Mining Industry Will "Recover" From Crisis Next Year

The mining industry "will recover" from the economic downturn next year, according to a top mining analyst.

Speaking at the Mines and Money conference in London today, Ernst & Young's head of mining, Michael Lynch-Bell, said he believed there would be recovery as opposed to "Armageddon" in 2009.

"Lending is likely to begin in early 2009," said Lynch-Bell after outlining the main difficulties faced by companies suffering from the economic downturn.

Ernst & Young’s US$ and LME metals index reveals that metals prices fell below those of 2005, revealing a slow rise and fast fall.

LME Copper stocks, although now on the rise, are still lower than 2003 levels, according to the report.

The worsening economic situation has led to a slowdown in mining deals, resulting in many companies putting projects on hold or scrapping them altogether.

One of the most recent casualties has been the suspension of Kopane’s Liqhobong diamond mining development in the Kingdom of Lesotho, announced at the start of the week.

The mine ceased production as a result of "severe economic and market turbulence" and a drop in diamond prices, said Kopane.

But while the financial picture has been grim over the past year, MD of mining finance at banking giant Société Générale, Judith Mosely, said the problems stem not from finding finance but from finding projects.

"The biggest challenge is the shortage of good mining projects to finance," she said.

By Ozge Ibrahim