Industry Trend Analysis - Monthly Mining Projects Roundup - JUNE 2014

Asia and gold continue to dominate the list of mining projects announced in May, with Australia attracting the bulk of investment. While Australia remains a clear leader in our Asia Mining Risk/Reward Index (with an impressive overall score of 71.0), headwinds are mounting in the country's mining sector. In particular, the multi-year boom in the coal sector will continue to cool over the coming quarters. Coking coal and thermal coal prices will stay subdued over 2014-2015 and this spell challenging economics for many domestic coal miners. Rising environmental concerns, which has resulted in the pullback of bank financing for the Abbot Point expansion, will be another challenge.

We remain bearish gold on a multi-year horizon and expect prices to average USD1,170/oz between 2014 and 2018. This compares with an average price of USD1,669/oz in 2012. Gold mining equities will weaken further as gold prices head south over the coming months ( see 'Gold Mining equities To Suffer As Prices Weaken', May 28). While gold miners will continue to slash capital expenditure and improve efficiency in their battle to maintain profitability, these measures will be insufficient to stem share price weakness. Junior miners will be especially vulnerable to the downturn in gold prices due to constraint funding from both the debt and equity markets.

Asia & Gold Dominate
Projects Announced In May 2014 - By Location (LHS) & Mineral (RHS)

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