In the last month, the U.S. still has not decided how it will use a $700 billion bailout approved by Congress, but it finally admitted that the economy was, in fact, in recession. The leaders from the world’s biggest economic powers (the G-20) met and decided to tell financial regulators to tighten lending standards, which might prevent future problems, but could hurt those suffering now in the midst of a credit crisis. All of the leaders pledged to take the necessary steps to restart the global economy. If a person believes that the government can actually help, these are good signs.

In general, metals prices have not declined due to over supply. They have declined as speculative demand dissipated. Traditionally miners mine themselves out of a job. But, this is not the typical boom-bust cycle that everyone expects. No one should have believed the $4/lb copper was here to stay and that in itself was a clear warning as to speculative money driving prices rather than pure supply-demand economics. Most copper miners knew that and that’s why there was not a rush to bring more capacity to the market.

One could argue that the mining industry really did not have the ability to take full advantage of the record high metal prices. They were not able to mine themselves out of a job this time mainly because it takes too long today to prove up an orebody and bring it into production. The permitting and socio-economic constraints the mines face today prevent them from moving too quickly. Only the companies that had the bravery/ foresight to invest during a down market truly benefited from strong pricing. That is a compelling reason for mining companies to continue with exploration programs.

Looking back 30 years ago, the mining industry was benefiting from a slow steady build-up, which they wrongfully extrapolated to an extreme in making future forecasts. When the economy turned south in the early 1980s, many mining companies had an inflexible approach to project management. The thought of a prolonged market downturn never crossed their minds. Sadly, as one retrospective E&MJ editorial from 1988 stated, “Our captains did not have the perspective to steer their organizations through the rough seas of restructuring economics.” The mining industry suffered from those mistakes for 20 years.

The situation is different today. Market supply and demand is in balance and mining executives can remember when they were not. Today’s mining executives are pragmatic and they watch the balance sheet as closely as their reserves. Everyone had the privilege of knowing that the global economy would slow this year. Already, as readers will see in this edition, mining companies are moving to suspend some projects and idling more costly operations. This use of market discipline will help them bridge the gap and prevent the market from falling into massive over supply.

Steve Fiscor, Editor-in-Chief, E&MJ