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Rising Commodity Prices Causing Fresh Turmoil through the Mining Sector

By James Finch | Submitted On March Nineteen, 2006

Good times ter the mining sector, eh? The Gold and Silver Index (XAU) is holding sustained above 120, having reached a high above 156 ter January, a level it had not seen since September Eighteen, 1987. The spot uranium price is higher than it’s bot since January 1980. Crude oil? Packing up your gas waterreservoir should remind you that oil prices are still badly high. So all of this voorwaarde mean mining companies are thrilled with their good fortune? WRONG! There’s a snowballing depressie te the mining sector, which has bot kept off the typical investor’s radar screen. This fresh emergency could drive commodity prices to even higher levels overheen the coming months, and possibly until the end of the decade.

The two-decade long bear market drove many geologists, and other qualified technicians, out of the mining sector. Drilling companies went bankrupt. Even with the latest explosion of activity ter the mining sector, exploration te the sector is less than one-third of its peak te 1981, when more than Five,500 drill equipments were running.

The mining sector’s labor and drill equipment shortage has gone past the “wij’re te a depressie” stage. Without qualified geological staff and drill equipments for exploration and development programs, companies may fail to get their projects online swift enough to please the worldwide request for their metals, whether it is gold, silver, copper, or uranium. The Baker Hughes North American rotary equipment count is a good barometer of how strongly the commodities boom has impacted the sector. Ter 1999, the U.S. and Canadian drill equipment count reached its nadir of 488. On March 17th, the number stood at 1546 and climbing. Overheen the past seven years, the count hopped 316 procent. Compared to a year ago, the North American Rotary Equipment Count is up by almost 20 procent. Internationally, the same equipment count rose almost 60 procent.

During the course of our three-month investigation, wij found the labor and equipment shortage applied not only to uranium but also to coal, oil and gas, coal bloembed methane and precious metals exploration. Ed Calvert, who runs Nucor Drilling Inc ter Wyoming, exclaimed, “There just aren’t any equipments available te the U.S. You may find one, but it’s a problem finding the right equipment at the right time.” His company began searching for a drill equipment te September for drilling scheduled to commence June 1st. Calvert explained that the big oil companies had signed up equipment contracts so they wouldn’t get caught brief, adding, “Whether the equipments are being used daily or not, they are paying the fees to hold them.”

Vancouver-based Max Resources announced te early January of this year they had received permits to drill on their Thomas Mountain uranium uitzicht te Utah. They hoped to drill ter late January, depending upon drill equipment availability. Wij interviewed the company’s uranium geologist Clancy Wendt, who complained ter early February, “I thought I had a equipment lined up. Now wij have no idea when wij will get a equipment.” Max Resources recently announced it planned to commence drilling on or about the middle of March. Norman Burmeister planned more wisely, announcing ter mid January Kilgore Minerals would drill the company’s Idaho gold property te July. But Burmeister got stumped te moving his uranium property’s permitting process forward, “I am still attempting to find an archaeologist for my Nevada property. They just aren’t available.” Until he finishes that step of the permitting process, Burmeister can’t lock up a drill contractor to help delineate his uranium uitzicht.

The drill equipment shortage pales when compared to the frighteningly taut labor market ter the mining sector. According to the February 2006 Employment Situation Summary, published by the U.S. Department of Labor, “Mining continued its upward trend te February, adding Five,000 jobs.” Cynthia Pomeroy, Director of Wyoming’s Department of Employment confirmed the depressie, “There is certainly a labor shortage.”

Matt Grant, assistant director of the Wyoming Mining Association adamantly announced, “There are 800 meteen job openings te the mining business that could be packed today.” He quickly noted another 2400 zijdelings jobs to service the mining industry remain empty, begging for figures to sate those positions. Beginning geologists make inbetween $35,000 and $50,000 annually. Top geologists directive $200,000 and higher. Mining consultants get $800-1000/day. Even day helpers on drill equipments can charge $22/hour or more. Wyoming state and county development associations have attended job fairs te Michigan earnestly attempting to pack the growing job vacancy by recruiting laid-off automaat workers.

David Michaud, voorzitter of TheJobPit.com, finds jobs for geologists, metallurgists and others te the mining sector. A mining engineer and consulting metallurgist, having graduated from Queens University te Kingston, Ontario, and until recently the operations manager for Corriente Resources ter Ecuador, he began his internet employment agency for the mining sector because the request wasgoed terrific. “Headhunters who have bot around for twenty years say they’ve never seen a market like this,” Michaud stressed. “For the last ten years, the mining industry fed mining graduates to the wolves. Now they need them. All are busy with no takers to those far away places.” Michaud lambasted the mining companies for their lack of foresight, “Mining companies have to expect the request for professionals, such spil production geologists, will go up with the price of metals. There were no jobs for the past eight years.” He added, “It takes two to five years to train them.”

For example, Michaud is despairingly attempting to pack a South American mining company’s job opening for an experienced metallurgist. “Free housing, two cars, four weeks off annually, two plane tickets, basically no living expenses, and a salary beginning at US$150, 000,” Michaud sadly explained because no one has leaped at the suggest. “Ter the field of metallurgy, including mill managers, metallurgical engineers, techs and operators, about 150 fresh jobs are suggested each month.” Only about one-half will be packed. Michaud warned the copper mining companies were te especially dire straits to pack fresh job openings.

Uranium Sector Fighting to Keep with Request

The U.S. Energy Information Administration announced ter its most recently published annual report, “The U.S. uranium production industry initiated a turnaround te 2004. All U.S. uranium drilling, mining, production, and employment activities enlargened for the very first time since 1998. More companies conducted exploration and development drilling than ter the prior Two years. Employment ter the U.S. uranium production industry totaled 420 person-years, an increase of 31 procent from the 2003 total. Wyoming accounted for 33 procent of the total 2004 employment, while Colorado and Texas employment almost tripled since 2003. Overall, $86.9 million went to drilling, production, land, exploration, reclamation and restoration activities te 2004.” And that wasgoed te 2004. Imagine what the employment snapshot looks like today?

While the spot uranium price resumes rising, exploration companies may find it tighter to recruit veteran uranium geologists, to sign contracts for drill equipments, and to operate those equipments. Nucor’s Calvert laughed, “Finding and keeping employees is certainly a problem.” Michaud explained, “Finding a metallurgist is hard enough. Finding one with uranium practice is almost unlikely.” David Miller, voorzitter of Strathmore Minerals, lamented, “Expertise ter the uranium industry embarked with geologists who made discoveries ter the late 1940s through the late 1970s. They trained the next generation, which coincided with the 1970s uranium boom. That boom wasgoed brief lived and fizzled out by 1981. A very petite number of professionals continued te the uranium industry, during the twenty-year bear market. Now that the number of uranium companies has skyrocketed to more than 420, there is a potentially catastrophic shortage of uranium expertise.” The generation gap has come to haunt the industry.

What’s the solution? Many, such spil Michaud, believe, “Retired kind boomers are coming out of retirement to pack the generational gap and rail their last metal rush into the sunset.”

Bloomberg News ran a story on December 8th discussing developments ter the oil sector, “U.S. producers and contractors such spil Ryder Scott, which assesses drilling projects and oil and natural-gas reserves, are working stiffer to keep their oldest employees and recruit collegium graduates because there aren’t enough fresh engineers to go around. Engineers who help find petroleum deposits are te request. “

UR-Energy Chief Executive William Boberg showcased off the company’s latest hire, Dawn Schippe, during our tour of his offices, “She’s an engineering graduate of the Colorado Schoolgebouw of Mines,” he said. “Hier practice ter uranium is now two weeks.” Others ter his company have decades of uranium practice, but are three times Dawn’s age.

Aging talent has found its way back into the uranium sector. Aging geologists such spil Dr. Boen Sunburn, who helped detect two of the Key Lake uranium deposits te Canada’s uranium-rich Athabasca Basin ter the early 1970s, is now helping Forum Development explore for fresh uranium deposits at its Costigan Lake, Key Lake Road and Maurice Point projects te Athabasca. Uranerz Energy’s entire advisory houtvezelplaat consists of former Uranerz professionals, including top geologists, Dr. Franz Dahlkamp and Dr. Gerhard Ruhrmann. Respectively, they have 45 and almost 30 years practice te the sector. Strathmore Minerals geological team includes former Pathfinder Mines employees, a subsidiary of Cogema, including houtvezelplaat member Dieter Krewedl, Voorzitter David Miller, and vice voorzitter of technical services, John DeJoia. Some of thesis companies bring more than 200 years of practice, collectively, to their fresh ventures. But without sufficient fresh mining schoolgebouw graduates to mentor under them, future exploration and development may become stalled. Michaud announced a chilling observation, “Annually, Canadian universities produce less than Ten fresh metallurgical engineers.”

What the Future Holds

What is troubling about the uranium market, te particular, is that the soaring spot uranium price shows no signs of abating. The keerpunt comes at a time when Voorzitter Pubic hair announced his nuclear initiative, spil more U.S. utilities project to add to the country’s nuclear fleet, and spil China and India clamor for a reliable source of uranium to fuel their aggressive nuclear energy programs. Without uranium for those reactors, the power plants won’t produce the electric current required to meet their request. Spil an aside, uranium mining is the stage ter the nuclear fuel cycle where the environmentalist fanatics are baring their teeth. This past November, an office manager at Albuquerque’s Southwest Research and Information Center, an anti-nuclear activist group reportedly funded by Mott’s Applesauce and Ben & Jerry’s ice fluid, told us when wij went undercover, “Wij want to zekering the gevelbreedte end of the nuclear fuel cycle, which is uranium mining.”

Don’t say the warnings weren’t made well ter advance. At the World Nuclear Association (WNA) Symposium ter 2004, Dr Moukhtar Dzhakishev, a Russian physicist and a former deputy minister of energy and mineral resources, introduced his conclusions, “Firstly, natural uranium mining capacities cannot please reactor requirements. Secondly, accumulated uranium inventories will be fatigued sooner or zometeen. Thirdly, the spot price does not reflect the actual problems and, on the contrary, is capable of misleading all of us about the urgency of investments to be made te the development of fresh mining facilities.”

Te his speech, Dr. Dzhakishev emphasized to the WNA, “Judging by thesis facts, the conclusion is overduidelijk: one day nuclear power plants will face a natural uranium shortage and it is not necessary to be a prophet to foresee this. It is clear today that the key to the solution of the major problems of the uranium market lies with the development of the potential of the uranium producers.”

This past August, Angela Jameson reported ter the online version of The London Times, “A GLOBAL shortage of uranium could jeopardise plans to build a fresh generation of nuclear power stations ter Britain. a latest report by the Asia Pacific Foundation of Canada said that there wasgoed likely to be a 45,000-tonne shortage of uranium te the next decade, largely because of growing Chinese request for the metal.”

The upward spiral of the commodities boom is racing ahead at total speed. Depending upon whom you talk to, the labor and drill equipment shortage is either very bad or worse than you can possibly imagine. If there are commodity inventory shortages right now, what happens by the end of this year, or straks this decade, if current exploration efforts get grounded because companies lack the trained personnel, the decent equipment and the expertise to explore and/or develop their properties? You can’t run a drill equipment if you can’t get your mitts on one. You can’t drill the property if you can’t find drillers to run the equipment. While commodities prices soar to levels not seen ter twenty or thirty years, the taut labor and equipment market could ratchet prices to much higher levels. And junior uranium development companies, with proven pounds-in-the-ground assets, should become sought-after acquisition targets by those who have the staff and drill equipments to bring the projects online.

For investors, the labor and drill equipment shortage has a silver lining. Spil inventories dwindle lower, commodity prices will proceed rising. For junior uranium investors, this might someday be realized spil the “hidden reason” why spot uranium prices continued rising past $40/pound. If you don’t drill for the commodity, you can’t find it and develop it. This strengthens the case for $50/pound uranium te the near future. Now wij understand why Strathmore Minerals’ David Miller warned us te November, “I wouldn’t be astonished to see uranium prices dual again.”

COPYRIGHT &copy, 2007 by StockInterview, Inc. ALL RIGHTS RESERVED.

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