In 2016, the mining industry saw an increasing number of companies with market caps rising above 50 million for junior players, a huge number after years of declining market caps and de listing for juniors.
That’s just one of the big takeaways from the 2017 mining outlook survey, from Pedersen and Partners. The survey looked at what issues of concern in predicting the economic outlook for the mining sector in 2017, and asked 114 executives across the Canadian mining sector for their say.
“The outlook for 2017 is still very much subject to change, given current geopolitical complexities in resource rich countries such as the US, South Africa, Brazil. Venezuela, Vietnam and Indonesia, to name a few,” says the report.
“In spite of this, or perhaps even because of this, the general climate seems to be one of increasing optimism,”
Here are some of the biggest takeaways from the survey:
- Increasing number of companies with market caps rising above 50 million for junior players in 2016, after several years of declining market caps and de-listings for juniors. This follows several years of seeing large numbers of juniors with market caps under 15 million.
- The overall perspective appears to be one of cautious optimism, with most respondents predicating that 2017 will be an improvement over 2016, with only six percent expecting further economic contraction and 57 percent expecting to see growth in the sector
- The perception is that this is an auspicious time in the market cycle to make acquisitions, but a difficult time to secure the necessary capital. However, we have recently seen an increase in M&A, with 45 percent of respondents expecting M&A to be a part of their growth strategy this year, 35 percent saying it would be a possibility if the right opportunity arose and only 19 percent ruling it out.
- Securing resources, nationalism, skills shortages, infrastructure access and cost inflation are the highest concerns moving forward in 2017.
- Respondents fear that the weakened growth in emerging markets will cause pressure on commodity values and margins, and result in the less access to new sources of financing. However, many feel that this will create more opportunities to acquire assets during the low price cycle.
- Although regulatory requirements are increasing globally in the exploration and mining sectors, 54 percent of this respondents do not expect it to affect their operational strategy, while 26 percent do, and 20 percent are unsure.
- Despite the fact that market caps and share prices are down across the board, 28 percent indicate they will be hiring new employees, 5 percent indicate that will be bringing back staff that were laid off, 50 percent will maintain their current staffing levels, and only 15 percent suggest they will be restructuring.
- Many of the junior companies with the lowest market caps will disappear or seek mergers in order to increase capital. As a result, the number of publicly traded companies in the sector will be greatly reduced over the next year, which should in turn benefit some of the larger juniors with strong projects and healthy market caps.
- As far as environmental sustainability and risk mitigation are concerned, most respondents (42.9 percent) considered the matter best handled at the executive team level, while almost a third (30.1 percent) would designate a special Board Committee to deal with these issues. One-fifth of respondents (21.9 percent) preferred to retain external consultants to examine these issues.
- Almost two-thirds of the executives surveyed (62.3 percent), see the continuation of current exploration programmes as the best way to access new deposits over the next year, while only 21.9 percent would rely on acquisitions. 15.8 percent would consider restarting dormant exploration projects or bringing mins that are currently in care and maintenance back into production.