A recent boost in spending to build new mines, spurred by economic recovery and a rebound in metals markets, is too late to head off looming shortages in supply in many metals and sharp price gains in coming years, some industry analysts say.

Mining groups such as Rio Tinto PLC and Vale are beginning to reverse some of the heavy cuts in capital spending they made when cash was scarce in the downturn.

But the timelines for many new mines have already been delayed and most operations will not be ready to extract ore by the time world demand ramps back up, the analysts said.

Spending on exploration, a key forward indicator for developing new mines, has also declined.

"I think there is a great risk that in 2011/12 there will be a shortage of new projects," said Magnus Ericsson of Stockholm-based consultancy Raw Materials Group. "The lack of investment is so serious it could result in another price boom."

The situation is most critical in copper, nickel, lead and zinc, he added.

Even before the global downturn, companies were spending less of their profits on building new mines than in the past, a recent report by Ernst & Young found.

Capital expenditure, known in the trade as capex, was around 60% to 80% of core earnings (earnings before interest, tax, amortization and depreciation, or EBITDA) during the 1990s, but during the current decade has been much lower, around 40% to 60%, it said.

The impact of the economic downturn will further dampen the ability of debt-laden mining firms to build new mines, said Tim Williams, director of mining and metals at the accountancy firm.

"This was a banking crisis and the disappearance of debt is going to limit the ability of the mining industry to respond to the revival in demand in the next few years," Mr. Williams said. "This is a formula for very high metal and mineral prices."

Severe shortages could push prices for copper, used in power and construction, beyond the record highs of US$8,940 a tonne reached in July 2008.

Yesterday the London Metal Exchange three-month price for copper was around US$6,485 a tonne.

Paul Robinson, group manager of non-ferrous metals at consultancy CRU Group, expected the copper market to start to tighten in late 2012, with large deficits of 250,000 and 400,000 tonnes, respectively, in the next two years.

He said an insufficient number of new mines will be one of the key factors.

"If the investment community thinks there's a strong medium-term story, copper prices could easily spike through historic highs," he said.

The decline in spending on new mines is making potential shortages worse because of delays in getting new mines approved in remote, emerging nations -- especially as these countries are increasingly relied upon as reserves become exhausted elsewhere.

The huge Oyu Tolgoi copper-and-gold mine in Mongolia being developed by Rio Tinto and Ivanhoe Mines Ltd. was expected to be in production by 2007, but the government approved it last month and output now is due in 2013.

The outlook for capital spending has improved recently as companies gained more confidence in early signs of recovery, but overall spending is still weak.

Brazil's Vale said last month it planned to boost capex by nearly 30% next year to about $13-billion, but this was still below the $14-billion the world's top iron-ore producer planned before the global financial crisis. Despite the increased capex, Vale pushed back the delivery dates of its projects by six to 18 months due to the previous cuts in spending.

Rio Tinto doubled planned capex for next year to at least $5-billion. But this represented scant growth from 2009 and a steep fall from about $9-billion last year.

In addition, small and mid-sized mining and exploration firms have been frightened away or are unable to secure funding.

While the focus is on a lack of spending on new mine projects to start up in the next three to four years, the decline in exploration expenditure is equally disconcerting.

RMG said it could fall to $7-billion to $9-billion in 2009 from $12-billion to $14-billion last year, with only a slight rebound seen in 2010.

"Exploration is a major factor in keeping the status quo of reserves and it's not taking place," Mr. Ericsson said.