Thursday, September 26th 05:50 PM IST

Gold mining activity adversely affected by budget cuts: SNL MEG

# SNL Metals Economics Group  # drilling  # gold mining  # Pipeline Activity Index  # PAI  

Among factors adversely affecting mining are ongoing financing pressures on the junior exploration sector and budget cuts by major and intermediate producers.

NEW YORK (Bullion Street): Gold mining activity has been adversely affected by budget cuts and unfavourable commodity outlooks. Therefore, the SNL Metal Economic Group's (SNL-MEG) Pipeline Activity Index (PAI) which reverse the slide in July and dropped to the second lowest level in its history in August, surpassed only by the lows of the financial crisis in late 2008.

Among factors adversely affecting mining are ongoing financing pressures on the junior exploration sector and budget cuts by major and intermediate producers.

The question now is—is this the bottom? Improvement in commodity prices was enough to help the industry’s aggregate market cap increase in both July and August to finish August at $1.48 trillion—its highest point since March. This total is still lower than any month in 2012.

Despite the ongoing pressures on the junior exploration sector, the number of significant drill results remained relatively level for gold and base metals over the past five months. The number of significant results announced in July-August was almost unchanged from May-June, but is down more than 30% from same period last year.

The seasonal North American exploration reporting cycle is helping to keep the current numbers steady, along with ongoing activity by intermediates and a limited number of sufficiently funded juniors. Drilling activity typically slows in the months leading up to the holiday season, and given the ongoing difficulty of obtaining financing, we expect this year’s decline to begin sooner than in previous years.

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