Pipeline Activity Index Ends 2012 on a low Note; Looks to Rebound in 2013, says SNL Metals Economics Group

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SNL Metals Economics Group’s (MEG) Pipeline Activity Index (PAI) dropped significantly in November and December to settle at its lowest level since mid-2010. Improved financing activity in December was not enough to offset declines in drilling activity and initial resource announcements caused by the holiday season.

SNL Metals Economics Group Pipeline Activity Index

SNL Metals Economics Group’s (MEG) Pipeline Activity Index (PAI) dropped significantly in November and December to settle at its lowest level since mid-2010. Improved financing activity in December was not enough to offset declines in drilling activity and initial resource announcements caused by the holiday season. We expect exploration to rebound slowly over the next few months, as the junior sector proceeds cautiously in the hope that the equity financing improvements since October continue in the new year.

The industry’s aggregate market cap has been steady since September, and finished 2012 at $1.73 trillion, which is almost identical to where it finished 2011. With the annual earning season fast approaching, investors will find out whether the capital expenditure cuts by many major miners in 2012 are having the desired effect.

Unsurprisingly, the pace of significant drill results slowed considerably leading up to the holiday season. This pattern is fairly consistent with 2010 and 2011, although with two notable observations in gold results: the number of gold results began declining in November, and December had the lowest one-month total since late 2010. Some juniors likely decided to pause drilling a little earlier to preserve cash for work in early 2013.

While a good number of advanced-stage projects remain active, the number of new projects being drilled waned in the latter part of 2012. Financing conditions for the junior sector moderately improved in recent months, but explorers will be wise to proceed cautiously in 2013. We expect significant drilling activity to rebound slowly over the next few months.

Although 22 initial resource announcements in November-December is the lowest two-month total in 2012, the year as a whole can be considered a success in terms of adding new resources to the pipeline. Initial resource estimates were announced for a total of 168 new zones or deposits in 2012—an average of about 14 per month, which is a significant improvement over nine per month in 2011 and six per month in 2010.

For more information and to purchase the complete SNL MEG Industry Monitor, visit SNL Metals Economics Group’s web site at http://www.snlmetalseconomics.com.

About SNL Metals Economics Group
SNL Metals Economics Group (MEG) is the most trusted source of global mining information and analysis. We draw on more than three decades of comprehensive information and analysis, with an unsurpassed level of experience and historical data. To help our clients reach better decisions more quickly, we supply raw data and sophisticated analysis based on unbiased research and reporting. From worldwide exploration, development, and production to strategic planning and acquisitions activity—our databases and studies help you make confident decisions and, ultimately, improve results.

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Christina Twomey
SNL Financial
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