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.
Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
Global energy transition is boosting the market for nickel
The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
“The global movement to electric vehicles, renewable energies and carbon reduction has shone a welcome spotlight on nickel – positioning the metal we mine as a key contributor to a greener future and boosting world demand. We are proud that Thompson can be part of that future and part of the low carbon solution.”
Vale continues drilling program at Manitoba
Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
“This $150mn investment is just one part of our ambitious Thompson turnaround story. It is an indicator of our confidence in a long future for the Thompson operations,” added Dino Otranto, Chief Operating Officer for Vale’s North Atlantic Base Metals operations.
“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.