Mining Eye Q4 2016
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)