Project DelaysIn regard to mining projects on a world wide basis; most companies will extend the construction time of existing projects. Projects not started will be delayed; and if commodity prices do not improve many projects will be postponed.
In general aftermath of this financial implosion, everything about anything is going to be delayed.
The commodity depression of the eighties is somewhat similar to the airline depression of the eighties. Investors did not get a return of original capital, not to mention a return on invested capital. Investors in these industries were raped of their capital.
To build new mines, we are going to need very high commodity prices and I mean very high prices. Vale has said it needs $260 per ton to ship iron to China, South Africa has said it needs $2000 gold for new gold mines and Potash has said it will not build new plants unless prices double. After this financial implosion, capital will not be available for marginal projects with low profit profile.
Consequently it is going to be a long time before new multiple mines are put into production.
Teck recent purchase of Fording makes Teck the largest Met seaborne coal exporter. This will set the base case for pricing.
Inflation will be a lot higher in the future and so will be the cost of new mines.
I believe this all is good for Cline.
For base case valuations, Cline will be valued at the replacement cost of the New Elk Mine and this could be over $300 million dollars.
In regard to work at the New Elk Mine, I doubt much will happen between now and spring 2009.
I suspect Cline will form a base before moving forward.
I still believe Cline will be bought out and I will write more in the next few days.
Cline is a good long term investment.
Remember most of the insiders have not sold many shares. The big payout is yet to come.