From the Editor - The Mid-year Report
The first half of 2014 is history and, despite all of the moaning from groups not actively involved in mining and mineral processing, the mining business has stabilized from the shakeout it experienced starting in 2013. The news department and the opening spread (See Leading Developments, p. 4-5) in particular showcase the current state of the mining business. We lead off this month with the best news South Africa could have received, which came toward the end of June when striking platinum miners agreed to return to work. Hopefully, they have reached a lasting agreement and can begin working toward restoring that segment.
We also provide a synopsis of a PwC report, titled Mine 2014: Realigning Expectations. The report summarizes what the mining industry experienced recently by analyzing the top 40 mining companies by market capitalization. In it, PwC said the global mining industry has endured one of the most difficult operating environments “in recent memory.” That qualifier prevents comparisons with the 1990s, 1980s and farther back for longtime E&MJ readers. They make this evaluation based on the lack of mergers and acquisitions (M&A) activity, the number of ousted C level executives, and falling metal prices. A lack of M&A activity should correlate to stability. Seeing a dozen or so CEOs lose their jobs is not a sign of a healthy industry, but the industry should also look at who kept their jobs and why. Yes, metal prices, particularly gold and silver, slid in 2013. So far this year, prices have stabilized for precious metals and non-ferrous base metals. Iron ore would be the exception that proves the rule. Oversupply has had a big impact on prices and iron ore is the largest segment of the mining business on an investment basis.
What will happen in the second half of the year? To gain some perspective, readers should take stock in what’s happening around them. The uprising of militant Muslim fanatics in the Middle East could impact the price of oil and gold. The situation with Ukraine and Russia could worsen, impacting some commodities, such as coal, iron ore, potash and nickel. For the moment, Chinese growth has slowed. The questions surrounding Indonesia are starting to have an impact (See Newmont Suspends Operations at Batu Hijau, p. 20). The previously mentioned oversupply of iron ore (and coal) is hurting the Australian mining sector. On the bright side, the U.S., Japan and Germany are seeing manufacturing levels grow again. Similarly, for the most part, the mining business is steady throughout Latin America, the U.S., Canada and the Nordic Region.
Getting back to that PwC report, it also asks: Who will be bold enough to thrive during these times? E&MJ routinely showcases bold leaders in the mining business. This month, that group would be Sibanye Gold (See Sibanye Sets its Sights on Burnstone, p. 50). Spun-off from Gold Fields, over the last year the company has established an enviable position as a low-cost gold producer. They acquired Burnstone, a troubled South African gold-mining operation, which has the potential to drag the company’s earnings down. Sibanye believes they can make the mine work using a more selective mine plan. When asked why they would risk what they have worked so hard to establish, the answer was simply: How could we not?
Steve Fiscor, Editor-in-Chief, E&MJ