Miners face threat from falling prices

via Miners face threat from falling prices – NewsDay Zimbabwe September 10, 2015

Zimbabwe’s mining firms will struggle to remain viable if the trend in falling prices of platinum group metals (PGM) persists, a leading research firm has warned.

In a research note, MMC Capital said the slowdown in China’s Gross Domestic Product and the stronger United States dollar had put pressure on commodities leading to a decline in prices.

China has been the major market driving demand for platinum jewellery and palladium-based auto-catalyst devices, among other commodities, and a slowdown in its growth has seen a substantial reduction in commodity imports by Chinese firms thus putting downward pressure on commodity prices, MMC said.

“Falling prices will see revenue declines among Zimbabwe’s miners, with high production costs putting further pressure on profitability. If the current bear trend in PGM prices is sustained, miners may struggle to remain viable. Our view is that, commodity prices will likely remain under pressure as long as the growth prospects in China remain murky and the greenback continues to strengthen,” MMC said.

Between January and September, the prices of gold and silver eased 4% and 7% to $1 123,31 per ounce and $14,62 per ounce respectively.

Platinum and palladium lost 17% and 27% respectively to settle at $1 002,53 and $583,50 per ounce in the period.

“The persistent nosediving of PGM prices is proving to be an albatross around the global mining sector’s neck, thus sounding the cautionary bells of a dying industry,” MMC Capital said.

“Zimbabwe, the world’s third-biggest platinum producer, has also witnessed its mining industry shrink precipitously for the first time in five years.”

MMC said the industrial metals fared no better with nickel and aluminum both registering declines of 35% and 13% respectively to settle at $77 per ounce and $10,17 per ounce as at September 1.

In his mid-term Fiscal Policy review, Finance minister Patrick Chinamasa said mining developments during the first half of the year “indicate stronger performance to the end of the year, with mining growth projected above 3,5% against the initial projection of 3,1%”.