Easter Saturday: 4/4/26: Wishing everybody an excellent long weekend - safe, relaxing (as possible) and as @Strawman suggested in his weekly email this morning, an opportunity to focus on stuff that's not share market-related, and take a break from investing and markets.
That said, I'm going to talk about the market now (of course!), but feel free to either skip this post completely or circle back to it later (after the long weekend) - my thoughts have been prompted by various podcasts and articles I've been reading, and the latest of those is the Saturday weekly wrap email from Marcus Padley's MarcusToday newsletter service. An extended family member that I was managing investments for passed away earlier this year after a long period of gradually increasing dementia, so I am now only managing money (investments) for my immediate family, and I am therefore considering which newsletter services I do actually require, and which ones are more, nice to have, but probably not worth the subscription price. MarcusToday is one I may not resubscribe to, but I probably will, as I do read at least part of at least one of his newsletters most days, except when on holidays (travelling).
My FNArena Subscription has recently expired - as I found out this morning when I went to log in, and so I probably won't bother resubscribing to that one, especially as I've now lost my loyalty discount - it would have been nice if they had given me some warning - I found one email sent when I was in WA on the motorhome trip saying that my sub would expire "some time in the next 45 days" but nothing else. So, FNArena is almost definitely going to be discontinued by me now.
Here's a table that MP or his team at MarcusToday included in their Saturday morning email today:
That's the market movements over the past week (above). Below is the weekly movements of each of our ASX sectors during this past week:
The IT sector - particularly software - sell-off continues with the MT newsletter noting:
- AI disruption concerns - SaaS benchmark down 3% (-7% for the week). SaaSpocalypse fears returned on Tuesday night. More updates to Anthropic’s Claude which climaxed with a new model called Mythos overnight. Salesforce down 8% for the week. Atlassian down 12%.
- AI spending concerns - Mag7 down 2.8% (-5%). Meta dropped 8% on Thursday night after losing a child mental health court case. Had announced it was targeting 500% share price growth by 2031 the day before. Down another 4% overnight. Microsoft down 6.6% this week. At its heart a software stock. Alphabet, the Mag7 outperformer of last year had its worst week in over a year. AI spending concerns and was involved in the same court case as Meta.
IT was also the worst sector on the ASX, by a big margin, however because our IT sector is one of the smallest sectors of our market, very unlike the US where IT is by far their biggest sector, the IT sector sell-down continuing here in Australia (down another -4.77% this past week) didn't stop our ASX200 and All Ords Indices being up aprox. +1% for the week.
Gold lost a little ground this past week but the ASX's best performing sectors were Materials, Metals & Mining and Resources (as shown in the table above). And seeing as our Bank Sector (one of our largest sectors) was down -2% for the week, our rare share market outperformance compared to every other major share market across the world (except Italy as it happens) was mostly due to mining companies doing OK here.
So what I am considering is that despite markets having the wobbles and volatility being elevated, especially with the gold price and gold company share prices, the mining boom that we're in the early stages of still looks to be on track. And that's despite the oil shortage concerns and the flow-on effects that may well negatively impact global growth, inflation and interest rates.
It's something I'm keeping an eye on, because there's plenty of evidence that we actually are at around 6 to 7 O'clock on Hedley's Widdup's mining cycle clock (shown below), and I'm trying to understand what could cause that to unwind or fall apart.
Source: Slide 8 of LSX's 3rd March 2026 Lion Investor Update Presentation: https://lionselection.com.au/wp-content/uploads/LSX-March-2026.pdf
So how have our largest mining companies performed over the past week? Better than most.
BHP and FMG were clear outperformers, with RIO being the third best performer of our ASX20.
If you have a gander down the left side below - being the outperformers - there's a bunch of mining companies there:
There's also a bunch of gold miners in the red on the right side (above and below), but the gold price volatility is likely a result of some particular central bank selling plus expectations of interest rates being more likely to rise than to fall if inflation becomes an issue. Outside of gold, most of the decent sized Australian mining companies are actually outperforming.
The table above covers the ASX200 while the one below covers the rest of the Aussie All Ords Index ex-top-200:
Most energy companies are outperforming also, relative to most other sectors, as expected when the oil price is doing what it's doing (see below), except for Amplitude Energy (AEL, -41.8%) which is down a lot this past fortnight due to a negative update regarding the Isabella prospect in the Offshore Otway Basin (source: Isabella-gas-discovery-assessed-as-not-commercial.pdf) - two Wednesdays ago, on March 25th. Investors had hoped the Isabella prospect would become a producing asset; its failure as a commercial project means that future revenue expectations for this project have now been removed and it also creates doubt over the likely success of their other planned drilling, especially when the costs and risks associated with offshore drilling are so high. I was an AEL shareholder in prior years, mostly back when they were known as Cooper Energy, because of their focus on Australian East Coast gas supply, but I sold out after I realised there was such high risk associated with their strategy, as there tends to be with most of the minor players in the energy sector.
[Additional: I've just noticed that AEL is second top on the best performers list above as well as topping the worst performers list, so MarcusToday is suggesting they were up +20% as well as being down -41.8% over the past week, so they obviously have some data issues there. They are actually down a lot for the past 2 weeks and up a little in recent days.]
But leaving AEL aside, most energy companies continue to benefit from the middle-east conflict, with our largest player, Woodside (WDS) being up +1.3% for the week.
WHAT HAPPENED THIS WEEK
- The Middle East dominated everything this week. Iran, the US and Israel moved from escalation to “constructive talks” to denial and back again. Trump talked ceasefire, Iran said messaging is not negotiation, and we were left guessing. No resolution, but a lot of noise and volatility. It’s not over. With interest rates ramping up, we are safest in cash until there is clarity on the oil price.
- It's all about the oil price, not the war. Our focus is squarely on the Strait of Hormuz, shipping risk and supply disruption. What started as a spike story is now turning into a “higher for longer” energy price problem. That feeds straight into inflation. You don’t want inflation higher for longer, but it's heading that way.
Source: MarcusToday: https://marcustoday.com.au/member/webpages/80_view-report.php?guid=b6438ab3862cd008bfcafd0f9ade824a&pid=88367&e=1
The MT newsletter included a few other interesting graphs that highlight just how bad things are travelling in IT investments right now:
- The SaaSpocalypse theme has resurfaced, as if the war wasn’t bad enough. You can see it in Microsoft (down 30%), and the MAG7 stocks this week, including Meta, which dropped 8% in a day on its lost court case. One person gets $3m - how many users do they have? Legal uncertainty is now a sentiment hangover. On top of that, AI disruption is a theme that won’t go away. A new AI model from Anthropic is being treated as a competitive risk rather than a benefit. The results season is coming. Some broker valuations suggest 100% upside (XRO). It's die or fly time. ATEC is the best way to play a SaaSpocalypse recovery in Australia.
Source: MarcusToday: https://marcustoday.com.au/member/webpages/80_view-report.php?guid=b6438ab3862cd008bfcafd0f9ade824a&pid=88367&e=1
However, on the Iran vs Israel & USA war, with particular focus on Trump and what he might do next, or soonish, the MT newsletter had this to say this morning:
- Trump's 10-day pause this week was an admission that peace talks are going nowhere and is seen as maybe another delaying tactic by the US as they prep for "boots on the ground". The speculation is that Trump didn't want to hit power plants because he knows that it would send oil to $130+, which would be devastating economically and politically.
- Callum's story on the Trump Pain Point Index was interesting. The “Trump Pain Point Index” is soaring. It's an index that includes the following: Inverse S&P500 returns, 10-year Treasury yields, 30-year mortgage rates, Gasoline futures, 1-year CPI swaps, and Presidential Approval Ratings. A basket of key economic indicators that have a direct connection to US consumers. The thinking is that Trump blinks when the pain point index spikes. It's spiking - see below. The question is, can the Republicans get it back down before the midterm elections? Here’s how the Trump Pain Point index looks at the moment:
My own thoughts on that (Bear77 back again) is that I wouldn't put it past Trump to engineer another crisis or make an existing one worse to manufacture a reason to postpone the midterm elections over there, seeing as he knows the GOP are going to get decimated, as this war is NOT popular with Americans, even with Republicans (the Grand Old Party a.k.a. GOP). But hey, anything could happen, and probably will.
More MarcusToday commentary today:
- A benign Australian CPI number this week was irrelevant. Australian CPI came in softer at 3.7%, below expectations. It was a pre-war number. Oil risk means “inflation is coming back”. No one cares about yesterday’s data. Next RBA meeting on May 5. Rate rise odds are up to 74%.
- Consumer confidence fell off a cliff. Record lows, worse than during the COVID lockdowns. Higher petrol prices, rate fears and war are not [just] headlines; they are costing the Australian consumer already. Spenders and debtors are feeling it, and that feeds into retail and discretionary risk.
- Bond market yields are pushing higher hard. The Australia 10 year bond yield is the highest since 2011. It hit 5.18%. US 30 year mortgage rates are 6.38%. Inflation is back, and rates are going up unofficially and officially. Where bond markets lead, the Central Banks will follow – unless it all ends soon. Equities are dropping in sympathy.
Source: https://marcustoday.com.au/member/webpages/80_view-report.php?guid=b6438ab3862cd008bfcafd0f9ade824a&pid=88367&e=1
So... a bleak outlook, depending on what you are focused on I guess. I'm thinking the metals bull market is just getting started, and the current weakness in the gold sector is more of an opportunity than a red flag. But I've been wrong before, and I will be again. Just putting it out there. There's always an opportunity somewhere in the market, and periods of high volatility tend to create more opportunities in my experience as long as you have the stomach for sharp price drops in shares you already hold, and often right after you buy them. It's not for everybody, but it's not too bad here in Australia from my point of view right now.
I know you didn't ask me specifically, however from my understanding of the sector is that the impacts of the diesel situation are on a case by case scenario, and dependent on the company in question and their current stage in the mining cycle, their infrastructure (grid powered, solar, generator) and type of mining activity that is being undertaken.
While for a different purpose, i came across https://www.atse.org.au/media/5z0nb2dj/atse-decarbonising-diesel-industries-report-final.pdf when I was doing some reading on the impacts of diesel on my investments - which helped me understand the impacts a bit better on the companies I hold. An excerpt from the document below includes a good breakdown of the uses of diesel across multiple industries, along with proportionate usage from the mining industry.
Using the table above and the company I posted about yesterday Savannah Goldfields as an example, they only reported a fuel cost of $70k last half, which is likely to operate their vehicles and power their accommodation. That however is not the full picture as fuel costs are also embedded within a number of their mining activities such as transport of materials (the increase cost of shifting their ore 80km from Agate Creek to the mill) and subsequently the seller, blasting to mine the ore from the pit, crushing the ore for processing and any future exploration endeavours they need to fund.
Personally I think SVG's transport costs will be more than double (due to a combination of the increased price, increased activities and the further travel to the Agate creek mine in the future), and I have factored this into my cost calculations which are broken down on a $/tonne throughput for their operations.
I hope this helps you work out how the increased cost impacts the companies that you hold.
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On a separate note, the exec summary and commentary in the report regarding fuel security and the fact that people have been saying since 2020 that Australia’s heavy reliance on imported diesel undermines both its fuel security and its capacity for energy independence.
"Australia imports nearly 29 billion litres of diesel annually, reflecting a heavy dependence on international fuel markets and diminishing domestic refining capacity. This reliance presents national security vulnerabilities due to geopolitical risks and potential supply chain disruptions."
Who could have possibly seen this coming... lol
Very much company-specific IMO @tomsmithidg - because some are reliant on diesel for basic power generation, often the more remote sites that haven't invested in solar farms or other renewable generation plus energy storage assets. Some use contractors for the actual mining, and some, like NST and GMD do their own mining using their own teams, so all of that mobile equipment that runs on diesel - and not all of it does, some, particularly a fair bit of underground kit, is now electric, i.e. battery operated - but the equipment that does run on diesel won't always be a direct cost of the mine owners, although they do pay for it indirectly.
Most mining contractors have provisions in their contracts these days that allows them to recoup additional costs such as what we are seeing with the recent spike up in diesel prices and supply issues in some areas as well apparently - I experienced a small taste of that on the way back from WA to Adelaide a couple of weeks ago in the Maui motorhome with only one roadhouse in Ceduna selling diesel and only from the truck bays down the side of the servo as the main out-front bowsers were all tagged out because that diesel tank was empty. All of the other servos in Ceduna and a bunch of servos in Esperance were completely out of diesel - the one we found that did have diesel (in Esperance) were rationing and we were only allowed to buy 50 litres. We were lucky that every roadhouse back across the Nullarbor did have diesel, especially that 1,000 km stretch from Balladonia to Ceduna where service stations are often 180km to 200km apart.
But back to mining, most contractors have learned from prior busts and other various issues that they need to have their contracts structured so they won't move from profitable to unprofitable due to input costs that are outside of their own control, so only the dumb ones or the ones with a high risk tolerance are going to be feeling the pinch personally at the moment; well their cashflow will be affected, as there is often a delay between those additional costs being incurred and those costs being recouped via the mine owner, if and when such provisions do exist within contracts, but as long as they have plenty of cash to cover such delays they should be OK.
But in terms of us investing in the actual mine owners and discussing how higher diesel prices affect them, I would say that the vast majority of miners will be affected negatively in various ways, but some of them a lot worse than others, with the worst affected likely to be those who rely on diesel generators for AC Power generation for their mills and associated infrastructure, site offices, worker accomodation and facilities, etc.
The least affected are probably going to be those who have grid power, or their own renewable energy generation assets plus energy storage assets - Bellevue Gold, BGL, is one example of a company that have invested a lot into such assets, and in terms of the largest gold miners, Northern Star Resources (NST) has significantly expanded its renewable energy generation assets in recent years, primarily through long-term partnerships with Zenith Energy, aiming for 35% reduction in Scope 1 and 2 emissions by 2030. And Evolution Mining (EVN) has also focused its renewable energy strategy on major partnerships, power purchase agreements (PPAs), as well as the planned repurposing of its Mt Rawdon mine rather than owning large-scale renewable generation assets directly.
Key details regarding EVN's renewable energy initiatives include:
- Mt Rawdon Pumped Hydro Project (Queensland): This is Evolution's premier renewable energy asset. The company is developing a proposed pumped hydro energy storage facility at its Mt Rawdon site as part of its post-mining closure strategy. The project is designed to store up to 20,000 megawatt hours (MWh) of energy and can potentially function as a key power station. This is Jake Klein's main focus now that he's retired from front line management at EVN, Jake is now the non-executive Chair of EVN rather than his previous role as Executive Chair - he'll always be the company's founder and the man who built the company of course but his primary responsibility at EVN now is to manage the Mt Rawdon transition from mine to pumped hydro energy storage asset - and to oversee governance and the Board as the non-exec Chair.
- Solar Power Agreements: Evolution has reduced its Scope 2 emissions through a Power Purchase Agreement (PPA) for the Cowal Gold Mine in New South Wales, sourcing power from a solar farm to meet part of its energy needs.
- Decarbonisation Targets: The company has a target of >30% renewable energy use by 2030 and is targeting net-zero emissions by 2050.
- Renewable Energy Progress: By the end of FY25, Evolution reported an estimated ~16% reduction in emissions against its FY20 baseline, partly enabled by renewable power sourcing.
EVN's bottom line with regard to renewable energy is that they are transitioning their operations, particularly in Queensland, to low-emission sources while pursuing the Mt Rawdon Pumped Hydro project as a commercial energy asset for long-term use.
So, the effects will vary across minesites and across miners, but there will certainly be negative effects for sure, the quantum of those will just vary a fair bit depending on the circumstances of each miner and their assets.
On the flip-side you have to look at their margins and how large those margins are. For an unhedged gold miner that is fully exposed to the spot price, most of them still have huge profit margins.
The gold price has recently briefly dipped below A$6,500 & US$4,500 per ounce, as shown above, but we're back above those levels now and the gold price is rising more than falling over recent days so it shouldn't be too long before it's back at new all-time highs again.
However, even if you factor in an A$6,000/ounce gold price, some $783/ounce below where it is right now as I type this, that's more than double what most of these gold miner's AISC (costs) are, so if their diesel costs double or triple, that only makes up a percentage of their costs, so their AISC doesn't double or triple, it goes up by a much smaller amount, and they can live with that when they are usually selling gold for more than twice what it costs them to produce it.
I won't discuss NST now too much in relation to their costs because they're in a unique situation of being half way through the expansion of their largest asset (KCGM, a.k.a. the Super Pit and its Fimiston Mill) to more than twice its previous capacity and having a primary crusher failure at that very same flagship KCGM operation, which has recently led to multiple production downgrades. The market is concerned with what they perceive to be persistent mechanical issues, specifically with the aging Fimiston mill - which this massive capacity upgrade will fix once it's completed, but that's over 12 months away; basically they're rebuilding the mill but much bigger, while keeping the old one running during the construction and commissioning of various phases of the new mill build at the same site - so it's tricky and they've got a few plates spinning in the air and one of those dropped and smashed, and it was a decent sized plate. So these recent production downgrades have "crashed" the NST share price and severely dented market confidence, so let's leave them aside - I'm bullish on them because they have a massive growth pipeline, with Hemi being the next big project after KCGM - but they do have high costs right now - they're still highly profitable, but not AS profitable as some of their peers at this point in time.
So EVN, the next biggest Australian goldy after NST, have low costs but that is assisted by two of their mines having negative costs (negative AISC) as shown below - due to copper byproduct credits reducing the costs to a negative number:
That was from Google - I also asked Chatty to list the costs of those miners and any other large Australian gold miners that it could think of:
I didn't ask ChatGPT to be careful but it suggested nonetheless that the above was a "careful, up-to-date summary". And here we go with the massive limitations of cheap (free) AI tools - Check out the following exchange between me and Chatty:
I said "Yes" and it gave me python code and said I didn't have the necessary access for it to create the chart itself. I didn't take that any further.
Even after all of that, I know those numbers are NOT accurate. In fact not one single AISC number in that summary is correct!
Chatty has NST @ A$1,500 to $1,550 AISC above, however Google confirms that "As of January 20, 2026, Northern Star Resources (ASX: NST) revised its FY26 cost guidance upward to an All-in Sustaining Cost (AISC) of A$2,600-2,800 per ounce, up from previous estimates of A$2,300-2,700/oz. This upward revision was driven by lower forecasted production and higher royalties." I know NST lowered production guidance again in March as I mentioned earlier but I haven't checked if they revised cost guidance up again. It doesn't really matter. Regardless, NST's costs are more than A$1,000/ounce higher than what ChatGPT is claiming.
Further, when I ask about EVN, Google tells me that Based on the December 2025 quarterly report and subsequent half-year results (1H FY26), Evolution Mining (ASX: EVN) has updated its FY26 Cost Guidance (AISC) to A$1,640 – A$1,760 per ounce and that updated guidance represented a 6% improvement on their original guidance due to strong cost control and higher by-product credits, despite short-term operational impacts from a weather event at Ernest Henry. That's low costs, but Chatty has an even lower AISC listed above for EVN.
Again, Google has higher costs than Chatty does for CapMetals: An AISC of A$1,530 - A$1,630 per ounce - although, again, that's at the lower end of costs for Australian gold miners at this point in time.
The most striking error is Chatty naming WGX as the lowest cost gold producer with AISC of A$1,250 to $1,300/ounce. Google says their costs are MUCH higher than that: A$2,600 – A$2,900 per ounce, more than double what ChatGPT is claiming and it places WGX alongside NST as the equal highest cost producers out of that group.
Nah, hold the train, RRL's latest guidance is for an AISC of A$2,610 – $2,990 per ounce (according to Google) so they're a smidge higher still.
FWIW, Google says that GMD recently maintained their FY26 AISC guidance at A$2,500 – A$2,700 per ounce and RMS is claiming their FY26 AISC should be between A$1,700 – A$1,900 per ounce.
So we've got EVN, CMM and RMS as the lowest cost gold producers, with all-in sustaining costs (AISC) ranging from A$1,530 to A$1,900/ounce of gold produced and we've got NST, WGX, GMD and RRL guiding for AISC of between A$2,500 and A$2,990, basically A$3,000/ounce at the top end. So even the higher cost producers from that list of 7 of Australia's largest gold producers are selling their gold for more than double what it costs them to dig it up, process it, and turn it into gold bars.
So they can absorb higher costs, including significantly higher diesel costs.
But that's just a quick analysis of gold miner margins, and this thread isn't even supposed to be about gold miners, so what am I doing?!? Well, I've slipped back into my circle of competency I guess and attempted to analyse the higher diesel price impacts on an area I'm more familiar with. When it comes to Aussie miners outside of gold miners, I have far less insight unfortunately, but I guess it still comes down to margins, so those with higher margins can more easily wear higher costs, and those with much thinner margins could be in trouble, especially if the increased costs stay higher for longer.
That's all I've got for now. Hope some of it was helpful to somebody. At least I now know that ChatGPT is worse than useless.
P.S. Additional: @SudMav posted a much more accurate, helpful and succinct answer to that question of yours @tomsmithidg while I was still fighting with Chatty about it using very out-of-date information to give me that "careful, up-to-date summary" of gold miner costs. If anybody is into Aussie gold miners they might have gotten something out of my lengthy but ultimately not very helpful attempt, but otherwise, all I can do is apologise - you'll never get that 10 minutes back unfortunately...
Monday 14th July 2025: A decent day for mining and metals today - but they've been few and far between of late...
Lithium companies did particularly well today:
Also mining services, gold, silver, nickel, rare earths, uranium, copper and graphite, all mostly up. Energy mostly flat, coal and iron ore mixed, but BHP & RIO both up.
S32 down -5.1% dragging the Aluminium / Alumina sector down, due to South32 flagging an expected impairment due to electrical supply issues in Mozambique at their Mozal Aluminium smelter located near Maputo (Mozal-Aluminium-Update.PDF). The smelter produces high-quality, primary aluminium for domestic and export markets and contributes approximately 3% of Mozambique's national gross domestic product. South32 holds 63.7% of Mozal, the Industrial Development Corporation of South Africa Limited holds 32.4%, and the Government of the Republic of Mozambique holds 3.9%.
My youngest brother works at S32's Australian Alumina refinery, Worsley Alumina, located near the town of Collie in south western WA. I also used to work there in my younger years, and my other brother did as well. The alumina produced at Worsley Alumina is primarily shipped to South32's aluminium smelters in Southern Africa, specifically Hillside in South Africa and Mozal in Mozambique. A portion of the alumina also goes to the seaborne market, meaning it is sold to other smelters around the world. If S32 ultimately close down or sell Mozal because they can not secure ongoing reliable power supply for the plant, which is one possible outcome from this issue, then this may well adversely impact Worsley, their Australian alumina refinery which supplies alumina to Mozal for smelting into aluminium. On the other hand, aluminium demand is widely expected to increase over future years, and there will likely be alternative buyers for that alumina from Worsley if Mozal is shut down.
The risks of mining in West Africa are well known, however it's clear that there are also risks, albeit different risks, when mining in southern Africa, such as reliable energy infrastructure and supply.
Further Reading:
Power deal threatens future of South32’s Mozal aluminium smelter in Mozambique
by Daniel Newell, The West Australian (newspaper & website), Mon, 14 July 2025 10:19AM
The Mozal operation in Mozambique Credit: South32
There is a growing risk South32 will be forced to pull the plug on its Mozal aluminium operations in Mozambique early next year as the diversified miner races against the clock to secure a new electricity supply deal.
Years of talks with the southern African nation’s government to power the smelter beyond March 2026 have so far failed to yield a deal for the project, which last financial year turned over more than $800 million.
South32 has a 63.7 per cent stake in Mozal, which produced 87,000 tonnes of aluminium in the March quarter.
The Industrial Development Corporation of South Africa holds 32.4 per cent and the Government of the Republic of Mozambique has a 3.9 per cent interest.
South32 has kept full-year guidance unchanged at 350,000t.
But on Monday it said guidance for FY26 was now under review because of the uncertainty over a new contract and warned it would book an associated impairment against the value of Mozal in this year’s accounts.
--- end of newspaper article excerpt ---
15th August 2025: One month on from my last post about South32 and Mozal: Mozal-Aluminium-Update.PDF [yesterday, 14-Aug-2025]
And the link below is to the convo today (on the MoM podcast) between Trav, JD and Sam Berridge, Portfolio Manager of the Perennial Natural Resources Trust, about the situation over there in Mozambique:
Lithium Mayhem and Mozal Woes (Sam Berridge) [today]
plain text link: https://youtu.be/YP3HoEL3AJU?t=891
Yesterday's announcement from S32:
Link: Mozal-Aluminium-Update.PDF [14-Aug-2025]
It's not been a good past 3 years for South32 - they're down by a larger percentage than the ASX 200 (XJO) is up by, and investing in a physical gold ETF like GOLD has provided even better returns - HEAPS better returns.
South32 isn't ALL about Aluminium (and its supply chain from bauxite to alumina to aluminium) but it's certainly a significant part of South32's business, in a similar way to how iron ore is a significant part of BHP's business, so those commodities - the prices of them and the outlook in terms of their future supply and demand - and expectations around that - is going to play a significant role in their share price trajectory. And so will supply chain disruptions and site-specific issues.
I was bullish on S32 a couple of years ago, but I never fell in love with the company, and I was happy to sell out when they no longer looked like one of my best 20 ideas in terms of my own expectations around risk-adjusted returns. During this calendar year I have not held S32, BHP, RIO, FMG, MIN, IGO, PLS, or any other aluminium, iron ore or lithium miner, and while there have been opportunities to make some shorter term trading profits, I've been happy to have avoided those sectors for over a year now. Playing in the gold sector has been much more rewarding for me.
But then I guess that also comes back to sticking to what you know best, a.k.a. not straying outside your own circle of competence (or wheelhouse), and people who know those other sectors a whole lot better than me have probably done OK if they got their timing right and were in the right companies at the right times.
Kakula Mine Crisis: Pillar Failures Halt Copper Production in 2025
By John Zadeh on May 30, 2025
What Happened at the Kakula Mine?
In May 2025, the Kakula copper mine in the Democratic Republic of Congo experienced a significant geotechnical event that halted operations and sent shockwaves through the mining industry. The incident involved multiple pillar failures within the underground workings, causing widespread ground instability and forcing the complete evacuation of all personnel from the mine.
The failure mechanism was particularly concerning—rock pillars left to support the mine's roof (known as the "hanging wall" in mining terminology) began to fail under pressure. This resulted in what engineers call "pillar bursting," where the rock support structures crack and material "spoils" or flakes off the sides, compromising the entire support system.
Critical infrastructure suffered extensive damage, particularly the mine's essential pumping system located in the main access declines. Without functioning pumps, the mine faces the additional risk of flooding, further complicating recovery efforts.
The Geotechnical Event Overview
The Kakula incident represents a classic case of pillar failure in a shallow mining environment. Operating at less than 500 meters deep, the mine's support pillars primarily deal with "dead weight" from the rock above rather than the elastic rock behavior seen in deeper mines.
According to mining engineer Neil Ringdal: "When pillars burst, you get spoiling… These failures suggest systemic design or operational issues. In shallow mines like Kakula, pillars fail plastically or burst under vertical stress, creating a fundamentally different challenge than deep mining operations."
The nature of the flat, tabular orebody at Kakula requires a board-and-pillar mining approach similar to coal mining methods. However, when pillars begin to fail in such an environment, the consequences can quickly cascade throughout the mining area.
Conflicting Initial Reports
When news of the Ivanhoe and Kakula mining crisis first broke, the two joint venture partners appeared to describe the situation using different terminology, creating some confusion about the actual events underground.
Zijin Mining's initial press release mentioned "spoiling and falls of hanging wall," while Ivanhoe Mines' statement referenced "seismicity and pillar bursts." Though using different technical language, both companies were describing the same fundamental problem: the structural integrity of the mine's support system had been compromised.
This communication disconnect highlighted the challenges of crisis management in joint ventures, especially when partners operate across different languages and technical traditions. The market responded with heightened uncertainty, contributing to Ivanhoe's approximately 20% share price drop following the announcement.
Why Is This Crisis Technically Significant?
The Kakula incident is not merely another operational disruption but represents a technically significant event that challenges fundamental assumptions about mining methods in this geological setting. The technical aspects of this crisis deserve particular attention as they provide crucial insights into both the causes and potential remediation strategies.
Understanding Pillar Bursting in Mining
Pillar bursting occurs when rock pillars left to support a mine's roof fail under excessive pressure. Unlike gradual deterioration, these failures happen suddenly and can be violent—releasing stored energy and creating localized seismic events.
In Kakula's case, the pillars exhibited classic signs of brittle failure, suggesting they were underdesigned for the actual stress conditions present. When rock pillars fail at shallow depths, they typically crush under vertical pressure rather than experiencing the sidewall spalling common in deeper mines.
The technical significance lies in how these failures manifested in a relatively shallow mining environment. Most catastrophic pillar failures documented in technical literature occur in deep mines (>1,000m), making Kakula's experience particularly noteworthy for mining engineers and geotechnical specialists.
Shallow vs. Deep Mining Challenges
The geotechnical behavior of Kakula's pillars highlights important distinctions between shallow and deep mining environments:
- Stress regime: Shallow mines (<500m>
- Failure mechanisms: Rock pillars in shallow mines typically fail through crushing rather than elastic deformation
- Support requirements: Shallow mines often rely heavily on the inherent strength of pillars rather than additional support systems
- Monitoring challenges: Early warning signs of failure can be less obvious in shallow mines
As Neil Ringdal explained: "Shallow mining deals with dead weight, not elastic rock behavior like deep mines. This fundamentally changes how we approach support design and stability monitoring."
The flat, tabular nature of the Kakula orebody requires a board-and-pillar mining approach similar to coal mining, but with the additional challenge of operating in harder rock with different failure characteristics. This combination of factors creates unique technical challenges that may have been underestimated in the original modern mine planning.
The Cascading Failure Mechanism
Perhaps the most technically significant aspect of the Kakula incident is the cascading nature of the failures. When pillars begin to fail, they create a domino effect that can rapidly spread through a mining area:
- Initial pillar failure occurs, often at a geological weakness or area of higher stress
- Load redistributes to neighboring pillars, immediately increasing stress on these structures
- Additional pillars fail under increased stress, creating an expanding zone of instability
- Hanging wall (roof) movement increases, potentially damaging infrastructure
- The failure zone expands, potentially affecting main access areas and critical infrastructure
This cascade effect explains why the damage at Kakula was so extensive and why recovery will be particularly challenging. Once the cascade begins, it becomes extremely difficult to arrest the progression of failures without completely withdrawing from the affected areas.
The pumping system damage reported by the company provides evidence of how the failures spread beyond the immediate production areas to affect critical infrastructure. When support pillars fail near main access routes, the consequences can jeopardize the entire mining operation.
What Are the Potential Causes of the Crisis?
Understanding the root causes of the Kakula mine crisis requires examining both technical design factors and operational decisions that may have contributed to the pillar failures. Several potential causes emerge from the available information and expert analysis.
Possible Design and Operational Factors
Mining engineers familiar with similar operations suggest several possible contributing factors:
- Undersized pillars: Support pillars may have been designed too small relative to the actual rock mass characteristics and stress conditions present at Kakula. Even small miscalculations in pillar strength can lead to catastrophic failures when multiplied across an entire mining area.
- Mining sequencing issues: The order and timing of extraction significantly impacts stress distribution in underground mines. If the extraction sequence created unfavorable stress concentrations, this could have triggered the initial failures that cascaded through the system.
- Delayed backfilling: Kakula utilizes a drift-and-fill mining method that requires systematic backfilling of mined-out areas. If operational pressures led to delays in the backfilling schedule, this could have left larger unsupported spans than the design intended.
- Geological factors: The presence of unidentified fault structures, water-bearing features, or variations in rock strength could have created weak points that initiated the pillar failures. Even sophisticated geological models can miss critical features that affect ground stability.
- Span width concerns: If the distances between support pillars (the "spans") were too wide for the actual rock conditions, this would place excessive stress on each pillar and increase the likelihood of failure.
Mining engineer Neil Ringdal notes that a combination of factors typically contributes to such events: "In my experience, these failures rarely have a single cause. It's usually a combination of design assumptions not matching reality, operational decisions that deviate from the plan, and geological surprises that weren't fully accounted for."
Technical Risk Factors Identified in Previous Reports
Interestingly, the potential for pillar bursting was acknowledged in previous technical documentation for the Kakula mine. The 2023 technical report specifically mentioned:
"The possibility of induced localized seismic response associated with strain bursting and/or pillar bursting."
The report also emphasized:
"The importance of tight filling and correct sequencing during cut mining operations to contain seismicity."
Additionally, it recommended:
"The need for bracket pillars along large fault structures to assist in containing seismic activity."
These acknowledgments suggest that the risk of pillar bursting was known but may have been underestimated in practice. The mention of "tight filling" (backfilling) and "correct sequencing" is particularly notable given that delayed backfilling is one potential contributing factor to the failures.
This highlights an important aspect of mining risk management—the gap between identified risks in technical documentation and the operational implementation of mitigation measures. Even when risks are properly identified, operational pressures can sometimes lead to compromises in how these risks are managed in practice.
How Severe Is the Impact on Operations?
The operational impact of the Kakula crisis extends far beyond the immediate disruption, affecting production capabilities, recovery timelines, and long-term mine planning. Understanding the severity requires assessing both the current status and the potential paths to recovery.
Current Operational Status
The Kakula mine has been fully evacuated, with all underground operations suspended indefinitely. This complete halt to production represents a significant disruption to what was previously one of Africa's most productive copper operations.
Critical infrastructure has suffered substantial damage, with the pumping system being particularly affected. Without functioning pumps, groundwater will naturally begin to fill the lower portions of the mine, potentially causing additional damage and complicating recovery efforts.
The company is currently implementing emergency measures to prevent flooding while technical teams assess the full extent of the damage. Alternative pumping solutions are being explored, including the installation of temporary pumping capacity through boreholes from the surface.
Access to large portions of the underground workings remains impossible due to safety concerns, making comprehensive damage assessment challenging. Remote monitoring systems, where still operational, provide limited data on ground movement and water levels.
Potential Recovery Timeframes
Based on expert analysis and historical precedents from similar incidents, recovery could require anywhere from 6 to 18 months, depending on the severity of the damage and the selected remediation approach.
Mining engineer Neil Ringdal estimates: "Redevelopment could require 1,000m of new tunnels… Bypassing collapsed zones is time-intensive and could take a year or more to complete."
The recovery timeline will be influenced by several key factors:
- Extent of damaged areas: If the failure zone is limited to specific production areas, recovery may be faster than if main access routes are compromised
- Water management capabilities: Establishing adequate pumping capacity is a prerequisite for any underground recovery work
- Alternative access development: If new decline or shaft access is required, this could add significant time to the recovery schedule
- Regulatory approvals: Any major modifications to the mining method will require regulatory review and approval
Most mining experts consider a phased recovery approach most likely, with initial efforts focused on stabilizing the mine, followed by redevelopment of access routes, and finally a gradual resumption of production with modified mining methods.
Production Implications
The crisis will have both immediate and long-term implications for Kakula's production profile:
- Near-term production loss: The complete cessation of production from Kakula represents a significant impact on the joint venture's copper output and revenue stream.
- Rescheduled development priorities: Resources may be shifted to accelerate development at other deposits within the broader Kamoa-Kakula complex, such as Kamoa North and Kakula West, to partially offset the production losses.
- Revised expansion timeline: The previously announced Phase 4 expansion will likely face delays as technical resources focus on recovery efforts rather than growth projects.
- Modified production ramp-up: Even after recovery, the production ramp-up will likely follow a more conservative trajectory as new mining methods are implemented and verified.
The production implications extend beyond the immediate joint venture to the broader copper market, where Kakula had been positioned as a significant source of new supply in the coming years. This disruption could contribute to tighter copper market conditions, particularly if the recovery extends toward the longer end of estimated timeframes.
What Are the Financial and Market Implications?
The financial consequences of the Kakula crisis extend far beyond the immediate operational disruption, affecting investor confidence, resource valuations, and long-term project economics. Understanding these implications requires examining both market reactions and fundamental value impacts.
Market Reaction and Share Price Impact
Ivanhoe Mines' share price dropped approximately 20% following the announcement of the incident, representing billions in market capitalization lost within days. This sharp decline reflects the market's immediate concern about both near-term production losses and potential long-term implications for the mining method and recovery rates.
The market reaction demonstrates a classic pattern of uncertainty pricing, where investors respond to incomplete information by assuming worst-case scenarios. As market analyst Koala noted: "Markets hate uncertainty… Long-term value remains in Kamoa-Kakula's 40-year resource, but investors need clarity on recovery plans before they'll return."
Interestingly, this pattern has historical precedents in mining. Market analyst Mark Turner coined the term "Turner's Law of Mining Press Releases," suggesting that when mining companies release bad news, the reality is often worse than initially portrayed. This skepticism contributes to the market's tendency to react strongly to negative announcements.
A comparison with other mining disruptions suggests the market reaction may be somewhat disproportionate. For example, Glencore's 2018 DOJ probe triggered a $56 billion selloff, yet ultimately settled for less than $2 billion—illustrating how markets often overreact to uncertainty.
Reserve and Resource Implications
The crisis could result in a meaningful reduction in mineable reserves due to several technical factors:
- Increased pillar sizes: If larger pillars are required for stability in the revised mining method, recovery rates could decline significantly. Each percentage increase in pillar dimension has a geometric impact on recoverable ore.
- Sterilized areas: Portions of the orebody may become inaccessible or too dangerous to mine, effectively removing them from the reserve base.
- Modified mining methods: Changes to extraction approaches could reduce recovery rates across the operation. For instance, shifting from open stoping to cut-and-fill mining typically reduces recovery while increasing costs.
Mining engineers estimate up to a 30% reduction in reserves could occur if pillar sizes need to be significantly increased to ensure stability. This percentage aligns with Neil Ringdal's assessment that: "Conservative redesign could reduce recovery rates by a quarter to a third compared to the original plan."
However, it's important to note that even with reduced recovery rates, the Kamoa-Kakula complex remains one of the world's largest and highest-grade undeveloped copper resources. The fundamental value proposition—exceptional grades in a massive resource—remains intact despite the operational challenges.
Cost Implications
The financial impact extends well beyond lost production and includes significant additional costs:
- Redevelopment expenses: Creating new access routes around collapsed areas could cost tens of millions of dollars, with each meter of development representing thousands in direct costs.
- Equipment replacement: Damaged machinery, ventilation systems, and pumping infrastructure will require substantial capital to replace.
- Mining method modifications: More conservative mining approaches typically come with higher operating costs per tonne extracted.
- Water management: Enhanced pumping capacity and water management systems represent both capital and operating cost increases.
- Engineering and consulting costs: External experts will likely be required to design and validate new mining approaches.
The combined impact on project economics will be substantial, potentially reducing the net present value of the operation by hundreds of millions of dollars. However, given the exceptional grades at Kakula (averaging over 5% copper), the project likely remains economically viable even with higher costs and lower recovery rates.
How Does This Compare to Other Mining Disruptions?
The Kakula incident exists within a broader context of mining disruptions, particularly in challenging jurisdictions. Comparing this event to other recent disruptions provides valuable perspective on both the severity and potential recovery patterns.
Recent African Mining Disruptions
The Ivanhoe and Kakula mining crisis is part of a concerning pattern of unexpected disruptions affecting mining operations across Africa in recent months:
- Alphamin's Bisie Tin Mine (DRC): Operations were suspended in March 2025 due to rebel activity in the vicinity. The mine, which produces approximately 4% of global tin supply, faces security challenges common to remote operations in the eastern DRC.
- Syrah's Balama Graphite Mine (Mozambique): Production was halted in April 2025 due to farmer protests blocking access routes. This social license disruption highlights the importance of community relations in maintaining operational continuity.
- Sabina's Goose Gold Mine (Canada): While not in Africa, this operation experienced a significant hoist failure in February 2025 that suspended production for several months. The technical nature of this failure provides an interesting comparison to Kakula's geotechnical issues.
These examples illustrate the diverse range of risks facing mining operations—from security and social challenges to technical failures—and the importance of robust risk management and contingency planning across all aspects of mining.
What distinguishes Kakula from these other disruptions is the fundamental technical nature of the failure, which potentially requires a complete rethinking of the mining method rather than simply resolving an external disruption or replacing damaged equipment.
Industry Context: The "Turner's Law" Perspective
The situation exemplifies what industry observer Mark Turner has termed "Turner's Law of Mining Press Releases," which suggests that when mining companies release bad news, the reality is often worse than initially portrayed.
This concept, while somewhat cynical, reflects the mining industry's historical tendency to present negative developments in the most favorable light possible while still meeting disclosure requirements. Companies naturally attempt to maintain investor confidence while addressing operational challenges.
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Source: https://discoveryalert.com.au/news/kakula-mine-2025-incident-pillar-failure/ [30th May 2025]
See also:
What's Gone Wrong at Ivanhoe? (with Neil Ringdahl) May 30, 2025 Money of Mine Podcast
One of my cousins also shared his take on the Kakula issues:
https://youtu.be/k3BnjmUsQF8?t=2527
Interesting!
Avagoodweekend Strawpeople!
Copper’s uber-bull predicts new record on most-profitable-ever trade
by Jack Farchy and Mark Burton, Mon, March 24, 2025 at 6:45 PM GMT+10:30 [4 min read]
(Bloomberg) — One of the highest-profile copper (HG=F) bulls is back predicting new price records, as Donald Trump’s threat of tariffs drains global stocks and creates what he sees as unprecedented opportunities for trading profit.
Kostas Bintas became one of the best-known metals traders during his years building Trafigura Group’s copper book into the world’s largest, before his departure in late 2023. Now spearheading a push into metals at energy trader Mercuria Energy Group Ltd., he is again calling for copper to surge to record highs, up by as much as a third from current levels.
The huge amounts of metal being drawn into the US will leave the rest of the world — and crucially, top consumer China — perilously short, Bintas said in an interview.
“We think there is something exceptional happening in the copper market,” he said. “Is it unreasonable to expect a copper price of $12,000 or $13,000? I’m struggling to put a number on it because this has never happened before.”
Bintas was one of the first of a growing chorus of traders and investors to predict that copper was about to enter a multiyear bull market in the wake of the coronavirus pandemic, and that rising demand for electrification would outpace supply growth. At Mercuria, he’s teamed up with another prolific bull: former Goldman Sachs Group Inc. metals strategist Nick Snowdon, who roughly a year ago was forecasting average prices of $15,000 a ton in 2025.
Still, copper bulls have been disappointed on several occasions, most recently last year when prices surged to a record high above $11,000 a ton, only to falter as Chinese buyers stepped back from the market.
Now the dislocations caused by Trump’s threat of copper tariffs have changed the market dynamic. While the US has yet to impose broad tariffs on copper imports, domestic prices have soared to over $1,500 a ton above the rest of the world, creating a huge incentive for traders to ship every spare ton to the US.
“In terms of the margins per ton, I’ve never seen a better trading opportunity,” Bintas said.
The shift of inventory to the US means the Chinese copper market will be left with insufficient stocks, Bintas said. Chinese buyers — who account for more than half of global demand — will be forced to compete with the US market. At the same time, the large volumes of scrap copper that typically flow out of the US have effectively dried up.
“China has been successful historically in rejecting high prices,” said Bintas. “This is the first time in recent history that another market is taking tons away from the Chinese market. That’s why it’s uncharted territory.”
Mercuria estimates that about 500,000 tons of copper is heading to the US, most of which is already on the way. That compares with normal monthly imports of about 70,000 tons. Traders are shipping metal to opportunistically profit from the large price differential, as well as frontloading already-planned shipments in order to clear customs before any potential tariffs are imposed.
Mercuria itself has 85,000 to 90,000 tons en route to the US. Bloomberg reported previously that some traders have been redirecting shipments from Asian customers to the US.
Bintas isn’t alone in his bullish call. Investment funds have lifted their net bullish positions in LME copper to the highest since last May, according to exchange data. David Lilley, chief executive of hedge fund Drakewood Capital Management Ltd., predicts that the pull of copper to the US will leave Chinese buyers facing “much more aggressive competition for metal.”
Global copper prices have already risen sharply, with benchmark LME prices up 14% so far this year to $10,010 a ton on Monday, and US futures on Comex, inflated by the tariff threats, nearing a record high.
The global market is showing some signs of tightness, but not yet indicating the extreme squeeze that Bintas is predicting. On the Shanghai Futures Exchange, copper has moved into the widest backwardation in more than a year, with nearby contracts trading above later-dated ones in an indication of tight supplies. Copper premiums in China have been rising since the end of February, although they remain at modest levels by historical standards.
Of course, the prediction for a surge higher in copper prices could be undercut if worries that a trade war could cause a global economic slowdown prove accurate.
Mercuria is unconcerned about that risk, predicting that global demand will outstrip supply by 320,000 tons this year, which, together with the draw of stock to the US, could drain a large share of the inventories outside the US.
What’s more, the tariff threat has caused exports of copper scrap from the US to dry up. About a third of global copper production comes from scrap, and the flow of scrap often acts as a market buffer, rising when prices are high and falling when they are low.
“Already through February, US scrap exports have gone to negligible levels,” said Snowdon, who is head of metals research at Mercuria. “You’re seeing an under-appreciated shock on the global copper market through this scrap channel.”
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I hold Evolution Mining (EVN.asx). They mine copper and gold.
That's EVN's 3 Year Chart. They have really accelerated up in the past year.
Another way to play copper is through Sandfire Resources (SFR), which I do not hold:
Sandfire is Australia's only pure-play copper producer with decent scale (size) now that OZ Minerals (was OZL) has been taken over by BHP. Anywhere else you're either buying into much smaller companies (so less commodity exposure) or else you are buying into diversification into other commodities, not just copper.
I have held SFR in the past, their MD/CEO at that time, Karl Simich was a bit prickly, getting pissed off with analysts on company earnings calls and so forth, and I was worried he was hell-bent on empire building and was buying too many overseas projects too often - at that time - so the main concern was he was doing too much at the same time and there were a few things that could go wrong, so I stepped off the ride. Having a look at them again this evening, their SP has certainly been heading north east at a good clip, and Karl apparently stepped down from the top job at Sandfire in October 2022, and their new MD & CEO, Brendan Harris, is not a name I know.
Commsec tells me: Mr Harris has experience as an exploration geologist, equity analyst and senior executive with BHP and South32. He has been a member of South32s executive management team since its demerger from BHP in 2015. Most recently, he has held the role of Chief Human Resources and Commercial Officer at South32, with responsibility for global commodity marketing, procurement and human resources. He has also previously served as BHPs Global Head of Investor Relations and, prior to joining BHP in 2010, held various roles in investment banking including as Executive Director at Macquarie Securities, where he led the Metals & Mining Research team. Good-O! Sounds like he has experience.
Commsec has SFR's current trailing PE ratio as 28.44. ASX says it's 37.96. They're not small - Sandfire's market cap is just over $5 Billion - and they are producing copper from multiple mines across different countries, Western Australia (DeGrussa), Botswana (Motheo), and Spain (MATSA).
Even if they are already expensive, and they do look expensive to me already, they're producers, so if the copper price DOES go nuts Sandfire's share price IS going higher still. Something to ponder.