The mining cycle - booms and busts

Unlike industrial companies such as Amcor or Transurban, mining companies' profits are inherently cyclical. The earnings from mining companies are subject to booms and busts, mainly outside the control of their management teams. This occurs as, ultimately, any company producing a commodity is a "price taker", not a "price maker", as there is no difference or brand premium between a ton of iron ore mined in Australia or Brazil.

Due to the nature of the cycle, we see that mining stocks should not be viewed as buy and hold forever. Instead, investors should choose their entry points based on where they consider minerals in the mining cycle.

In this week's piece, we will look at the five different points of the mining cycle and where Atlas perceives commodities as currently positioned. The travails of the nickel mining industry nicely illustrate the mining cycle. The non-corrosive metal used to make stainless steel and lithium-ion batteries has been one of the key mining stories of 2024. Nickel has gone from a boom in 2022/23 due to its inclusion in batteries for electric vehicles to miners asking for government subsidies and then closing mines in 2024.