Markets need to do their job

Uncertainty can be the killer of markets and mining, the impact it has on an industry can be absolutely devastating. It can (and does) destroy companies, close mines, cancel exploration projects and turn an incredible asset into a crippling liability.

When people think of uncertainty and risks in mining people inevitably think of the obvious social, political and environmental factors. A mining company wishing to operate next to or in a park or nature reserve will never have its deposit evaluated to its full potential, the risk of the government, environmental groups or aboriginals interfering and either restricting or denying mining or exploration rights scares and turns away investment dollars. The same goes for a project in a country like Venezuela, recent examples are Crystallex and Gold Reserve who are the victims of a over controlling government that can't be trusted. Ivanhoe and Aurelian had the same problems, sitting on a great deposit but the stock could not respond because the government provided too much uncertainty. New laws, new regulations...change. It just doesn't sit well with investors.

The recent credit issues surrounding the world and crash in commodity prices, mostly due to people expecting less demand for metals has broken down mining and beaten it to a pulp. The demand for metals has helped in shrinking the industry but the uncertainty of markets and mining operations has obliterated it. Mining is already exceptionally vulnerable to risks and uncertainty for the reasons I mentioned above, recent bailouts, stimulus packages and whatever else "help" federal governments have been trying to implement has done nothing to improve the situation.

The confusing nature of all the recent legislation passed has just caused people who were already unsure as to what was going on to get out and abandon the markets in droves. We need to take a step back, evaluate what we have done and respond accordingly, knee jerk reactions to "save" the free market system have ignored the fact that the free market is supposed to correct itself. The only true job of the market system that we are so desperately trying to save by force is to identify a value and price for something. Its job is to wade through the political factors a company faces, calculate its costs, revenue, assets, potential and to come up with a price. One, which is controlled by investors. By throwing a new quick fix every two days we're hurting the shell shocked investor from participating in the free market system and we're increasing to the levels of uncertainty.

Mining already has to deal with too much uncertainty and risks, if we have to implement changes and packages to help instituations from collapsing we have to be able to present them clearly and transparently to the investor. Until then, continue to expect wild volatility in commodities and stocks.