As the global
mining business ushers in another new year, it seems that the
stealth bulls, conjured by some leading industry figures at the
end of 2013, are still treading too softly to be felt in what
remains a distinctly bearish market.
The crisis of confidence that infected investor sentiment in
mining throughout last year could deepen in 2014, experts have
predicted, as early indications of the health of the industry
bode ill for a near-term recovery.
|Figures illustrating the performance of mining
company shares on
global stock exchanges have made for a subdued start
new year for mineral companies (Source: Mike
of early stage projects have simply been put on hold with only
minimum licence commitments being met, Alexander Keepin,
global co-head of mining at international law firm, Berwin
Leighton Paisner, told the Financial Times (FT).
companies feeling the pinch the most are those which are
looking to move to production and need to finance substantial
investment in the project and related infrastructure. They are
struggling the most and having to be very creative about using
a combination of all types of funding, he added.
assessment underscored recently released stock exchange figures
illustrating the persistently difficult financial conditions
for junior mining companies.
January and November last year, just 62 mining companies listed
on Canadas Toronto Stock Exchange and TSX Venture Exchange,
the worlds largest market for mining stocks, compared to
129 listings during the same period in 2012, and more than 200
in each of the preceding two years.
The amount of
equity raised on the TSX markets also fell from $10.3bn in 2012
to $6.5bn by the end of November 2013, with almost half that
total coming from a single equity raising of $3.1bn in new cash
by Canada-headquartered gold producer, Barrick Gold Corp.
mining companies continue to face adverse conditions on the Australian Stock
Exchange, with mining stocks, notably those of Anglo-Australian
resource giants Rio Tinto and BHP
Billiton, repeatedly dragging down overall daily trading in
Australian mining-related construction figures, meanwhile, led
to a 6.4 point dip in the countrys engineering
construction sub index in December, placing the industry in the
<50 point contraction territory at 46.1.
In London, a
report by the UK newspaper, The Telegraph, showed
that funds connected with natural resources made up nine of the
10 worst performing funds in 2013, including the gold
investment arms of Investec, BlackRock and JP Morgan.
downbeat signals, the final months of last year saw a handful
of predictions that the worst of minings capital-related
aches and pains are behind it and that the sector could look
forward to a more prosperous 2014.
I believe we are in a stealth bull market. Charts are
flattening and beginning to rise. I believe we are in a period
of bifurcation, chairman of Sprott US Holdings, Rick
Rule, told delegates at
Mines and Money London 2013
in early December.
His plea to
investors who had endured the pain to stay
around for the gain in 2014 was echoed, more hopefully
than decisively, by other industry commentators in the
industrial minerals sphere.
issues discussed at the third IM Graphite and Graphene
Conference in New York last November, Chris Berry, founder
of House Mountain Partners LLC, said that despite its financing
difficulties, the junior graphite
industry maintained a firm belief that its market
is set to expand in the coming months and years.
ubiquity of graphite in the global economy all but assures
this, added Berry, who has also hinted at House
Mountains tentative confidence in the recovery of the
suggested that, as long as mining companies can maintain the
discipline in capital spending
implemented across much of the business in 2013, investors may
be minded to regain some trust in mining and exploration
still need to see [miners] sticking to the disciplined
message, Evy Hambro, co-manager of the BlackRock World
Mining Trust, told the FT in December.
investors are to be attracted in, they need to be confident
about the fundamentals of supply and demand, but they also need
to believe that management are not going to repeat the mistakes
of the past, he added.
the decline in the price of gold, which fell by 28% in 2013, is
not necessarily bad news for the industrial minerals sector,
since many economists link lower gold prices with economic
strength, the latter being a more positive fundamental for
minerals used in industries such as manufacturing,
construction, chemicals and agriculture.
Junior miners too,
unsurprisingly, have sought to persuade investors that there is
sufficient market potential to support new projects, pointing
to medium and long term demand forecasts from existing and new
juniors in particular were buoyed by a prediction from SGL Groups vice
president Americas, Tom Burkett, who said that demand from
green energy applications could accommodate up to five new
beleaguered rare earths sector, meanwhile, saw out 2013 on an
even keel, and early market indications suggest that rare
prices improved slightly in January.
weeks significant Chinese resource policy announcements
regarding the consolidation of its rare earths industry could
also reduce global supply of the minerals, which may help to
most agree that the rare earths business remains top heavy with
juniors, and that this, coupled with the present weak state of
downstream demand and lacklustre investor interest, will lead
to a significant reduction in the number of active rare earths
projects in the near future.
industrial mineral markets, uncertainty continues to afflict potash following
the acrimonious divorce of Uralkali and
Belaruskali last August, while mineral sands companies
continue to struggle against weak prices and low
refractory, construction and chemical minerals are also
watching anxiously as an apparent uptick in worldwide
manufacturing and building activity in late 2013, indicated by
last weeks PMI results for
December, has been slow to translate into raw materials orders
and higher prices.
fate of existing and prospective mineral producers is indelibly
tied to the variable
price of what they extract from the ground, something over
which they have no control.
context of uncertainty, shareholders look to company executives
to take a tough approach to financial aspects they do have
power over namely, spending and productivity.