Why Economics is Important to a Mining Company
- Demand for products which contain metals controls the price.
- The price of a mineral helps determine whether to begin mining a newly found orebody.
- Since price is not controllable, then costs must be minimized in order to survive times when prices fall.
- As demand for a mineral falls, supply will not fall at the same rate in the mining industry. Inventories will build as higher levels of production continue for some time, which will lower prices even more.
- If price falls too much, the cost of mining may exceed the price. Mines will then drastically cut costs, attempt to operate at a loss, or will close.