Mining Eye Q4 2016

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Volatility sweeps through the markets

Q4 2016 falters following successive quarters of gains in mining equities

  • The UK Mining Eye fell 8% during Q4, following gains of 35% and 19% in Q3 and Q2, respectively.
  • It performed better than the Canadian Mining Eye, which declined by 13%. The FTSE Miners Index continued to rise, however, gaining 16%.
  • Precious metals came under pressure, with gold falling 12% quarter-on-quarter, while base metals continued to pick up; copper prices were up 13% from Q3, but down 12% on a year-on-year basis.
  • Base metal and bulk commodity (iron ore and coal) focused companies generally performed better because of a supportive commodity pricing environment.
  • The stabilisation of the GB£/US$ exchange rate over the quarter also capped the benefits seen by US$-denominated producers in the aftermath of the Brexit vote.

M&A and access to capital to improve in 2017, but markets set to diverge

  • The rebound in commodity prices, which started around Q2 2016, is expected to continue into 2017, positively impacting mining companies’ cash flows.
  • Looking ahead, the sector will no longer rise in unison as observed over the super cycle period; as such, performance of miners will reflect the commodities and markets participants play as well as the quality of assets in their portfolios.
  • With persisting global economic uncertainties, volatility is set to remain.

Mining Eye performance relative to peers (past 12 months)

EY - Mining Eye performance relative to peers (past 12 months)