Mixed messages for mining recovery
By Nick Wright | 20 June 2017

S&P Global Market Intelligence’s Monthly Industry Monitor reviews activity in the mining industry's exploration and development sector. Here's the latest highlights:

S&P Global Market Intelligence's Pipeline Activity Index (PAI) rebounded in May, from 66 to 77, due to increases in the numbers of significant financings, drill results and initial resources, offset by a decrease in project milestones. By target, the PAI for gold was up sharply, from 85 to 124, while the base metals PAI was down 19%.

The increases in the number of financings, drill results and resources belie a continued softness in the mining and exploration sector. For instance, although there were seven additional financings in May, the US$499 million total raised was 60% less than the US$1.23 billion garnered in the previous month. Similarly, while the number of initial resource announcements increased from four to five in May, their US$2.67 billion total value was down 55% from US$5.89 billion recorded in April.

Despite the mixed signals, drilling activity rebounded strongly in May after falling for the previous three months. Drilling activity has remained generally strong over the past nine months, which will hopefully translate into further initial resource announcements and positive project milestones over the near term. The best drill result from a base/other metals prospect in May was reported by Platina Resources, an Australia-based explorer focused on precious and specialty metals. The assay came from Platina's flagship Owendale project in New South Wales, one of the world's largest and highest-grade scandium deposits.                                           
S&P Global Pipeline Activity

Last month's new resource highlights included a 1.5 Moz gold resource at TSX-V-listed Granada Gold Mine's namesake project in Quebec. The deposit rests in the heart of the prolific Cadillac Trend, where more than 50 Moz of gold has been produced historically between Rouyn-Noranda and Val-d'Or. In May's largest financing, Newmont Mining and the RK Mine Finance Master Fund invested a total of US$135 million in Toronto-based Continental Gold, which is planning to begin construction of its Buritica gold-silver project in Colombia by the end of 2017.

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    Positive project milestones comprised three small production startups and one project entering preproduction. In the month's largest negative milestone, KGHM announced it would forego the phase-two expansion of its Sierra Gorda operation in Chile's Atacama Desert. Acquired in 2011, the mine has struggled to handle complex ores and high production costs in the face of falling copper prices.

    Mining equities have now retreated for four consecutive months, from a 21-month high in January, as S&P Global's aggregate market value of the industry's listed companies (based on 2,465 firms) slipped 3.5% to US$1.23 trillion. Similarly, the aggregate market cap of the industry's top 100 companies also retreated again in May, falling to below US$1 trillion for the first time since December 2016.

    Mirroring the continued market retreat, S&P Global Market Intelligence's Indexed Metals Price eased back from a 31-month high of 114, dropping to 111 at the end of May. The indexed price fell for seven — gold, silver, platinum, zinc, nickel, copper and cobalt — of the eight constituents of the index and rose for molybdenum.





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