Almonty's CEO Talks Tungsten And The Eurozone Crisis
Another effect, according to Black, is that everything costs more.
“Costs are up 20 to 25 percent over five years ago, but the lead times are double. You have to be more creative in obtaining heavy equipment because it seems manufacturers would rather work for more money over longer periods.”
Black explained that manufacturers have reduced staff on their assembly lines and have outsourced those jobs. The companies that they have outsourced to are generally smaller. In Europe, small and mid-sized businesses have no access to credit; that slows down production times because many can't keep large supplies of simple components, such as rubber seals. And given the broader sense of uncertainty, companies with the cash, like everyone else, aren't prone to risk tying it up in inventory.
One solution to this problem that Almonty has found is to turn to the “thriving second-hand market” for equipment.“We have always been creative in getting things done. We built Los Santos on a shoestring. We had less than a quarter million dollars and no credit,” Black said. During the Eurozone crisis, much emphasis has been placed on the strength of the region's banks and the possibility that the euro may not be able to survive. Black does not believe in risking the farm, so Almonty has taken precautions to protect against worst-case scenarios. The company has moved all its accounts out of Spanish banks. It was able to do so with no obstacles because it made moves at the end of 2011. “There were already rumblings about Spanish banks back then. We left the party before the parents got home, so to speak,” said Black. He said hedging does not make sense for the company. It invoices in dollars and converts into euros only the sums needed to cover accounts payable. “Honestly, we don't understand how the euro has held up as well as it has. They say the market is never wrong, but it makes absolutely no sense for the euro to be as high as it is.”
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