Boom! Boom! Well, beware of the bumps ahead.

After a long time the smile is back in the face of professionals working in the commodity industry. Good news are coming from all quarters: huge profit, dramatic salary raises, new openings to the old mines, new investors, and huge demand for the resource personnel, etc. In an annual term the international prices of most of the minerals have gone up generally by about three times in this fiscal. Obviously, to the glee of all involved, the price side elasticity is not matched by cost side elasticity- making the grin widening since . Let me just give an example: the cost of production of granite used for road making is Rs.40.00 per tonne in Rajasthan (obviously, the laborers are not paid in full, full royalty is not paid, etc! God bless our governance and administration! ) and pit mouth value of the granite is Rs.150.00 per tonne. Yesterday’s farmers, albeit not all, are becoming today’s dollar millionaire. Mining is big business -not much known to the outside world- if one has hands on a small but good property .More so because one can throw all other responsibilities in the wind since money can sure buy friends in the government, away from the eyes of the public and media !

Another thing has quietly happened. Perhaps we are seeing the demise of cyclical nature of mining business that we have known for ages. Mining fortunes are believed to have a cyclical nature: excess supply brings down the price, downing of price brings down the investment and thus the supply, reduced supply increases demand, and increased demand brings in excess supply. Now just think of the case when supply will be less than the demand as new and good resources are becoming few ands far in between. But demand is increasing: emerging markets asking for more minerals, 2008 Olympics have gargantuan demands of products from minerals for swanky new stadia, creaking infrastructure of the Europe, and the America are crying for anything that is mineral. So what we see is that cyclical mining business is slowly turning into upwardly linear mining business. So the clamour for mining and minerals will only increase and the properties will be transferred from one hand to other by mergers and acquisitions. But transferring of mining property from one hand to other is not like acquiring a manufacturing plant and its business where due diligence is easier. Mining due diligence is extremely difficult because firstly, worldwide there is no established practice of mining property due diligence and secondly, there are very few professionals to do it today. What exists is very skeletal and is more mandated by financial managers than mining professionals. So there is a huge risk. Investors beware! There will be many dream merchants who will hard sell unrealizable windfalls of profit.

There can be yet another twist. A company might end up buying a dud property at a very high cost. But it can also do it intentionally. Today, there may be non mining interest in buying a mining property that is strategic in nature. If it fits into the leveraging scheme of the company, it might want to buy a property that in it may be an unviable proposition but fits well in the overall business plan. Say , an alumina producer having good bauxite property might be interested to buy a coal mining property at a price more than the total operating and utilization cost just because this gives him or her an opportunity to obtain a fixed and rated supply . So mining economics will not be the sole criterion ; what will prevail is the ultimate business linkages and their operating economics. All strategic mine plans today capture these opportunities. Any mining property means a lot o surplus land. With realty and infrastructure sector booming getting few lands is a good investment by itself. If no mining, one can open warehouses! Pardon me, but the cynics say that all our coal bed methane properties are only good for warehouse projects.

Excessive profit will be both good and bad news for the minerals industry. Good, simply because who does not like fat profit margins. Bad, because these will draw streams of new investors who will like to have a slice of the business and thus, creating new rules of game in the industry –disrupting the old. Such upheavals will not take place without its share of severe skewed competition, malevolence, corruption, antitrust, and translucent insider trading etc. Mining history is replete with such examples from the past.

The comfortable financial position of the industry should auger well for the mining education if the opportunities are taken. Throughout the world, mining educators by default or by design created a ghetto of their own –distancing themselves from the engineering community at large. We stuck ourselves to the belief that we were special and in the process, we could not create pedagogy that would help us befriend other engineers who would consider us one day as their peer. That took away our all round engineering position. The result is, in the face of such demands, mineral resources engineers are pathetically short of supply. That mistake should not be done again. It is time that mining education embrace mineral processing, petroleum engineering and related environmental engineering in their cheer to chart the path for holistic Georesources Engineering. Boom in the industry instills optimism that needs to be creatively utilized. Do not again walk the path of isolation .Who knows whether there will be yet another next time!