Commodity Blog

Mining analysts are missing the mark in their predictions for a sharp decline in metal prices, according to a report from Ernst & Young.
“Contrary to the continued assertions of mining analysts, current metal prices are actually a return to sustainable price levels following an extended period of artificially depressed prices,” the report says of the recent runup in commodities.
“While analysts are wary of straying too far from their comfort zone of historic averages, the mining companies — by their actions — are taking a far more realistic view.”
Looking back, the Ernst & Young team found that short-term metal price forecasts by analysts since the start of 2005 have been “significantly adrift” of the eventual price reality, missing targets by between 20 and 200 per cent.
The end result is that most mines and mining companies have been “materially undervalued,” which means that significant premiums have often been paid over market prices. The report noted that over $100-billion (U.S.) has been spent on the Falconbridge, Inco, Phelps-Dodge and Alcan deals, as major mining industry players battle for a dwindling supply of low-cost production around the world.
“Research shows mining companies that have pursued growth through acquisitions have consistently outperformed those that have chosen to grow organically,” the report said.