9th January 2017 -IAM
Olivier Aeschlimann, Senior Financial Analyst- Fund Manager
After four years of debacle the mining sector presented a spectacular performance in 2016. This is the result of rising raw material prices, which in turn results from two major factors: on one side worldwide improved economic environment and on the other side a better discipline of the large mining groups. These have indeed stopped maximizing their volumes (which resulted in over production and the collapse of prices), in order to concentrate on their most profitable activities and focalise on generating free cash flow. We remain positive for the sector in 2017 as we think that there is still a potential for rise for certain metals (among which copper and nickel). Furthermore as mining companies have significantly reduced their level of debt and their production costs, they should generate record amounts of free cash flow. In the absence of large development projects this should translate in substantially increased dividends.
