The Conversation (0)
A new survey of 125 global mining executives shows renewed optimism about the sector’s performance in the short term.
Mining executives are not paying much heed to the International Monetary Fund’s (IMF) forecast for a slowdown in global growth this year and next. A new survey shows that at least one in two respondents holds a bullish view of the sector’s next six to 12 months.
Fifty-five percent of the 125 mining executives surveyed believe that the sector will perform better in the second half of this year than it did in the first half, according to a study by Vancouver-based Mining Recruitment Group. The number is up sharply from June, when just 22 percent of respondents were more optimistic about the second half of 2012 than the first.
The Mining Recruitment Group surveyed executives from mining companies of all sizes and stages. Nearly half of the executives came from companies with market caps below $50 million, and 21 percent came from companies with market caps between $51 million and $250 million. Another 14 percent came from companies with market caps between $251 million and $1 billion, while 16 percent were from companies with market caps above $1 billion.
“Thankfully, this new report provides evidence that the worse may in fact already be behind us,” Andrew Pollard, president of The Mining Recruitment Group, said in a statement, adding that executives now “seem to be focused on growth as opposed to just mere survival. Across the board the outlook is better for all involved in the industry as sentiment has vastly improved.”
John Bulmer, an economist at Scotiabank, shares Pollard’s view, at least about the mining sector in British Columbia.
“Notwithstanding a year-over-year softening, historically high mineral prices have supported continued mining sector development,” Bulmer said in a recent report. “Natural Resources Canada forecasts that annual mineral exploration expenditures will increase by 43% in 2012, reflecting expectations of medium-term strength in global demand.”
The Mining Recruitment Group survey found that 47 percent of respondents are bullish about the six-to-12-month outlook for the overall strength of the mining industry. That is up significantly from the June survey, when only 8 percent of executives held a bullish outlook and 38 percent said they were bearish.
The fact that the October survey shows that only 11 percent of respondents hold a bearish outlook and 41 percent hold a neutral view indicates that “there has clearly been a massive change in the psychology of mining executives over a very short time,” Pollard said.
The study also found that the long-term outlook stayed “steadfastly rosy,” with 69 percent of respondents being bullish on the strength of the industry in terms of a three-year time frame. Only 8 percent were bearish.
Nearly three in five respondents (59 percent) were moderately to extremely concerned about a lack of investment capital moving into the industry over the next two years, down from the 76 percent who held this view in June.
Two of three respondents said they expect to recruit over the next six months. In the June survey, 60 percent said they would not be hiring. And 90 percent of executives surveyed said they are not considering further layoffs for the rest of the year.
Nearly three out of four respondents said acquisition opportunities are at the top of their mind as access to capital becomes easier. More than half (55 percent) would like to see increased exploration and development budgets and 14 percent said they plan to increase their marketing and investor relations budgets.
The mining industry is subject to cyclical fluctuations in prices and can be affected adversely by general economic conditions and end-user markets. The weakening outlook for global economic growth has emerged as a major headwind for the mining sector, but this survey certainly shows renewed optimism.
The IMF said on October 9 that the global economic slowdown is worsening and cut its growth forecasts for the second time since April. In its latest health check on the world economy, the IMF projected that global output in 2012 will grow just 3.3 percent, down from a July estimate of 3.5 percent. It predicted only a modest increase next year to 3.6 percent, below its July estimate of 3.9 percent.