SNL Report: State of the Market--March quarter 2015

In the previous State of the Market (SOTM) report, the messages for the international mining industry from the final three months of 2014 were summarized as “decidedly mixed.” Unfortunately, almost all of the signs were negative in the three months to end-March.

Global economic growth remains precarious, and six of the eight constituents of the SNL metals-price index declined during the March quarter. With these gloomy market conditions, there was a decline in global drilling activity and the value of initial resources. Financing also fell in the three months to end-March, and there was a decline in the number of mergers and acquisitions.

Market for Mining

Last year was probably the worst for mined commodities since 2008, and the trend continued into the start of 2015 for most metals. Gold and silver did well in January before falling back in February. After early weakness, copper enjoyed a strong quarter but this did little to compensate for a decline in the price of other major metals.

Exploration

With the gloomy market conditions the first three months of 2015 was another difficult period for the mining industry. According to the SNL Metals & Mining database, only 380 projects reported drill results, compared with 418 during the December quarter. Reflecting this reduced activity, the value of initial resources announced during the quarter fell to just US$33.0 billion from US$51.8 billion in the December quarter.

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Pipeline Activity Index

There are few better visual representations of the health of the international mining industry than SNL’s PAI, which incorporates significant drill results, initial resource announcements, significant financings and positive project development milestones into a single comparable index. PAI rose in March but the index was down for the quarter as a whole.

Metals Production Outlook

By mid-May, SNL had recorded production announcements by 188 companies where comparable gold, copper and iron ore output had been announced for the March 2015 and December 2014 quarters. If these early announcements turn out to be representative of all producers, then there has been a significant fall in output for all three metals in the March quarter compared with the previous quarter.

Mergers and Acquisitions

The number of deals registered on the SNL Metals & Mining database fell to 24 in the March quarter, compared with 43 in the final three months of 2014. However, the value of these transactions was only slightly lower at US$4.67 billion. This is comfortably ahead of the US$2.42 billion recorded in the
September quarter but remains well short of the US$11.11 billion achieved in the June quarter 2014.

Mining Finance

Funds raised in the three months to end-March, as reported by mid-May, totaled just US$10.03 billion, compared with a restated US$15.47 billion in the December (updated because of late-reporting financing). The shortfall was attributed to a sharp reduction in financings announced by the largest companies — those with a market capitalization of over US$100 million — which raised barely two-thirds of the amount in the December quarter.

Read the full report here. 

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