ASA Spotlights its Upcoming Advanced Mining Virtual Class

In light of ASA’s upcoming Advanced Mining Valuation virtual class on 9/10-12, 2021, ending one day before MINExpo INTERNATIONAL® 2021 starting 9/13-15, we interviewed one of the most experienced, top leaders in the field, Charles W. (Bill) Ruth, ASA. During this class, Bill will provide students with information on current estimates of capital mining equipment costs, discuss how to identify various pieces of mining equipment processes and components, communicate the requirements of an appraisal, and teach students how to assess the scope of work and qualifications needed to perform a mining appraisal assignment. 

ASA sat down with instructor Charles W. “Bill” Ruth, ASA for a Q&A to discuss this unique class.

Q: What was the economic state of the mining equipment industry just prior to COVID-19?

A: The year (2020), brought with it a new sense of investor optimism and purpose. Global equities were trading well, fixed asset investment was moving in the right direction. This optimism proved steady in the early stages of the COVID-19 as the virus spread. In the past months, this optimism has proven to be misplaced. COVID-19 has created more pervasive economic disruption through curtailing movement of workers, consumers, and goods and services.

Q: What is the most recent economic state of the mining industry now?

A: Some global economists have stated that they view that:  The global economic recovery is set to drive some resources earnings to an all-time high this financial year, led by number iron ore, while rapid growth in the production of battery minerals will see them challenge coal in importance in coming years. A strong bounce back from the pandemic, especially in China, is forecast.

Iron ore giants BHP Group, Rio Tinto Group and Fortescue Metals Group Ltd. are enjoying an earnings bonanza after prices surged on the back of strong demand from Chinese steelmakers and supply disruptions in number two producer Brazil. The strength in iron ore, and other key exports such as liquefied natural gas and copper, has helped to insulate some countries economy from Covid-19, with gross domestic product strengthening.

Lithium exports are set to jump more than five-fold over the period which, along with strong copper and nickel output will gain strength.

Copper prices continue to soar as the global economic recovery strengthens amid a backdrop of loose monetary and financial conditions, slowing Covid-19 infection rates, and shifting energy policies. The red metal will record its sixth consecutive monthly increase if the current trend holds, with all-time highs in view.

The industrial metal is trading at its highest level since mid-2011 when prices were coming off a record peak following a commodity super cycle that pushed copper and other metals into the stratosphere. The current rally suggests we are now in another one. That hypothesis may be confirmed soon if prices break the approaching all-time high of $4.649.

A new all-time high would certainly solidify the bull case for copper and potentially beget even higher highs. Current supply and demand conditions are favoring commodity prices. While there are many gradations under close examination, the bullish narrative for copper can be broken down into simpler terms. Supply will likely remain under pressure as stimulus-driven demand bolsters prices.

One reason supply will likely remain under pressure is the amount of time it takes – which is estimated at around 8-10 years per industry experts – to get a copper mine up and running. That said, major physical inventory levels are nearing record lows, with the London Metals Exchange’s current copper inventory level near 15-year lows (see chart below).

The demand side is equally bullish, driven by government stimulus spending centered around infrastructure, particularly China which is the world’s largest copper importer. Moreover, the world is shifting towards clean energy solutions to add and replace energy consumption. The green energy push is heavily reliant on metals like copper. In addition, as global economic activity continues to expand coming out of the pandemic, it will likely drag the red metal along for the ride.

Q: How has the pandemic impacted this sector and the appraisers who specialize in this area?

A: As manufactures ramp up for the increase in mining activity, and mining companies continue to increase their work force. The mining community, for the most part, will be increasing their operating tempo, some rebuilding of assets that have been put on the back burner, while curtailments occurred will now be done. New equipment will be ordered.  The mining appraiser needs to know the potential impact on future life of the operation if scheduled maintenance protocols have been converted to “run till failure” protocol.  If capitol assets, such as haul trucks, shovels, and other larger equipment that were scheduled to be replaced may now be rebuilt.

Q: What important drivers do you see impacting this field in the next 12 months?

A: I think the world mining operations feel more optimistic. Metal stock piles should be going down, and the commodity prices will rise as the world economy rebounds. From my research, looking at company stock some of, what I consider major players, is shown in my table below. (unaudited of course)

Company StockDateClosedDateClosedChange% of Change
Caterpillar3/30/2020$111.713/29/2021$229.32$117.6151%
FCX3/30/2020$6.243/29/2021$32.51$26.2781%
BHP3/30/2020$14.753/29/2021$28.10$13.3548%
Rio Tinto3/30/2020$44.913/29/2021$76.99$32.0842%
Glencore3/30/2020$2.903/29/2021$7.84$4.9463%
VALE3/30/2020$8.043/29/2021$16.97$8.9353%

Q: What are professional development opportunities, like ASA’s Advanced Mining Valuation class important?

A: ASA’s advanced courses, which there are many, provide the appraiser with new information on the subject taught that the student may not have thought about before. It is an opportunity for the student to discuss the topic of study, which may be new to them, with other appraiser that may have an extensive knowledge of the subject, thus establishing a network of other professionals to draw from during their practice.

Q: Which professionals would benefit best from attending such?

A: The professionals that I think would benefit from this course are appraisers that may want to get into mining appraising, financial personal that review appraisals of mining operations / equipment to perhaps ask additional questions about the scope of work of the appraisal of the operation or equipment.

To register or to learn more about ASA’s Advanced Mining Valuation class, visit www.appraisers.org or call (800) 272-8258.

Charles W. (Bill) RuthASA, Machinery & Equipment retired from Phelps Dodge Corporation / Freeport McMoRan Copper & Gold on January 30, 2009, after being employed for 38 years. His appraisal activity has, for the most part, been as an in-house appraiser of mining equipment and process plants for the company. The focus has been primarily in the southwestern United States at sites in Arizona, New Mexico, Texas and Colorado with additional assignments in Mexico and South America.

Bill began appraising machinery and equipment for Phelps Dodge in 1988, and specialized in the appraisal of mining equipment and material processes for both open pit and underground operations. He completed appraisal assignments for a variety of departments within the company, including Resource Management (process plants & equipment), Global Supply Chain (asset recovery, liquidation and transfers of machinery & equipment and other capital assets,) Risk Management (insurance values), Land & Water (ranches & water rights), Corporate Finance (lease options, residual values at end of mine life, values for bond issues).

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