Yet another lot who does not understand what the term "reserves" means.
Let's explain this again. In mining, "reserves" is a legal term (to protect investors) that is defined to mean the quantity of a mineral that has been proved to exist by drilling or other accepted means to exist, that can be recovered economically (i.e. showing a profit) using today's technology and today's prices. It is only very tenuously related to "resources", which is the quantity of a mineral that is inferred (with varying confidence) to exist, that can be technically recovered.
It says nothing about the quantity of a mineral that is actually able to be recovered in the future. And it is worth noting that it is not worth any company carrying out work to find and prove reserves unless it can be shown that the probable reserve will have a DCF* rate of return greater than the company's hurdle* rate.
No (reputable) company is going to explore for minerals unless these criteria are met, so if there is plenty of a mineral known, there is no incentive to look for it. And if the demand is changing rapidly, the risks involved are very high, so even if it looks like there will be a shortage, exploration is unlikely. This applies especially to minerals (such as lithium) where inferred resources are far greater than reserves.
*DCF = Discounted Cash Flow, that is the cash flow from mining the reserve, discounted for the lead time and amount of investment prior to production. This is very sensitive to predicted mineral price and interest rate, and the estimated risk attached to proving the reserve, changes in interest rate, changes in price, delays in production, and sovereign risk.
Hurdle rate = the minimum return the organisation expects from an investment. It is sensitive to the predicted interest rate, and varies between organisations depending on their circumstances and alternative investments.
John
JDNSW
1986 110 County 3.9 diesel
1970 2a 109 2.25 petrol
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