Faced with worrying political and economic developments, and falling metals prices, the value of the mining industry's listed companies fell last month. The latest monthly Industry Monitor report from S&P Global Market Intelligence (SPGMI) noted that the aggregate market value of the industry's listed companies, based on 2,416 firms, was down 2% in April at US$1.40 trillion.
SPGMI's Bob Anders also confirmed fears that the recent slump in financings had impacted exploration, with global drilling activity down for a third consecutive month. The total number of distinct projects reporting drill results dropped to 182 in April from 188 the previous month — this is the lowest number of projects reporting drill results since August 2016.
SPGMI also monitors exploration and development activity, and its Pipeline Activity Index (PAI) incorporates significant drill results, initial resource announcements, significant financings and positive project development 'milestones' into a single comparable index.
An increase in positive project milestones in April was no match for a decline in gold and base metals financings, a continuing decrease in drilling activity and a decline in initial resource announcements. As a result, the PAI slipped to 71 from 73 in March.
Mr Anders noted that, after rebounding in March, the number of financings by junior and intermediate companies fell to 174 in April from 187 in March. However, the US$1.20 billion total raised (53% of which was from a single debt offering) was up 45% from the US$826 million garnered in the previous month. Companies listed on the Australian Securities Exchange accounted for 68% of these raisings, while firms on the Canadian exchanges contributed a further 26% of the total.
Positive project milestone activity improved significantly in April, with the number of milestones increasing to seven from only three in March. This is the highest number of positive milestones declared since October 2017.
April's positive milestones included four production startups (three new mines and one expansion), two projects entering pre-production and one entering feasibility. In the month's largest milestone by far, the Juanicipio silver-gold project (a joint venture between Fresnillo Plc and MAG Silver Corp.), in Mexico's Zacatecas state, received the green light for development, with construction to begin immediately.
Last week was a mixed one for mined-commodity prices, with copper, zinc and thermal coal lower, but small improvements for gold, aluminium and nickel, and iron ore broke decisively above US$100/t on Friday. After rising for the two previous weeks, the benchmark thermal-coal price dropped 10.4% to US$65.6/t (50mm, 6,000kcal/kg material, FOB Richards Bay). Copper fell 1.3% last week, closing in London on Friday at US$6,059/t, with zinc down 1.5% at US$2,596/t. There was better news elsewhere, however, with gold, aluminium and nickel up 0.4%, 0.8% and 0.5%, respectively, to US$1,292/oz, US$1,829/t and US$12,005/t. Iron ore (62% Fe) was the stand-out performer, again, up 5.5% at US$100.4/t.
Metals markets were surprisingly sanguine about the sharp escalation in the US-China trade war on Monday, May 13, when Beijing said it would raise tariffs on US$60 billion of US goods. This was in response to President Trump's lifting of tariffs on US$300 billion of Chinese imports from 10% to 25%. Most of the reaction came in equity and bond markets, with a particular retreat from riskier assets — emerging market bond funds recorded US$2.6 billion in outflows in the week to Wednesday (the largest net redemptions in almost a year).
Beijing appears to be allowing China's currency to weaken as a defence against the higher tariffs, and the offshore renminbi weakened to its lowest level since November. The Financial Times reported that China sold US$20.5 billion of US government bonds in March, and said Beijing could "weaponize its position as the US government's largest foreign creditor". The newspaper noted that, as a percentage of GDP, China's total exports were only 18% in 2017, compared with 35% in 2006, and exports to the US are only equivalent to 4% of GDP. Moody's analysts calculated that if all Chinese exports to the US were taxed at 25%, the country's real GDP growth would slow from 6.2% to a manageable 5.0%.
At least tension between the US and Iran had eased by the end of the week, when President Trump said "he hoped" the two countries would not go to war (although he subsequently tweeted that war "may very well be a good thing").
US sabre-rattling against China and Iran has helped lift oil prices (with the Brent crude benchmark testing US$73/bbl) but put equities under pressure. A survey by Bank of America Merrill Lynch suggested that over one-third of fund managers have taken out protection against a fall in share prices over the next quarter — the highest proportion on record.
At least President Trump has dodged an immediate collision on trade with the EU and Japan by apparently deferring a decision to impose tariffs on cars and car parts by up to six months.