“[There is] a lot of volatility in the markets in the macro-economic outlook, and that certainly has translated into certain indices faring much poorer during the first half of this year,” said research director for S&P Global Commodity Insights Mark Ferguson, during a webcast.
In the wider context, the S&P 500 put in its worst first half in 50 years. However, Ferguson said the softer numbers translated into depressed equity market support for the mining industry throughout the timeframe.
“The TSX Global Mining and the ASX Metals and Mining indexes fared much better through April, and that was supported by prices maintaining high levels into early April. But since then, those indices have also struggled,” said Ferguson.
The analyst noted that S&P’s monthly industry monitor series of reports tracks the exploration sector in more detail and compiles the aggregate market caps of about 2,800 publicly listed companies globally. The June quarter saw a retreat in the aggregate market cap of this group of companies despite S&P’s Exploration Price Index, which is a basket of commodities for which exploration is a crucial component. “It remained relatively strong even into the June quarter, near all-time highs benchmarked back to the June quarter of 2008,” said Ferguson.
He flagged weakening equity market support for the sector, given the recent retreat in metals prices.
“If we look at the June quarter activity levels, we certainly have seen subdued equity market support for these companies. It hasn’t fallen off a cliff completely, but it’s definitely down compared to all of 2021, and even the second half of 2020. Gold held sway through much of this period and is a dominant factor in exploration spending,” he said.