Issue link: http://resourceworld.uberflip.com/i/612354
d e c e m b e r / j a n u a r y 2 0 1 6 www.resourceworld.com 7 JSE] was one of the largest spin-offs in 2015 and started trading in May. Many of the seniors, particularly in the iron ore sector, are also engaged in epic "last-man standing" battles, where they are selling into an oversupplied market to preserve market share and to pressure competitors working with tighter margins. "Some [seniors] can also produce below cash costs, hoping not only to preserve market share but to also avoid shutdown costs. This can enable them to scale up and enter any ensuing bull market at a faster rate than their competitors," Rule noted. Along with natural end-of-life closures, this source of "supply destruction" slowly pinches and then removes any overhang, while also putting in the props for a tangi- ble upside when demand starts exceeding supply, pushes prices higher and helps buoy sector performance. "[And] if supply doesn't return quickly enough to satisfy demand, you then see the sort of price spikes witnessed in the early parts of the last decade," Rule explained. "Take a look three, four or five years out and think about what the copper price could be, or the uranium price or the platinum price and so on. Look at the util- ity afforded by various commodities to the economy and what commodity prices need to be for industry to earn the cost to capi- tal. That's when [you realize] there's some truly stunning stories out there." Rule highlighted uranium as an exam- ple, noting its current spot price remained below the US $40/lb level, which meant those producing at around the US $60- 65/lb had been losing more than US $20/ lb and were trying to make this up on sales volumes. "When markets eventu- ally recover they usually overshoot the other way," he noted. "Because uranium is such an inconsequential part of the cost of delivering nuclear energy it wouldn't sur- Cameco's Cigar Lake Mine in the Athabasca Basin of northern Saskatchewan is the world's highest grade uranium mine. The company developed an innovative jet-boring technique specifically for this challenging deposit and began production in May 2015. Source: Cameco Corp.