Photo by: Duane Daws
JOHANNESBURG (miningweekly.com) – Despite the modest recovery in global commodity prices, miners will remain focused on capital and supply discipline in the year ahead, through debt reduction and efficiency enhancements, research firm BMI said on Tuesday.
In its ‘Mining Mid-Year Update: Key Themes For 2017’ report, it noted that miners would perform better over the coming years, as 2015/16 marked the bottoming out of the mining downturn.
“In terms of financing, improving market conditions will see a return of commercial bank lending to the mining industry. Nevertheless, private equity will continue to play a growing role in mining project finance, and mining companies will increasingly turn to joint venture partnerships to share risk,” the company highlighted.
It added that capital expenditure would also remain stringent over the next three years in terms of absolute value, as miners continue to follow a strategy of greater capital discipline.
This, BMI explained, would ensure that miners have greater free cash flows going forward to weather market volatility better than in past years.
However, the research firm did expect miners to continue investing in technology, as it would help improve efficiencies, while they would also focus on expanding growth assets.
“There will be minimal investment in greenfield projects and we expect miners to invest less in commodities such as coal, iron-ore and steel, while investment in copper and tin will hold up,” it stated.
In terms of improving commodity prices, BMI took a bearish outlook for industrial metals, owing to slowing economic growth in China and waning optimism surrounding robust US fiscal stimulus, which would drag on metals.
“Looking on a multiquarter horizon, we expect nonferrous metals to be on an uptrend in the medium term, while ferrous metals will head lower,” BMI pointed out.