Amidst write downs, commodity price drops and lower revenues, gold, silver and copper are among the most closely watched metals in the mining sector. They are also some of the hardest hit metals in 2013, according to a PwC report.
Gold has been the big mining story of the year. It surpassed $1,900 per ounce in 2011, but fell to around $1,200 this summer. The worst performing metal this year is silver, with prices plummeting 40% in 2013. As for copper, prices fell from $3.70 per pound at the start of the year to above $3 currently.
Gold producers are preparing for another challenging year. Reflecting lower levels of confidence, 47% of gold producers expect the price to increase in the next 12 months, compared to 88% a year ago.
Silver miners are optimistic for 2014, with only 9% anticipating the price of silver to fall further. Copper is expected to be stable with nearly two thirds of respondents (62%) predicting copper prices to remain the same in 2014.
“After years of spending on mergers and acquisitions and expanding operations with money generated from high metal prices, miners are now cutting back,” says John Gravelle, PwC’s Global and Canadian mining leader. “Encouraging investors to return to the mining space will involve strict cost management strategies and responsible investment in production growth.”
Read: Top 10 mining trends for 2014
Managing costs and finding financing are among the top priorities for miners amid less optimistic future price expectations. According to the report:
- 66% of mining companies cite managing their spending as one of the most important business imperatives in 2014
- More than half (54%) of miners say raising financing is critical
- Less than a quarter of (20%) of respondents highlight mergers and acquisitions as something they plan to pursue
For the coming year, 53% of miners said they anticipate going to the equity markets to raise capital, while 29% expect to raise project financing and another 14% plan to raise corporate debt.
“While 2013 has been a tough year for miners, the industry has faith that fundamentals will recover,” says Gravelle. “Gold, silver and copper may not reach record levels in the near future, but expect prices to increase alongside the stabilizing global economy.”
Gravelle adds, “China’s economic growth is expected to remain strong as it executes its reform agenda – providing hope for mining companies that continue to sell their commodities to the world’s second largest economy. The gradual economic recovery in the US should also help increase long-term demand for commodities.”