Gold, copper and silver to face more troubles in 2014— PwC

Amidst write downs, commodity price drops and lower revenues, gold, silver and copper were the hardest hit metals this year and will continue to struggle in 2014, reveals the latest report published Monday by PwC.

In its Gold, silver and copper report 2014, the research firm says that while bullion prices have been the “big mining story” of the year, the metal wasn’t the worst performing. The title, they say, goes to silver, which prices plummeting 40% in 2013.

Gold prices, which surpassed $1,900 per ounce in 2011, fell to around $1,200 this summer and they are currently hovering not far above that. Dr. Copper, meanwhile, gave clear signs of an ailing industry, falling from $3.70 per pound at the start of the year to above $3 currently. This, says PwC, made it the metal that “outperformed” this year.

The bad news is that PwC predicts the challenges affecting these metals are not over yet. Gold producers are preparing for another challenging year. Reflecting lower levels of confidence, 47% of gold producers expect the price to increase in the next 12 months, compared to 88% a year ago, the study shows.

Silver miners are surprisingly optimistic for 2014, with only 9% anticipating the price of silver to fall further next year.

PwC found that 62% of the respondents thinks that copper would be stable next year, with prices remaining pretty much the same.

Keeping costs in line and finding finance

After years of spending on mergers and acquisitions and expanding operations with money generated from high metal prices, this year most companies have been cutting back.

“Encouraging investors to return to the mining space will involve strict cost management strategies and responsible investment in production growth,” ,” says John Gravelle, PwC’s Global and Canadian mining leader

Managing costs and finding financing are among the top priorities for miners, according to the report:

  • 66% of mining companies cite managing their spending as one of the most important business imperatives in 2014.
  • 54% of miners say luring investors is critical.
  • Less than 20% of respondents highlight mergers and acquisitions as something 
they plan to pursue.

There is light at the end of the tunnel, says PwC, as the industry has faith that fundamentals will recover.

“Gold, silver and copper may not reach record levels in the near future, but expect prices to increase alongside the stabilizing global economy,” 
Gravelle says.

China’s economic growth is expected to remain strong as it executes its reform agenda and the US gradual recovery should also help increase long-term demand for commodities, concludes the report.

Image by The Everett Collection

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