Industry Trend Analysis - Low Prices To Offset Opening Market Gains - DEC 2015

BMI View: Cuba's mining sector's investment attractiveness will increase as relations with the US improve, opening up the economy to foreign investment over the coming years . However, low metal prices and state-ownership requirements will present major headwinds to the sector's development.

Cuba's extractive sector will experience modest growth on the back of increased access to foreign direct investment over 2016-2019. We expect Cuba's mining industry value to rise from USD96.0mn in 2016 to USD1.1bn by 2019. Cuba is among the top ten world producers of nickel and cobalt, and has mineral resources including copper, iron and precious metals.

Despite the reestablishment of diplomatic relations between Cuba and the US in July 2015, American firms remain barred from economic activity in the island country under the Helms-Burton law. While we do not expect the embargo to be lifted over the next twelve months, the potential arrival of US firms in the Cuban market will spur other foreign miners to invest and establish market share. In November 2014, Cuba's Ministry of Foreign Trade and Investment announced over two hundred development projects, 10 of which are mining projects, open for USD8.0bn of foreign investment. For instance, over the first nine months of 2015, Canadian resource company Sherritt International ramped up capital expenditure to USD43.6mn, up from USD21.1mn in 2014, at the firm's joint-venture, with Cubaniquel, Moa Bay nickel-cobalt mine. The increased spending is due to the construction of the approximately 700 thousand tonnes (kt) per annum acid plant expected to come online in H216.

No Big Changes Yet
Cuba - Nickel Mine Production ('000 tonnes) & Share Of Global (%)
f = BMI forecast. Source: BMI, USGS

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