermining it (no pun etc.)
