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The mining industry’s market capitalization rose 32% to $1.393 trillion in Q2 2020 compared to previous quarter, driven mainly by the positive gold price performance in the quarter and by a rebound in Chinese demand, according to a new report by S&P Global market intelligence.

Twenty-one of the 25 largest mining companies posted gains in June, boosted by high metal prices, S&P reports.

The Exploration Price Index (EPI), which measures the relative change in precious and base metals prices, weighted by the percentage of overall exploration spending for each metal as a proxy of its relative importance to the industry, was at 135.9, its highest level since March 2013, driven mainly by its significant weighting to gold and the positive gold price performance in the quarter, S&P reports.

Copper, nickel, zinc, iron ore, gold, silver and platinum all rose by double digit percentages by end-June. Copper rose above $3 a pound for the first time in more than two years last week and iron ore prices hit six-and-half year highs as Chinese furnaces, where more than half the world’s steel is forged, roll out crude steel at an unprecedented pace.

According to S&P, there was also an uptick in M&A activity in Q2, with 38 deals at a value of $4.12 billion. Gold made up 75% of the total, at $3.13 billion. SSR Mining’s acquisition of Alacer Gold accounted for about $1.9 billion and Zijin Mining’s acquisition of Tibet Julong Copper, at $453 million, accounted for 41% of the overall deal value for copper.

Based on an analysis of capex expenditure guidance for the top 150 mining companies, 52 recorded an aggregate $7.5 billion cut in planned spending in 2020.

Financings fell by over $5 billion to $7.2 billion in Q2, compared to the previous quarter. Canada was the top destination with $1.05 billion.

Financing raised by majors more than halved compared with Q1. However, financing for juniors more than doubled, indicating strong markets for gold explorers and developers.

Drilling activity in Q2 fell in terms of the number of projects drilled and
the number of drillholes, by 21% and 17% respectively, compared to Q1.

Outlook

Global mining has escaped the worst of covid-19 in terms of production disruptions because major producing nations across Latin America and countries like Canada and South Africa declared mining essential industries. 

S&P’s tracking of mine closures throughout the pandemic identified 275 mine sites in 36 countries that were impacted.

“Many commodities only suffered total suspensions that we calculated to be less than 5% of annualized output. Yet a significant shadow is cast over the outlook for the second half of 2020,” the analysis company said.

“We nevertheless expect the second half to be driven by demand, and notably the trajectory and magnitude of recovery as major economies reactivate.”

Click here for S&P Global State of the Market: Mining Q2-2020