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BMI View: The United States' mining sector will experience production
declines in the coal, gold and lead industries due to structurally lower
commodity prices and elevated operating costs over the forecast period to 2020.
Latest Updates & Structural Trends
■ The US' mining industry value will decline through 2018, as elevated costs and
structurally lower prices weigh on mineral growth. In particular, the declining
coal sector, which accounts for nearly two thirds of the US mining industry
value, will drag down mining industry value, which we forecast to contract by an
average of 4.3% annually over 2016-2020. In absolute terms, we expect the US
mining industry value to decline from USD73.8bn in 2016 to USD68.6bn by 2020.
■ We have revised down our US lead production forecast for 2016 from 0.5% y-o-y
growth to a contraction of 2.0% based on weak prices and capacity cuts from
major miners. We now expect US lead production to contract by an annual average
of 2.3% during 2016-2020, as output drops from 367 thousand tonnes (kt) to
334kt. While the US will remain a top producer, the country will lose global
production share, falling from 7.1% of global lead output in 2016 to 6.1% of the
global total by 2020.
■ Weak prices and elevated production costs will continue to drive both major
and junior mining firms to defer major investments, scale back production and
divest high-cost assets. As a result, the US mining industry will experience
significant mothballing and retrenchment over the coming quarters. Key deals
include Freeport's USD1.0bn sale of a 13.0% stake in the Morenci copper mine to
minority owner Sumitomo Metal Mining and Kinross Gold's USD610mn purchase of
various gold mines from Barrick Gold.