Further Capex Declines On The Horizon


BMI View: We expect delays and reductions in capital expenditure to continue as mining companies face slowing growth in China and lower metal prices. This view has been playing out already with Xstrata and BHP Billiton looking to rein in spending.

In line with our expectations, several mining companies have announced declines in capital expenditure as lower prices and a weaker growth outlook have dampened expectations. BHP Billiton looks set to cut the first stage of its US$10bn iron ore expansion in half and Xstrata has announced it is looking to sell its stake in the Frieda River copper project in Papua New Guinea as the company seeks to rein in spending. This follows Rio Tinto's withdrawal from the US$9bn Abbot Point port expansion due to 'a weaker global economy and rising costs'.

GLOBAL - POTENTIAL PROJECTS AT RISK
Country Mine Metal Company Estimated Production Year
Source: BMI, Company Reports
Argentina Cerro Negro Gold Goldcorp 500kozpa 2013
Australia Olympic Dam Copper/Uranium BHP Billiton Copper: Increase from 300 to 750ktpa 2015
Brazil Minas Rio Iron ore Anglo American 26.5mntpa 2013
Chile El Morro Copper/Gold Goldcorp 90ktpa of copper, 210kozpa of gold n/a
Eritrea Bisha Gold Nevsun Mining 450kozpa 2012
Guinea Simandou North Iron ore Vale 95mntpa 2015
Guinea Simandou Iron ore Rio Tinto 15mntpa 2015
Pakistan Reko Diq Gold Barrick Gold Resources: 9.5moz n/a
Papua New Guinea Frieda River Copper/Gold Xstrata 246ktpa of copper, 379kozpa of gold 2013
Peru Tintaya Copper Xstrata 160ktpa 2012
Peru Conga Gold Newmont Mining 580kozpa 2014
Peru Tia Maria Copper Southern Copper 120ktpa 2015
Philippines Tampakan Copper Xstrata Reserves: 13.5mnt of copper and 15.8moz of gold 2015
Zimbabwe Murowa Diamonds Rio Tinto 2mn carats pa 2014

We previously highlighted the Frieda River mine as a project which could be subjected to delays in capital expenditure as metal prices head lower. (See BMI Online 'Commodity Correction: Capex At Risk' May 31). On the back of our below consensus views across base metals as well as Chinese economic growth, we expect further declines in capital expenditure and highlight projects in Peru and the Philippines which are most at risk from delays or cutbacks. In addition, we note that iron ore projects in Guinea are particularly at risk as much of the mining investment emanates from Vale and Rio Tinto, companies which have lower risk projects in Brazil and Australia, which they could fall back on.

This article is tagged to:
Sector: Mining
Geography: Guinea, Global, Guinea, Peru, Papua New Guinea, Philippines, Global, Global, Global