Mining Webinar in Review: Increased Project Numbers, but Decreased Values
In a recent webinar, Joe Govreau, Industrial Info's vice president of Metals & Minerals research, and Shaheen Chohan, vice president of analytics, discussed the outlook for spending in the global mining industry. While the number of mining projects throughout the world is rising, the overall total investment value is declining, thanks to a larger number of in-plant and brownfield projects. Total project value for under-construction projects has moved from about $179 billion in August 2017 to $164 billion in September 2018.
Industrial Info is tracking $1.1 trillion in active mining projects, including $164 billion worth that are under construction and $450 billion worth in the planning and engineering stage that are planned to kick off in 2018 and 2019.
While the number of mining projects throughout the world is rising, the overall total investment value is declining, thanks to a larger number of in-plant and brownfield projects. Total project value for under-construction projects has moved from about $179 billion in August 2017 to $164 billion in September 2018.
Govreau said, "Mining companies continue to invest in productivity optimizations to reduce costs and strategic mine expansion projects, mainly to replace capacity from mines nearing end of life or to combat low ore grades. Projects are tending to be smaller in-plant capital and equipment upgrades and replacements, while larger grassroot projects continue to get pushed out." However, new growth markets such as electric vehicles are driving mining exploration projects, including those for cobalt, lithium, copper, graphite and zinc. Building block commodities such as coal, iron ore and copper continue to garner the largest amount of expenditures and represent about 70% of project activity.
Africa is the largest market for grassroot mining activity, followed by North America and Oceania. In North America, Canada accounts for 70% of planned mining activity in 2018-19, where new-build oil sands projects lead the way. Govreau said, "The regulatory system in the U.S. has definitely turned more mining friendly with the loosening of permitting regulations and promoting the development of critical minerals." In addition to seeing the new development for hot commodities such as lithium, frac sand, used in the hydraulic fracturing of oil and gas wells, is a key growth component in parts of the U.S. such as Texas and Oklahoma.
While there is a war on coal in developed economies, coal still accounts for about 38% of global electricity generation. New coal-fired generation continues to come online, mainly in Asian countries such as Malaysia, Vietnam and the Philippines, with strong demand from China and India. East Asia, South Asia and Oceania lead in the value of coal mining projects. In the U.S., the Trump administration's Affordable Clean Energy rule is expected to benefit coal mining firms in the short term, but in the long term, coal is expected to continue losing market share in the U.S. power market to natural gas and renewables. For more information, see September 20, 2018, article - Trump's Affordable Clean Energy Plan to Get a Public Hearing October 1.
Copper prices reached their highest point in June 2018 since bottoming out in 2016. However, they have since declined and now hover at about one-year lows. Govreau said, "Copper miners are betting on long-term demand for copper, which is expected to appreciate with demand outpacing supply in the next five to 10 years." The drivers for copper demand include GDP growth, the rise of renewable energy development, commercial construction activity and electric vehicle development. The majority of projects for this commodity are grassroot, new-build projects, but Govreau said it will take sustained levels of commodity prices for many of these projects to be approved. Most projects underway are expansions at existing mines.
Africa represents the largest sector for project activity for precious metals. The price of gold has declined since peaking in April 2018, but is currently above 2016 lows. The largest gold mining development in the world is in Alaska and is a joint venture of Barrick Gold Corporation (NYSE:ABX) (Toronto, Ontario) and NovaGold Resources Incorporated (NYSE:NG) (Vancouver, British Columbia). For more information, see Industrial Info's project report.
To listen to this webinar in its entirety, including discussions of the effects of the escalating trade war and an analysis of capital spending by major mining companies, visit Industrial Info's Market Outlook library.