Rerating of the mining sector: A matter of trust

Since 2011 the performance of the mining sector has been most disappointing. From 2011 to 2015, the MSCI World Mining Index (USD) recorded five consecutive years of losses. This reflected the end of the super cycle of raw materials. The conjunction of a less dynamic Chinese demand and a constant increasing mining production resulted in the collapse of prices and company valorisation. The lesson of these years has however been learnt. The capex have been reduced, balance sheets cleaned and the central word is now profitability. The companies have now adapted to the new market conditions and the MSCI World Mining Index (USD) is back in positive territory: +56% in 2016 and +19% until end of November 2017. For 2018 we expect a positive performance as well. At the current price of the most important metals, the sector looks strongly under evaluated. It is now the task of the large mining groups to restore investor confidence in order to trigger the rerating of the sector.