base metal miners and explorers now high risk

Whilst Gold and silver have catapulted with the demise of the USD, base metals have remained fairly stagnant and well below their highs of a year ago.

This fact must be causing concern within the base metals mining sector.

The strong AUD, by my calculations, is making some projects that have not reached the production stage yet, uneconomical. This is particularly the case with nickel and zinc producers. The high labour costs must also be causing concern where a Company has begun development of mining infrastructure and has no currency hedging in place.

I see many financiers of projects re-rating their risk exposure.

Ultimately, the supply:demand ratio will have a positive affect on prices as some producers mothball their operations while those yet to get to the production stage are forced to delay development through a lack of finance and/or reappraising the financial viability of their future operations.

I see this as the greatest threat to the Australian Mining industry. Look at the problems in South Africa now. We will be next.

The sooner all commodities are traded in a basket of currencies the better.

What is stopping Oz Mining Companies negotiating sales agreements in AUD until the global mining industry makes, what I believe, will be the inevitable move away from USD based prices ? The USD has some ways to fall yet and producers are seeing revenues drop significantly already.

This is not just a question for a few Companies - it applies to all base metal and iron ore producers. I am assuming the large players in iron ore are negotiating contracts in USD. Not for much longer if they have been.

I would appreciate any feedback on this developing threat to the viability of our mining industry.

What is the general feeling within the industry from your perspective if you are close to it and not just a trader/investor?