Covid-19 report shows 8% reduction in mining capital expenditure in 2020

A new study by s & p global market intelligence found that real capital expenditure fell by 8 per cent in 2020 among more than 400 mining companies surveyed, with regional blockades forcing workers to stop work and putting unprecedented pressure on global supply chains.

At the beginning of 2020, mining groups forecast capital expenditure of $162 million, up 9 per cent year-on-year in 2019. But mining companies cut their spending plans by 4 per cent this year to $156 billion, still well above 2019 levels, as the pandemic affected the mining industry.

But as the pandemic tightens its grip on miners, they strive to meet the revised plan, with actual spending of $149.5 billion in 2020, 8% and 4% lower than pre-COVID-19 and COVID-19 revised forecasts, respectively, and slightly lower than reported expenditure in 2019

However, S & P points out that the global economic recovery is already under way and forecasts that global gross domestic product will grow by 5.5% in 2021. Capital expenditure is expected to increase significantly as the world begins to shake off this pandemic.

The forecast for 2021 is $176 billion, an increase of 18 per cent over spending in 2020 and 2019. This is due to the resumption of the delayed plan and the general increase in activity spurred by solid metal prices.

There are clear leaders in the recovery, with Chinese companies exceeding the initial capex guidance in 2020.

Chinese companies' initial capital expenditure guidelines for 2020 are 8 per cent lower than they were in 2019, partly reflecting locks and restrictions imposed by China at the beginning of the year, according to standard & poor's (standard & poor's) data.

Nonetheless, by the middle of the second quarter, the revised guidelines (an 8 per cent increase in spending over 2019) marked signs of recovery. Actual reported capital expenditure increased by 15% in 2020.

Precious metals companies had lowered their 2020 capital expenditure target by 13 per cent before the pandemic, but their spending in 2020 was the same as in 2019, with Australian and Chinese companies taking the lead in the economic recovery. By 2021, capital expenditure for precious metals companies is expected to increase by 1/3 over 2019 levels, led by NYSE:NEM,TSX:NGT and Gold Fields (JSE:GFI,NYSE:GFI.

S & P also expects large mining companies with a market capitalization of more than $50 billion to overtake low-end mining companies in terms of guidance and capital expenditure. Before the pandemic, guidelines for big mining companies increased by 35% in 2020 compared with 2019. After the events triggered by the pandemic, the capital expenditure guidelines were revised to only 28 per cent, compared with 22 per cent of actual spending in 2020.

It is estimated that capital expenditure in 2021 will further widen the gap between large market capitalization companies and other companies. Large companies are expected to spend 51% higher than in 2019, while the guidance indicators of other companies remain similar, with an average of 12%.