Source: Pixabay, retrieved from

Although having seemingly recovered from the downturn that dominated the mining industry over the last four years, miners are still cautious about the metals market. There is still reluctance to invest in exploration spending due to uncertainty, but according to S&P Market Intelligence, miners have no real need to worry. “Looking ahead to 2019, macroeconomic and geopolitical risks to continued global growth are rising, but the mining sector remains well positioned to thrive over the coming year,” on a webinar hosted last November 15 on the state of the mining market.




While specialized consultancies provide a positive forecast for mining’s near future, preparation for all scenarios is the best inoculation amongst uncertainty. PwC’s We Need to Talk About the Future of Mining report explains that the industry needs to take into account factors that are likely to disrupt its future the most. “One is the extent to which new entrants –non-traditional mining companies such as finance, tech players or consumer brands— change the sector. The other is public trust of mining companies and the extent to which external stakeholders gain greater control of miners’ privilege to operate,” it said.

Public trust is hugely important for gaining and retaining mining concessions. This could be seen recently in South Africa, where environmental activists won a legal victory in the country’s High Court for a community approval process on projects before awarding concessions. A similar bill initiative was recently proposed in Mexican Congress, causing several mining companies’ stocks to slip on the BMV and FTSE.


Merging Strengths:


The third quarter of the year was a busy period for M&A activity. The total number of global announced transactions increased dramatically to 46 in 3Q18 compared to 37 in 2Q18, with deal value growing to US$16 billion from almost US$4 billion. “At the end of the quarter (3Q18), the proposed Barrick/Randgold merger provided a much-needed uplift for the mining sector, with the merged company likely to divest US$2.6 billion in assets and stack up well against its peers in the coming years,” stated S&P’s webinar. Gold and copper dominated M&As around the world.


Exploring the Exploration Sector:


Source: Grupo Mexico

According to S&P Market Intelligence, metal prices slid during 3Q18, but the global exploration sector performed resiliently, providing an encouraging forecast. “Our index of activity was only slightly lower than in the June quarter (2Q18), reaffirming recently released exploration budget data that suggests a spending increase of 19 percent in 2018,” states the report.

While the global drilling activity slightly decreased in 2018 compared to 4Q17, the highest peak since 1Q12, it remains much more positive than all the previous periods. The number of district projects drilled remains higher than 500 per quarter. Gold continued to monopolize exploration by far, including the number of drill holes. Also, the western seaboard of the Americas attracted most of the activity, with Mexico leading the share for silver exploration in the region.

As for the sector’s financing, Mark Ferguson, Associate Director for Metals & Mining Research at S&P Market Intelligence, explained that the industry raised 7 percent less in funds in 3Q18 compared to the previous period, lowering to US$4.35 billion from US$4.7 billion in 2Q18. Also, the estimated global exploration budget declined 66 percent from 2012 to 2016. But 2018 is looking positive with US$10.1 billion budgeted for exploration, a growth of 38 percent compared to FY16 and up 53 percent from FY12.

Forecasting Metals’ Prices:


Commodity Price as of Oct.31, 2018 4Q18 Forecast 2019 Forecast 2020 Forecast Consensus Settlement
Gold (US$/oz) 1,215.00 1,227.34 1,277.57 1,308.76 COMEX
Silver (US$/oz) 14.28 15.48 16.43 17.20 COMEX
Copper (US$/lb) 2.66 2.86 3.01 3.09 COMEX
Cobalt (US$/lb) 24.95 31.21 33.73 33.37 LME Cash
Lead (US$/lb) 0.87 0.97 1.02 1.02 LME Cash Official
Zinc (US$/lb) 1.12 1.20 1.25 1.20 LME Cash Official
Nickel (US$/lb) 5.42 6.07 6.46 6.78 LME Cash Official

Source: S&P Market Intelligence

According to consensus commodity target prices as of Oct. 31 2018, the 2020 forecast looks bright, according to S&P. “We continue to see growth in demand for key base metals prices, despite mining policy headwinds,” said Maximilian Court, Senior Commodities Analyst for Metals & Mining Research at S&P Market Intelligence. “Zinc continues to be challenged by supplier response, while nickel needs to continue to work through the stock overhang. Iron ore prices are to remain broadly flat as the market remains relatively balanced, while copper prices are expected to rise due to the increased demand.”

The strengthening of the US dollar tends to have a negative correlation with metal prices as it can stunt demand from metal purchasers. But while the dollar has performed well in 2018, metal price expectations for 4Q18 remain unharmed. “The average price for 2018 is expected to remain higher than the average price in 2017, with the exception of silver, platinum, tin and iron ore,” said Ferguson.

Also, the Chinese Road and Belt Initiative, driving a global construction boom is buoying demand for several minerals. According to S&P, the so-called Chinese Marshall Plan for global domination, has already driven aggregate revenue for top miners. Vale, Rio Tinto, BHP and Fortescue Metals Group reported a 16 percent YOY total revenue increase in 2017, corresponding to US$193 billion in total revenues.




Source: Flickr, retrieved from

An incoming administration and an announced nationalist agenda are causing distress in the industry, but Mexico closes the year among the Top 10 global producers of silver, gold and copper. A healthy pipeline of projects shows an optimism in the country. Peñoles is to contribute with an extra 4.7 million silver ounces by mid-2019 with the ramp-up of its Rey de Plata mine. Sonora remains the king copper state, contributing with 84 percent of national production in 2017. But Guerrero contends for the crown as its recent reactivation of Campo Morado and the future opening of Rey de Plata have the potential to greatly increase the state’s output.

The battery metals boom has also reached the country, as operators such as Azure Minerals and Bacanora Lithium pursue world-class deposits of cobalt and lithium, such as Sonora Minerals. Also, Sara Alicia in Sonora is believed to be the highest-grade cobalt project in the world and is currently in the development stage.

As for M&As, higher revenues, efficient operations and appealing projects were some of the main factors driving a flourishing market in Mexico. According to CAMIMEX, in 2017 mining companies completed 36 M&As in the country. First Majestic Silver’s procurement of Primero Mining’s San Dimas gold and silver project was one of the most noteworthy of the year.

But while Mexico maintains a key role in the global mining industry, the country has some challenges to tackle for keeping its international competitivity as a golden mining jurisdiction. Increased security, legal certainty and the reinforcement of rule of law head the list, according to industry insiders. Community setbacks, such as the five-month blockade of Torex’s Gold El Limón-Guajes and Argonaut Gold’s explosives permit suspension in La Colorada, are also areas of opportunity for the new administration.


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