Recent research conducted by S&P Global Market Intelligence has discovered that actual capital expenditures decreased by 8% last year in more than 400 mining companies. This was a result of the regional lockdowns imposed, which brought about work stoppages and placed unprecedented stress on international supply chains.
At the start of last year, S&P Global Market Intelligence forecasted a capital expenditure of more than $160 million, based on a 9% year-over-year increase of the previous year. However, the pandemic’s impact on the mining sector prompted miners to alter spending plans, which brought the forecasted capital expenditures to about $155 billion. The pandemic’s effect on the sector only increased as the year progressed, which resulted in last year’s actual spending to total approximately $149 billion. These figures were 4% and 8% lower than COVID-19 revised and pre-COVID forecasts, respectively.
Despite these setbacks, S&P Global Market Intelligence signals that worldwide economic recovery is already ongoing and predicts that there will be a 5% or more growth in this year’s gross domestic product. Capital spending is expected to grow considerably as the world recovers from the pandemic.
This year’s forecast of $175 billion is an 18% increase from last year’s expenditures. A general increase in activity encouraged by the higher metal prices and the resumption of delayed programs will help boost expenditures.
Among the many other countries also recovering from the global pandemic, China seems to be doing well with companies in the country surpassing the initial capital expenditure guidance for last year. The original guidance of China-based companies was 8% less than their 2019 expenditure, which partly shows the restrictions and lockdowns that the country imposed that year. Despite these issues, however, the actual reported expenditure for 2020 had increased by 15%.
The 2020 expenditure of precious metal companies was almost similar with the previous year’s levels, having set a capital expenditure guidance that was 13% lower. Companies based in China and Australia led in the recovery.
This year, precious metals companies are expected to grow their capital expenditure by a third, in comparison with 2019 levels, with Gold Fields and Newmont in the lead. In addition, the analyst firm expects that mining companies with market capitalizations of more than $50 billion will surpass lower-tier companies in reported capital expenditure and guidance.
Estimated capital expenditure for this year may widen the gap between lower-tier companies and the large market-cap group even further, with forecasts showing that it may be more than 50% higher than 2019’s expenditure.
All in all, as the pandemic is brought under control, the operations and capital spend of mining companies such as Excellon Resources Corp. (TSX: EXN) (NYSE American: EXN) (FSE: E4X2) can only scale greater heights.
NOTE TO INVESTORS: The latest news and updates relating to Excellon Resources Inc. (TSX: EXN) (NYSE American: EXN) (FSE: E4X2) are available in the company’s newsroom at https://ibn.fm/EXN
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