Categories: General Market Commentary
Topics: General Market Commentary

TSX supercharges global recovery in global mining exploration

Don’t expect your assay results to get processed quickly!

Global mining exploration surged to the highest in several years, due in large part to companies that belong to the TSX Venture Capital ecosystem. That’s the upshot of the Pipeline Activity Index (PAI), a tool devised by S&P Global Market Intelligence that scrapes financial reports to monitor exploration activity.

Drilling occurred on 554 projects worldwide in Q1 2018, slightly below Q4 2017 which was the highest since Q1 2012. Companies from the TSX universe accounted for 54% of that total, followed by the Australian Stock Exchange, with 39%, according to S&P Market Intelligence.

Despite the uptick in exploration activity, Wall Street still hasn’t totally shaken off its hangover from the commodities super-cycle, which arguably ran for a decade between 2003 and 2013. Mining financing was at similar level to Q1 2017, despite a considerable run in prices last year.

Mining bulls will argue that the price swoon starting in 2013 had more to do with the step change in U.S. economic policy than it did with industry supply and demand fundamentals. According to London-based mining consultancy CRU, the freeze on capital funding large-scale mining projects has only worsened a structural shortage in LME-traded base metals that might result in substitution.

“Investors are clearly still sitting on their thumbs” with regard to mining, Chris Hinde, S&P Global’s director of metal and mining said on a webcast last week to discuss the state of global markets.

For sure, investors are cautious as prices dipped in the first quarter of this year. Even metals that have outperformed in recent history such as nickel and zinc had a big sell off in Q1 amid a wider rout in financial markets, as the China-U.S. trade spat got worse. Uttered days before the truce, don’t expect the sell-off to last, said Hinde. Prices right across the metals complex should rise this year, with the exceptions of iron ore and tin, he said.

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