Pitfalls and Pipelines - Philippine Indigenous Peoples Links

Chapter 1.2: Financial Innovations and the Extractive Industries
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The global ratings agency did expect that “the credit
prospects of producers of copper, high grade minerals sands,
seaborne iron ore, and coking coal [would] remain steady,”
But it believed that thermal coal prices could “further soften,”
especially “if exports from the U.S. to Asia due to a sluggish
domestic market consolidate its momentum.” Meanwhile,
warned Standard & Poor’s: “Further bouts of weakness could
also materialize for nickel because of the metal’s demand sensitivity
to industrial usage and substitution risks.” 29
PwC also recently published a commentary on the chequered
state of the industry last year. It asserted that, despite
the top 40 mining companies posting record profits (of $133
billion) in 2011, and “generat[ing] record operating cash
flows,” their market capitalization actually fell by 25 percent.
Only six of these companies saw “positive market capitilization
movements”—namely, China Shenhua, Ivanhoe Mines,
Industriales Penoles, and low-cost gold miners, Goldcorp,
Randgold and Yamana Gold. The leading companies’ price
earnings ratios were also “at one of the lowest levels seen in
years.” PwC said that Europe’s debt crisis and fears of a slowdown
in global growth “dominated the markets during the
second half of the year,” while “mining company share prices
were hit particularly hard.” 30
Chinese Syndromes
In 2011, PwC had already anticipated a “drop off ” in
mining deal making, but predicted it would not cease altogether—placing
its faith in China’s demand for metals
“continu[ing] to drive long-term fundamentals,” specifically
“in the mining merger and acquisition market.” 31
A decade before, the mining industry had indeed set
its cap at the Peoples Republic of China as the world’s most
vital single market for its ferrous and nonferrous metals, fuel
minerals (in particular coal) and a wide range of construction
materials. 32 More recently, China has itself become the leading
global producer and consumer of gold.