SNL Report: State of the Market--March quarter 2015
In the previous State of the Market (SOTM) report, the messages for the international mining industry from the final three months of 2014 were summarized as “decidedly mixed.” Unfortunately, almost all of the signs were negative in the three months to end-March.
Global economic growth remains precarious, and six of the eight constituents of the SNL metals-price index declined during the March quarter. With these gloomy market conditions, there was a decline in global drilling activity and the value of initial resources. Financing also fell in the three months to end-March, and there was a decline in the number of mergers and acquisitions.
Market for Mining
Last year was probably the worst for mined commodities since 2008, and the trend continued into the start of 2015 for most metals. Gold and silver did well in January before falling back in February. After early weakness, copper enjoyed a strong quarter but this did little to compensate for a decline in the price of other major metals.
With the gloomy market conditions the first three months of 2015 was another difficult period for the mining industry. According to the SNL Metals & Mining database, only 380 projects reported drill results, compared with 418 during the December quarter. Reflecting this reduced activity, the value of initial resources announced during the quarter fell to just US$33.0 billion from US$51.8 billion in the December quarter.
Pipeline Activity Index
There are few better visual representations of the health of the international mining industry than SNL’s PAI, which incorporates significant drill results, initial resource announcements, significant financings and positive project development milestones into a single comparable index. PAI rose in March but the index was down for the quarter as a whole.
Metals Production Outlook
By mid-May, SNL had recorded production announcements by 188 companies where comparable gold, copper and iron ore output had been announced for the March 2015 and December 2014 quarters. If these early announcements turn out to be representative of all producers, then there has been a significant fall in output for all three metals in the March quarter compared with the previous quarter.
Mergers and Acquisitions
The number of deals registered on the SNL Metals & Mining database fell to 24 in the March quarter, compared with 43 in the final three months of 2014. However, the value of these transactions was only slightly lower at US$4.67 billion. This is comfortably ahead of the US$2.42 billion recorded in the
September quarter but remains well short of the US$11.11 billion achieved in the June quarter 2014.
Funds raised in the three months to end-March, as reported by mid-May, totaled just US$10.03 billion, compared with a restated US$15.47 billion in the December (updated because of late-reporting financing). The shortfall was attributed to a sharp reduction in financings announced by the largest companies — those with a market capitalization of over US$100 million — which raised barely two-thirds of the amount in the December quarter.
Read the full report here.
Global iron ore production to recover by 5.1% in 2021
Global iron ore production fell by 3% to 2.2bnt in 2020. Global production is expected to grow at a compound annual growth rate (CAGR) of 3.7% to 2,663.4Mt between 2021 to 2025. The key contributors to this grow will be Brazil (6.2%), South Africa (4.1%), Australia (3.2%) and India (2.9%). Key upcoming projects expected to commence operations include South Flank in Australia (2021), Zulti in South Africa (H2 2021), Serrote Da Laje in Brazil (H2 2021) and Gudai-Darri (2022), according to GlobalData, a leading data and analytics company.
Vinneth Bajaj, Associate Project Manager at GlobalData, comments: “Declines from Brazil and India were major contributors to the reduced output in 2020. Combined production from these two countries fell from a collective 638.2Mt in 2019 to an estimated 591.1Mt in 2020. The reduced output from the iron ore giant, Vale, was the key factor behind Brazil’s reduced output, while delays in the auctioning of mines in Odisha affected India’s output in 2020.
“Miners in Australia were relatively unaffected by COVID-19 due to effective measures adopted by the Australian Government, while a speedy recovery in China led to a significant 10.4% increase in the country’s iron ore output.”
Looking ahead, the global iron ore production is expected to increase by 111.3Mt to 2,302.5Mt in 2021. Rio Tinto is expected to produce up to 340Mt of iron ore, while BHP has released production guidance of 245–255Mt, supported by the start of the Samarco project in December, which is expected to produce between 1–2Mt.The company has retained its guidance for Australian mines at 276–286Mt on a 100% basis, due to scheduled maintenance work at its ore handling plant and tie-in activity at the Area C mine and South-Flank mine.
Bajaj added: “The remaining companies are expected to produce more than 600Mt of iron ore, including FMG, whose production is expected to range between 175–180Mt supported by its Eliwana mine that commenced operations in late December 2020, and Anglo American, which is expecting to produce between 64–67Mt. Vale is expected to resume 40Mt of its production capacity, taking its overall production capacity to 350Mt in 2021, with production guidance of 315-335Mt.”