Deloitte tips big miners to ‘weather the storm’ of COVID-19

Deloitte has said it expects mining majors to be in a much better financial shape once the COVID-19 (coronavirus) pandemic subsides, compared to the aftermath of the 2008 global financial crisis (GFC) and the last commodity market downturn in 2015.

The global accountancy giant made the statement in its Impacts of COVID-19 on the Mining Sector report, which also predicted that the coronavirus-induced global economic downturn would be ‘as severe, if not more,’ than the GFC.

“Most companies should be able to weather the storm without having to tap shareholders for cash or fire sale assets,” said Deloitte. “The impact of coronavirus on supply and production operations may partially offset downward pressure on commodity prices.”

However, the company noted a fall in industrial metal prices during the past month, including copper, nickel and zinc. Copper has dropped by 20%, while zinc and nickel have fallen by 13% and 14% respectively.

Precious metals have also seen significant declines. Palladium prices have declined 38%, platinum by 35% and silver by 30%. Even ‘safe haven’ gold has slipped by 6% in the last month.

Deloitte also highlighted the increased risk of supply shortages across key commodities due to the number of operations announces production cutbacks.

“Efforts to contain the virus by restricting the flow of labour and transport will inevitably have a production impact,” the firm stated.

“[This is] particularly for those commodities where supply is highly concentrated in a particular region and where transportation is a big part of the value chain like the bulk commodities.”