Archive | Commodity Super-Cycle and Decline

Miners Regain Mojo to Spark $18 Billion in Exploration Hunt – by David Stringer (Bloomberg News – March 24, 2017)

A rebound in exploration by global miners could see spending hit $18 billion by 2025 with China the front runner in the search for a new generation of giant discoveries.

Exploration budgets are rising after they plunged to an 11-year low of about $10 billion last year as mining companies slashed costs in the wake of a collapse in prices, according to Richard Schodde, managing director of Melbourne-based MinEx Consulting Pty, an industry adviser.

“We are coming out of the bottom of the cycle. I actually see the opportunity for the exploration sector to regain its mojo and quickly deliver a pipeline of good discoveries,” Schodde said in an e-mailed response to questions. “It’s catch-up time for the industry.” Continue Reading →

$5.5 billion private capital ready to invest in mining – by Frik Els ( – March 20, 2017)

According to a new report by private capital tracker Preqin, overall fundraising for natural resources investment actually declined declined by a fifth in 2016 to the lowest since 2012.

Coming off a record 2015, 74 funds raised a total of $60bn in 2016 for investment in natural resources, which includes metals and mining, water, timberland and energy. Private providers of capital include pension funds, sovereign wealth funds, endowments, family offices and others.

In 2015 mining and metals made up a paltry portion of funds raised with three funds closing on $1.1 billion in 2015. Last year five funds managed to raise $2.1 billion. 2012 was the peak year for mining fundraising with $4.6 billion of capital commitments from investors. Continue Reading →

PDAC Take-Away. Optimism for gold and mining in general – by Lawrence Williams (Sharps – March 20, 2017)

The annual Prospectors and Developers Association of Canada (PDAC) Convention is truly something special. Although unable to attend this year I have been watching reports on the event with considerable interest as it is very much a bellwether of the mineral exploration sector – and that is itself a great indicator of the strength, or otherwise, of the global mining industry and where it is headed. This year’s PDAC took place from March 5th-8th inclusive.

I had been attending the PDAC since 1977 and it has always been one of the industry’s highlights. Back then the whole event took place in the Royal York Hotel and attendance rose to around 7-8,000 at its peak before it transferred to the nearby Toronto Convention Centre, since when it has grown enormously to become what is probably the world’s biggest annual mining event.

Numbers of attendees peaked four years back at around 32,000 when the industry – and gold mining in particular – had been riding high, although had been beginning to turn down. Gold exploration and mining has always been the principal driver of PDAC sentiment – and attendance. Continue Reading →

Anglo’s Billionaire Investor Puts Mining on Cusp of M&A Era – by Jesse Riseborough, Dinesh Nair and Thomas Biesheuvel (Bloomberg News – March 17, 2017)

Anil Agarwal’s surprise move into Anglo American Plc suggests the mining industry may be on the cusp of a new wave of deals.

For years, Anglo has been the subject of takeover speculation and during the worst of the commodities crisis it seemed on the verge of a breakup. It spent last year getting back on firmer footing, but the 2 billion pound ($2.4 billion) investment by one-time Anglo suitor Agarwal has sparked the return of speculation about the company’s future.

“I’m pretty sure every investment banker in London is running around, dusting off old pitch books and going to every major in town,” Paul Gait, an analyst at Sanford C. Bernstein Ltd. in London, said by phone. “This feels to me a little like the last cycle, when the first mover precipitated a round of consolidation.” Continue Reading →

‘This time isn’t different’: Miners must learn lessons of the last boom-bust cycle – by Sunny Freeman (Financial Post – March 7, 2017)

As the mining industry gingerly approaches what could be the start of a new, improved commodity cycle, analysts at the 85th Prospectors and Developers Association of Canada convention in Toronto warned companies to heed lessons from the last crash, lest they repeat their boom-cycle follies.

“This time isn’t different,” warned Mark Fellows, director at U.K.-based Skarn Associates, noting that the impact of the cyclical nature of the industry isn’t going away and miners are an industry of price-takers, having little direct influence over the value of the commodities they produce.

That’s why, he said, those preparing for a price upswing must be more prudent than before as global economic uncertainty persists, especially given that the last boom-bust cycle was particularly extreme. Continue Reading →

PREVIEW-With money in their pockets, prospects improve for small miners – by Susan Taylor and Rod Nickel (Daily Mail/Reuters – March 6, 2017)

TORONTO, March 3 (Reuters) – As mineral and metal prices have rebounded from a slump, so have the fortunes of small miners, and some industry experts are predicting even better times, ahead of the industry’s biggest conference for explorers and developers.

Brighter prospects will be in focus at the Prospectors and Developers Association of Canada’s conference in Toronto, Sunday through Wednesday. The world’s top miners are increasingly investing in exploration companies early on, taking “toehold” minority stakes to boost their odds of success.

“Majors have gutted their own exploration departments,” said Theophile Yameogo, mining and metals advisory leader at consultant EY Canada. “They don’t want to do leap-of-faith drilling.” Continue Reading →

Flush with cash, global miners promise prudence, dividends – by Nicole Mordant (Reuters U.S. – March 1, 2017)

HOLLYWOOD, FLA. – For the first time in four years, the world’s biggest miners are awash in cash, riding a wave of cost cuts and a recovery in raw material prices from coal to zinc last year.

But instead of using their newfound bounty to unveil lavish growth plans, as they did in 2012 just as metals prices started plummeting, the cash is going to more sober uses this time: paying dividends and slashing debt.

Spending on growth projects ranks third in priority, delegates and companies said at a mining industry conference in Florida this week. That raised the prospect of limited mine production increases that could support commodity prices especially for copper and zinc. Continue Reading →

Column: Big miners poised to fall into debt trap? – by David Fickling (Bloomberg News/Sudbury Star – February 28, 2017)

(Bloomberg Gadfly) — The world’s miners went on one hell of a binge five years ago, and they’ve been dealing with the hangover ever since. Even the worst overindulgence passes into memory eventually, though, and last week the industry emerged blinking into a bright new day.

At BHP Billiton Ltd., Vale SA, Rio Tinto Group and Anglo American Plc, combined net debt fell by almost $15 billion between June and December, compared with a $3.7 billion reduction across the previous three-and-a-half years. Free cash flow in the December half rose more than sevenfold from a year earlier, to its highest level since 2011. Capital spending dropped to the lowest point in a decade.

Executives rolling out these results did their best to project an ascetic air. Having set fire to a mountain of capital during the boom, they were keen to remind shareholders they were now reformed characters. Continue Reading →

Mining exploration spending drops to 11-year low – by Frik Els ( – February 23, 2017)

A new report by SNL Metals and Mining on Corporate Exploration Strategies in 2016 shows an industry still caught in a deep downturn after four years of sharp declines. According to SNL, part of S&P Global Market Intelligence, 2016 exploration budgets at the 1,580 companies covered by the study totalled $6.9 billion, the lowest in 11 years.

Other measures show the extent of the damage to the sector: The average 2016 exploration budget was $4.4 million, the lowest since 2009, and the median budget was $800,000, the smallest in more than a decade.

Spending was dominated by the industry’s largest companies with just the top 10 companies were responsible for over $1 of every $5 spent on exploration – mainly for copper and gold – worldwide last year. Continue Reading →

Ivan Glasenberg keen to tell the world he is back on top – by Neil Hume and David Sheppard (Financial Times – February 24, 2017)

The morning after announcing a return to profit that capped a dramatic turnround for Glencore, you could have forgiven Ivan Glasenberg, the mining and trading company’s billionaire chief executive, for enjoying a lie in.

Not so. By 5.45am on Friday, the 60-year-old was in the lobby of his hotel in London’s Park Lane, limbering up for a run with a select group of analysts and other associates who were much younger than him.

After a brisk 7km around Hyde Park — clocking 4m 48s/km — he dashed off to a breakfast meeting with investors. By the evening Ivan, as he is universally known in the commodities industry, was preparing to head to Florida to attend a mining conference. Continue Reading →

Can commodity producers resist the temptations of the up cycle? – by Clyde Russell (Daily Mail/Reuters – February 23, 2017)

LAUNCESTON, Australia, Feb 23 (Reuters) – Anytime you hear the mantra “this time it will be different,” it’s probably best to assume the same old cycle will repeat itself.

This is especially true for commodity producers, who often appear to lurch from boom to bust and back to boom with little regard for learning from past mistakes. Perhaps this is because commodity cycles can take decades to play out, meaning institutional memory is lost over time, allowing executives to repeat the mistakes of their predecessors.

But more likely it’s because most chief executives in listed commodity majors are either forced by investors to be seen doing something to boost growth, or by nature are driven to build and buy new mines. Continue Reading →

Mining Companies Are Back in the Black – by Scott Patterson and Rhiannon Hoyle (Wall Street Journal – February 21, 2017)

Coming out of a punishing downturn, executives are still cautious despite the return to profitability

The world’s biggest miners are profit machines again, cashing in on soaring commodity prices and rewarding investors who stuck with them through a brutal downturn.

BHP Billiton Ltd., the world’s largest miner by market value, said Tuesday it earned a net profit of $3.2 billion for the second half of 2016 after posting a $5.7 billion loss in the year-ago period. Anglo American PLC, the fifth-largest mining company, reported a net profit of $1.6 billion for all of 2016, a dramatic rebound from 2015, when it lost $5.6 billion.

The solid performance builds on strong results posted by British-Australian miner Rio Tinto PLC, which two weeks ago said it earned $4.6 billion in 2016 following a loss of $866 million in the prior year. Switzerland-based Glencore PLC is scheduled to release 2016 results on Thursday, with analysts widely predicting a return to profit. Continue Reading →

Miners Enjoy Fastest Comeback in a Decade on Surging Profits – by Kevin Crowley and David Stringer (Bloomberg News – February 21, 2017)

The speed of the mining recovery is faster than anything that’s been seen in the past decade. BHP Billiton Ltd. and Anglo American Plc on Tuesday reported the biggest profit increases since at least 2007 on deep cost cuts and rebounding metal prices. The earnings exceeded analysts estimates and highlight mining’s dramatic reversal of fortune in the past year.

The industry is coming back from a crisis that forced some of the top metal producers to sell assets, cut costs and rein in spending after years of over-investment. Metal prices have largely recovered from the downturn and several of the biggest mines are profitable, instead of bleeding cash.

“You can see how cash generative this business can be,” Paul Gait, an analyst at Sanford C. Bernstein Ltd. in London, said by phone. “I think 2017 is a year of strategic re-positioning and rethinking.” Continue Reading →

Don’t expect another commodities supercycle but oil at $60 is better than $30 for your portfolio – by Olev Edur (Financial Post – February 15, 2017)

“We’ve had a ten-year supercycle and then a five-year blow-off.” That’s how Drummond Brodeur, senior vice-president and global strategist with Signature Asset Management (a division of CI Investments) in Toronto, succinctly sums up the past 15 years for Canadian markets.

While the panic selling of early 2016 gave way to something of a rebound throughout the rest of the year — a “still alive bounce” — Brodeur offers an even more succinct summary of the outlook for Canadian markets going forward: “Meh.”

“We saw oil go down below US$30 and now it’s back to US$50, but it’s not going back to US$100 any time soon,” Brodeur says. “Maybe US$60, but we won’t see a resumption of the supercycle that occurred between 2001 and 2011. It’s not exciting, but US$60 is a lot better than US$30, and the market should be much more stable going forward.” Continue Reading →

‘Timing is key’: Supercycle effects still loom over long-term fund returns – by Olev Edur (Financial Post – February 15, 2017)

Looking at the latest 15-year fund performance figures, you’d think that Canadian equities are absolutely the best investments in the world, especially the small and mid caps. Resource and precious metal funds, despite ongoing commodity headwinds, don’t look too shabby either.

Those were among the top-performing categories in the Canadian mutual fund universe for the 15-year period ended Dec. 31, 2016, according to data provided by Fundata Canada Inc. Real estate equities (a small category comprising just three funds with 15-year track records) and energy equity funds rounded out the Top 5, even though oil prices now hover around the US$50 per barrel mark. Canadian dividend/income equity funds held sixth place in terms of 15-year performance.

The implications of Table 2 (below), which lists the Top 15 out of 28 total funds that achieved double-digit 15-year returns through 2016, are even more dramatic: The vast majority of these funds were Canadian equities and most were also in the small/mid-cap space. Continue Reading →