JOHANNESBURG (miningweekly.com) - Metals prices have benefited from the improved global economy and from a recently weaker US dollar, in which most commodities are valued, with the Standard & Poor's (S&P's) GSCI reaching a two-year high on January 26, aiding the uptick in global exploration, the research firm's 'World Exploration Trends' report reveals.
In January 2018, the dollar's trade-weighted value was the lowest since December 2014, which extended the gains since December 6 to almost 12%.
Further, S&P's noted US Treasury secretary Steven Mnuchin's comments that a weaker dollar was "good for trade", adding to the bullish sentiment for natural resources.
Gold benefited the most. The precious metal started 2017 at $1 157/oz, ended the year at $1 303/oz and traded at $1 359/oz on January 25 - its highest price since August 2016.
Copper, the next most important exploration target after gold, also showed improvement. Prices averaged $6 200/t in 2017. "Our analysts expect the London Metal Exchange (LME) three-month contract to average $6 563/t in 2018," the report stated.
The higher copper prices were partly owing to tightness in supply and partly to changes in economic growth. Mined production was 20.2-million tonnes in 2016; however, this dipped to 19.9-million tonnes last year. "We forecast an increase to 20.4-million tonnes this year, led by production in Africa and Latin America."
Iron-ore was also sensitive to changes in economic growth, with the price averaging $58.4/t in 2016, reaching a high of $75/t in late December 2017 and averaging $71.3/t for the year. Iron-ore mined production was 2.08-billion tonnes in 2016, and S&P's analysts expect output of 2.16-billion tonnes in 2017, rising to 2.22-billion this year.
Average LME three-month nickel prices rose from $9 638/t in 2016 to $10 434/t in 2017. "We estimate a 2018 average price of $11 206/t, with softening in 2019. This optimism is based on robust near-term demand and a restrained increase in supply. Mined nickel production would increase
slightly to 2.12-million tonnes in 2018," it added.
Meanwhile, the LME three-month zinc average price jumped from $2 102/t in 2016 to $2 890/t in 2017, and traded in late January was at $3 460/t - its highest level since August 2007. Prices were helped by the weaker US dollar and stronger supply/demand fundamentals. While production would increase to 13.22-million tonnes this year, S&P's forecast the price to remain flat at $3 36/t.
As metals prices started to rebound, producers had more free cash flow to search for new reserves; while financings, which fuel most junior company exploration, gained traction and injected fresh hope into the depressed exploration sector.