Covid-19 Executive Briefing

Understanding the economic impact of the Covid-19 pandemic and the implications for the mining sector

- ECONOMIC IMPACT -

Latest update: 11 May

Many economists have cut their GDP forecasts. The 2020 consensus forecast for GDP growth is currently negative and many predict a recession.

Major market indices are improving as, despite oil dipping below zero, it has rebounded quickly.

-2.3%

With economists cutting their forecasts in response to the pandemic, the 2020 consensus forecast for GDP growth is currently -2.3%.

14.7%

According to the US Bureau of Labour Statistics, the unemployment rate rose to 14.7%, the highest since the great
depression of the 1930s

Impact of Covid-19 on asset prices

- SECTOR IMPACT: Mining -

Latest update: 11 May

GlobalData analyst view:

"Lockdowns and closure of non-essential businesses and operations is particularly impacting platinum, copper, silver and gold, with only coal mines largely exempt."

The latest forecast for global construction output growth is a decline of 2.2%, versus initial expectations of 3.1% for 2020.

Lower automotive manufacturing will also impact demand for steel, aluminium, platinum, and palladium. Platinum demand is forecast to decline by 7% in 2020.

Mining suspensions have now been ended in Argentina, South Africa, India, Zimbabwe, Peru, and Bolivia. Governments in both Peru and Bolivia have allowed mines to return to operation from 2 May, provided they implement strict protocols to avoid the spread of Covid-19.

impact on capital expenditure

Rio Tinto advised capex for the full year would be between $5-6bn, down from the previous guidance of $7bn.

Anglo American is cutting its 2020 capex by $1bn to $4-4.5bn.

First Quantum advised on a reduction from $850m to $675m.

Freeport-McMoRan announced a cut in capex from $2.8bn to $2bn.

Vale announced a reduction from $5bn to $4.6bn as expenditure will be delayed until 2021.