Continuing to extract metals and minerals when the prices fetched for them are below breakeven is contentious.

Mining companies are granted rights by host governments which expect them to use what is a national patrimony optimally.

Yet, during the commodity price crash of 2015, many mining companies turned a blind eye to the poor price margins and decimated value.

Now criticism of this blinkered approach is growing. For instance, Bernstein analysts Paul Gait, Jonathan Absolon and Catherine Tubb conclude in a note that mining companies are wrong to close their eyes to market realities and that tonnes should be left in the ground when prices are so low that it does not pay to mine.

Conversely, the analysts advocate that mining companies that pull back on production to allow prices to recover should enjoy the benefit of reserve value premiums.

They portray as wrong simply mining at a fixed rate until a deposit is exhausted, and show that poor decision-making during the last downturn needlessly blew a hole in the value of reserves.

Taking note of the need to respect national patrimony and sparing a thought for the economies of host countries, the analysts quoted author TS Lovering on rich mineral deposits being a nation’s most valuable but often also a country’s most short-lived material possession.

One cannot overemphasise the need for responsible custodianship of what are finite resources. When a tonne of metal-bearing ore is removed from the ground of a host country, it is lost to future generations, and if it is sold at a loss on world markets, the world benefits but the host country and its people lose out.

Most of the host countries are developing countries inhabited by some of the poorest people on the planet and mining companies that fail to do their best for these countries should be called to account.

As it is, commodities-dependent developing countries risk falling short of achieving their sustainable development goals by 2030, United Nations Conference on Trade and Development (Unctad) economic affairs officer Stefan Csordas has warned.

Gait, Absolon and Tubb show that deferring production during periods of low commodity prices is almost invariably the correct thing to do, should command a premium in the market and, by Lovering’s reasoning, renders national patrimony less ephemeral.

They argue that tonnes should be left in the ground if bringing them to surface fails to offer at least a break-even return.
At the heart of this is the contention that there is such a thing as a “correct value” for a commodity and that price recovery favours waiting until it reaches correct value before resuming production.
The idea is that idled personnel are put through productivity-enhancing training during the lulls so that they add value once operations return to normal.