Engineering and Mining Journal - Whether the market is copper, gold, nickel, iron ore, lead/zinc, PGM, diamonds or other commodities, E&MJ takes the lead in projecting trends, following development and reporting on the most efficient operating pr
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PROJECT SURVEY 2017 18 E&MJ; • JANUARY 2017 www.e-mj.com The new year brings with it the promise of new beginnings and 2017 may very well end up being the new beginning the mining industry has been waiting for. After hitting five-year lows in capital expendi- tures, leading indicators for mine develop- ment, including commodity prices, have improved substantially; but will the im- provements in commodity prices that were experienced in 2016 carry into 2017? The answer to that question will be one of the key drivers expected to impact capital spending for the mining industry in 2017. Uncertainty is constant. War continues in the Middle East and a new U.S. lead- ership takes control January 20. Initial comments from mining companies and associations have been positive toward the new executive team that President-elect Donald Trump is putting together. Trump has said he will help the beleaguered coal and steel industries, and appears to be pro-mining, but talk is cheap and action is what the industry needs. Only time will tell if the new executive leadership can set a framework where mining and metals companies can thrive in the U.S. The ad- ministration can help by promoting a re- vamp of the mine permitting process and installing policy that will help, not hinder, mining. But even this will not guarantee further recovery of mining in the U.S. Market drivers, mainly commodity de- mand and prices, will dictate how mining companies spend money in 2017. For the most part, 2016 was a consid- erably better year for mining companies than 2015. Even though capital spending reached its lowest point in five years, lead- ing indicators of project spending, like com- modity prices, improved. Coal, gold, iron ore and zinc were a few of the commodities that experienced price increases in 2016. Demand for rare earths and lithium for use in batteries and other electronics is driving an increase in exploration-stage projects for these commodities. If metal prices contin- ue the upward trend, then the mining in- dustry will respond with more projects. Mining companies have gone through several years of production and capital spending cuts, for the most part postpon- ing large projects, especially grassroot mines, in favor of smaller in-plant capital and productivity optimization projects. There are some notable exceptions like Rio Tinto's $5.3 billion expansion of the Oyu Tolgoi mine in Mongolia. This trend will continue in 2017, but companies are starting to benefit from the conservative policies of the past few years and have better balance sheets as a result. We'll see an increase in the development of larger projects in 2017 and 2018. Indus- trial Info is forecasting a slightly higher capital spending outlook for 2017 than 2016 as continued moderate growth combines with the need for companies to make equipment improvements and replacements that have been delayed. Grassroot mine project spending, which reached the lowest point in 2016 since the peak of the mining boom, will see some improvement in 2017-2018 as companies will need to replace capacity coming offline. North America continues to be the No. 1 region for mining project develop- ment, with more than $403 billion worth of projects, ranging from exploration stage to construction. (See Global Min- ing Project Development Map Graphic) More than 80% of the value of active mining projects in North America is lo- cated in Canada. The improved commodity prices in 2016 have the market buzzing with activ- ity, even though that activity has not yet translated to an increase in equipment and construction service orders. Over the past year, there has been a significant increase in the value of projects in the advanced planning and permitting stage. Project Survey 2017: Industry Indicators Improve Last year was better than the year before and 2017 might be even better yet By Joseph F. Govreau