The following research article is an excerpt of the Q4-16 State of the Market: Mining report, a detailed analysis of mining industry operations that includes expert commentary from S&P Global Market Intelligence.
Highlights from the latest edition are below:
Although metals prices were weak in December, the final three months of 2016 were good overall for the price of mined commodities. Gold was an exception with the precious metal suffering from a stronger U.S. dollar and raised expectation of higher interest rates. Because of its importance in S&P Global Market Intelligence's Price Index, which is weighted by exploration expenditure, the index fell quarter-on quarter. Nevertheless, the mining industry's market capitalization rose for the fourth consecutive quarter.
Market for Mining
The past year has been very encouraging but commodity markets remain delicately poised. On the one hand there is optimism based on an infrastructure-fuelled metals boom in the U.S., facilitated by fiscal expansion and easier corporate regulations. On the other hand, the Chinese economy is still giving cause for concern, and President Trump is threatening increased tariffs and an isolationist agenda.
Exploration
The value of initial resource announcements more than doubled in the December quarter from US$25.3 billion in the previous quarter to US$62.30 billion. This extended an upward trend in the count and value of initial resource announcements over the year, from 11 new deposits valued at only US$13.49 billion in the March quarter.
Pipeline Activity Index
S&P Global Market Intelligence's Pipeline Activity Index (PAI) surged to almost 75 from under 71 in the September quarter, meaning the PAI is at its highest level since the first quarter of 2013. Two of the indicators used to measure PAI increased; the number of projects reporting significant drill results (385) was the highest for almost four years, and there was an increase, albeit of only one, in the number of new initial resource announcements. The number of positive project milestones (20) remained the same quarter-on-quarter but the number of significant financings (those of over US$2 million) fell 30% to 115.
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