Market Analysis—Feb 2019

Commodities fell on some profit taking, with gold price going down to US$1310 although the Fed said balance sheet decision market is close to happening and the US economic data was weaker than expected ahead of fourth quarter GDP figures. The US equity markets remained range bound as geopolitical sideshows took center stage. Spot Cu prices re-approaching the psychological $3/lb level on the back of an apparent easing of USA-China trade war tensions.

The No.1 gold producer Barrick went hostile in a bid for No.2 gold producer Newmont just several weeks after two fresh consolidation transaction respectively, the M&A boom should give rise to active sector rotation. With most output numbers now in, 2018 looks to have been another year of decline in global gold production, bringing talk of peak gold once more, with existing operations continuing to be a drag on supply volumes, and Chinese output in trend decline, a renewed focus on exploring for and developing large, long mine life gold projects will be required.

The mining industry equities of North American and Australia went down with downward metal prices, while the Asian markets were showing up. The balance sheets of gold producers continues to improve, with a number of large gold producers signaling dividend increases in the future. Diversifieds and base metals producers delivered a balanced message of capital discipline and growth, EBITDA has been upgraded through optimization exercises, companies are talking more about organic growth and aspirational M&A.