by S&P Global Market Intelligence
Mining industry capitalization and Exploration Price Index (EPI) increased
In Q2, mining industry market capitalization rose 32% to USD 1.393 trillion. The Exploration Price Index (EPI) was at 135.9, its highest level since March 2013, driven mainly by its significant weighting to gold and the positive gold price performance in the quarter.
Drill result announcements decreased
Drilling activity in Q2 fell in terms of the number of projects drilled and the number of drillholes, by 21% and 17% respectively. On a positive note, both metrics are still above the levels seen in 2016.
Canada tops in financing
Financings fell by over USD 5 billion to USD 7.2 billion in Q2. Of those that could be allocated to a specific region, Canada was the top destination with USD 1.05 billion. Financing raised by majors more than halved compared with Q1. However, financing for juniors more than doubled, indicating strong markets for gold explorers and developers.
Gold accounted for 75% of Mining Deal Value
There was an uptick in M&A activity in Q2, with 38 deals and a deal value of USD 4.12 billion. Gold made up 75% of the total at USD 3.13 billion. SSR Mining’s acquisition of Alacer Gold accounted for about USD 1.9 billion. Zijin Mining’s acquisition of Tibet Julong Copper, at USD 453 million, accounted for 41% of the overall deal value for copper.
USD 7.5 billion cut in capital expenditure
Based on our July 17 analysis of capex expenditure guidance for the top 150 mining companies, 52 recorded an aggregate USD 7.5 billion cut in planned spending in 2020. See related article
FMG increase planned spending by 10%
Of the 52 companies with updated capex guidance, only nine had increases. FMG’s 10% increase to USD 2.2. billion in planned spending was the largest. It was mainly driven by strong iron ore prices and no pandemic interruptions to production. See related article
Copper market outlook
LME copper cash prices increased from the year-to-date low of USD/t 4618 on March 23 to USD/t 6434 on July 30. We assess this to be a result of strong demand from China as it relaxes lockdown measures to curb the spread of COVID-19.
Iron ore market outlook
Iron ore prices rose above USD/t 100 in June, to a 10-month high. This is up from a year-to-date low of USD/t 79 on February 3. The spread of COVID-19 is fuelling uncertainty over Brazil’s H2 export capability. We have upgraded our 2020 average price forecast to USD/t 90.
Nickel market outlook
Indonesian primary nickel output is expected to rise 46% YOY to 550 000 tonnes in 2020. In the absence of sufficient primary demand, the higher Indonesian production will not be absorbed. This will drive the global primary nickel market to a 100 000-tonne surplus this year from a 33 000-tonne deficit in 2019. See related article
Zinc market outlook
Despite higher zinc prices in Q2, they failed to recover their pre-COVID highs. April had the lowest monthly average this year at USD/t 1914, while prices rose to USD/t 2032 in June. We forecast that the zinc market will be in surplus in 2020 and 2021, as we expect refined zinc demand forecasts for India, Mexico and Brazil to drop by 15 000, 5000 and 5000 tonnes respectively.
Lithium market outlook
Lithium prices continued to trend lower in Q2 due to a partial recovery in China’s New Energy Vehicle sector, as well as high lithium inventory volumes throughout the value chain. We forecast a larger reduction in lithium compound supply of 17% YOY, compared with a 12% decline in raw material. See related article
Cobalt market outlook
Cobalt prices were broadly stable in Q2 and supported by raw material tightness, as logistic delays in Africa significantly reduced cobalt stock arriving at Chinese ports by 33% QOQ and 33% YOY. This was due to Durban’s port closure affecting shipments to China, and uncertainties over COVID-19’s trajectory in the Democratic Republic of Congo and South Africa. See related article