Comment: Do you think any of the Economic Studies of uranium mining will have the following statement: "So every mining stock should be seen as high risk, no matter how big the company. " Keep the Ban!
10/22/2011 @ 11:30AM
The surprise announcement last Wednesday that Agnico-Eagle (NYSE: AEM) has shut down operations at its Goldex mine in Val d’Or, Quebec reminds us just how risky the mining business can be – not just for the miners but for investors as well.
The company said the closure was necessitated by weak volcanic rock above the ore deposit which allowed water to flow into the mine. The situation is being investigated further and it is uncertain whether the mine will ever be able to reopen.
The stock plunged by 18.5 per cent, more than $10 a share, after the news came out and took another hit the next day
Risk is the critical word when it comes to any mining stock.
Even the biggest and brightest can be hammered by unforeseen developments. Consider the case of Cameco (NYSE: CCJ), the world’s largest uranium producer. The share price was clobbered in the aftermath of the March nuclear disaster in Japan which led to countries such as Germany declaring a moratorium on new atomic power plants.
But Cameco’s troubles began long before that
Construction on the mine began in 2005 with the expectation of a start-up in early 2008. But in April and October 2006, the mine was completely flooded after a rock fall, setting back work for years.
Cameco has spent millions to drain and seal the mine, clean up the silt and debris, and re-start construction.
Floods and rock falls aren’t the only problems facing mining companies.
Strikes, political unrest, falling commodity prices, currency fluctuations, and environmental issues are only a few of the many other setbacks they can experience.
So every mining stock should be seen as high risk, no matter how big the company.
Read more:
http://www.forbes.com/sites/gordonpape/2011/10/22/the-perils-of-mining/2/
