La Balsa ReduxHere's a very telling stat:
"According to the International Copper Study Group, world refined copper consumption exceeded production by 37,000 tonnes between January and April of this year. That's quite different from a year ago when there was a deficit of 147,000 tonnes."
How did this happen? In the midst of The Great Recession?
Q1 2009 was a disaster for the all most all economies around the world. We're really only shown signs of a recovery -- and many would debate this "recovery" status noting things today are just "less bad."
Bill Harris was on BNN last Friday musing on how could this be happening when we're supposed to be in the biggest economic crisis since WWII? His distinction was that while we obviously have been through the biggest "credit crisis" (arguably ever), this "economic crisis" is decidedly different.
He added that all the world's copper mines are currently profitable, none have been shut in and the world's needs everything they can produce. He did caution, however, that we don't know the full effect of China's stockpiling...
What we do know, is that unlike other previous great recessions (or depression if you prefer), China and India didn't count back then.
But they sure do now. I think we can now say that China's nadir during this recession was its 6.1% "growth" rate in Q1.
And while the Middle Kingdom's stock inventory builds are a bit of speculation, we do know something about their internal demand...like the fact that China is now the world's biggest consumer of cars. And as US Global Investors just reported. "China’s real urban household consumption, a better measure of consumer spending than retail sales, rose 10.3 percent year-over-year in the first half of this year. The country notched 5.7 percent growth over the first half of 2008.
China's hardly slowing down. Moreover as a lot of China's exports are "re-exports", i.e where the expensive parts are made abroad in places like Taiwan then "assembled" in China, some posit that even a significant slowdown in their exports will just mean that their growth rates won't reach double digits and likely hover in the 8% to 9% range.
So is any of this relevant to an investment in Bell Copper?
Early in 2008, getting some reasonable copper production going for a relatively modest amount seemed like a great way to fund some of theMarsh's big geo theories. A way of turning Bell Copper into a signficant force in the world of the red metal.
But the "nuclear sized" proportions of the last year's credit crisis threw the newly merged Bell Copper's pre-crises formulated plan of fueling exploration from La Balsa production completely out the window.
So by Q1 2009, it was argued that Bell's fortune's were now essentially tied a discovery at Kabba. They had too much debt, copper was below $2 and it was getting increasingly hard to believe that we could still "continuously" rely on deep pocketed investors to keep funding 'continuous' exploration.
I didn't foresee a scenario where Kabba could be deemed a bust and we could just then move on and try our hand at Sombrero Butte. I still agree with that baseline scenario, but I'm now sensing some headwinds that were certainly not blowing some 4 or 6 months ago.
Over the past couple years, when we saw record $4+ copper, a lot of scrap came off the market. The scrap factor today has been greatly diminished. When the world needs copper, it needs to get that from"primary" (i.e. mined) production.
Where am I going with all this...I'm revisiting La Balsa.
The environment is changing where we could begin to see renewed interest in LB's deposit given its relatively quick start up time, and the fact that this deposit, while relatively modest by world standards,is still open.
More importantly, it's low cost. A port that's essentially next door -- along with power and water infrastructure --as well as a relatively low cost workforce in a mining friendly jurisdiction, starts to make this a reasonable business proposition once again.
Certainly more viable than it was some 6 months back.
I'm not saying we're out the woods yet...but finally some winds are now blowing.
I'm getting my kites out.