State of the Mining Market

Transcription

1 State of the Mining Market Trends and Opportunities Chris Hinde Pick and Pen Ltd ABMEC Conference; Thursday, Nov 22nd, 2018 Permission to reprint or distribute any content from this presentation requires the prior written approval of Pick and Pen Ltd by Pick and Pen Ltd. All rights reserved.

2 The Mining Sector (2017) MINED ('000t) AVERAGE PRICE (US$/t) VALUE PA (US$ bn) Coal (commercial) 7,300, * 825 Iron Ore (62% Fe) 2,165, Copper 23,350 6, Moz $1,258/oz Gold ,445, Zinc 13,790 2, Nickel 2,050 10, Moz $17.0/oz Silver , Diamonds 140 Mct ,700,000 $107/ct 15 Bauxite 300, Potash (K2O) 37, Top Ten Total 9,841,220 Av $138/t 1,366 Other major metals include Lead (4.6 Mt at $2,315/t for $10.6 billion), and the PGMs (12.6 Moz at a combined $950/oz for total of $12.0 billion) * 70% Thermal ($85/t) + 20% Met ($250) + 10% Lignite ($30) Source: S&P Global Market Intelligence; as of end-january 2018

3 Main Mined Commodities 10 Year Price Trend * Australian thermal coal; FOB Newcastle. Source: S&P Global Market Intelligence; end-june 2018.

4 Key Metal Prices (indexed to January 1, 2012) Zinc Copper Gold Nickel 0.4 Feb 2012 Feb 2013 Feb 2014 Feb 2015 Feb 2016 Feb 2017 Feb 2018 Nickel Zinc Gold Copper Source: S&P Global Market Intelligence; November 13, 2018.

5 Coal and Iron Ore Prices (US$/t) (Past Five Years) Coal Price (6,000 kcal/kg, FOB Richards Bay; LH axis) Iron Ore Price (Chinese imports, 62% Fe; RH axis) Source: globalcoal from Financial Times; November 10,

6 Industry's Reaction to the Falling Prices i) Lower, and Flatter, Cost Curves Average copper cash price (2017; US$2.80/lb) Average copper cash price (2016; US$2.20/lb) 2017 COO = Cash Operating Cost (excludes royalties). TCC = Total Cash Costs. AISC = All-in-Sustaining Cost. Margin = Operating profit. Source: S&P Global Market Intelligence; November

7 Reducing Costs Mining Less Waste STRIPPING RATIO (Copper and Gold Open Pits) Gold ore, ore+waste and strip ratio circled Source: S&P Global Market Intelligence; August 2018

8 Gold Sustaining Costs* (2018e) Source: S&P Global Market Intelligence; end-july 2018

9 Reaction to the Falling Metals Prices ii) Falling Equipment Orders (large excavators/loaders/trucks) 4,500 4,000 3,500 3,000 2,500 Shipments 2,000 1,500 1, Next Three Years: Installed equipment capacity grows at under 1.5% pa 2,500 excavators/loaders and 12,000 trucks replaced 2020 shipments still 25% below 2012 peak. 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Source: The Parker Bay Co. Information as of end-september

10 Reaction to the Falling Metals Prices iii) Lower Exploration Expenditure US$10.1bn in Source: S&P Global Market Intelligence; October

11 Reminder: Demand is Cyclical Global IP and Base Metal Demand (year-on-year % change) Slowdown/recession

12 Price Trends OECD Output vs. Metal Prices Source: Professor Phillip Crowson; end-2015.

13 Exploration Update Very Disappointing Third Quarter The softening of most precious and base metals prices in the 2nd and 3rd quarters has impacted exploration activity. Same number of active exploration projects as in the previous quarter but 7% fewer holes have been drilled. Only 95 'significant' financings (those of over US$2 million) were announced during the quarter. This is the lowest number since Q There were only eight positive 'milestones' (mine start-ups etc) announced during the quarter. This is the lowest total since S&P Global's measurements started in 2008.

14 Number of distinct projects drilled Global Drill Activity (Projects; Q3 2018) Copper Gold Lead-Zinc Silver Nickel PGM Minor base metals Specialty metals M J S D M J S D M J S D M J S D M J S D M J S D M J S Source: S&P Global Market Intelligence; Nov 8, 2018

15 Number of drillholes announced Average number of drillholes per project Global Drill Activity (Drill Holes; Q3 2018) Copper Gold Lead-Zinc Silver Nickel PGM Minor base metals Specialty metals Average no. of holes 35 12, , , , , , M J S D M J S D M J S D M J S D M J S Source: S&P Global Market Intelligence; Nov 8, 2018.

16 Global Drill Activity (Q3; 2018) Source: S&P Global Market Intelligence; Nov 8, 2018

17 Quarterly Financing * Company classification according to definitions in the Corporate Exploration Strategies report, adjusted to include all commodities. Source: S&P Global Market Intelligence; November 8, 2018

18 Regional (Allocated) Financing (US$m) Source: S&P Global Market Intelligence; November 13, % of total announced financing

19 Mergers and Acquisitions Deal Value (US$M) 18,000 Gold Copper Nickel Number of transactions 50 16, ,000 12, ,000 8,000 6, Number of Transactions 25 4,000 2, Q Q Q Q Source: S&P Global Market Intelligence; November 13, 2018.

20 Consensus Commodity Forecasts (end-october)

21 S&P Global's Short-Term Price Expectations Index 160 Iron ore Copper Nickel Zinc US$3,017/t 150 Zinc; currently US$2,504/t Iron Ore (62% Fe); US$77.3/t Copper; currently US$6,045/t US$70.5/dmt CFR US$6,664/t Nickel; currently US$11,430/t US$12,976/t Source: S&P Global Market Intelligence; November 2018.

22 Mining Industry Market Cap (US$B) Industry's Market Capitalisation Mining Industry Market Cap Pipeline Activity Index Exploration Price Index 2, ,000 1,500 1,000 Recovery? Pipeline Activity Index/Exploration Price Index (June ) Source: S&P Global Market Intelligence; end-october 2018

23 Thank You Chris Hinde Director, Pick and Pen Ltd Tel: Mobile:

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