Poland Mining Report Q3 2016 - New Study Released

Growth in the Polish mining sector will be modest over the coming years. The coal sector will be overhauled as the government seeks to either restructure or close unprofitable mines. Copper output will struggle as falling copper ore grades and weak prices are set to hinder growth. Nevertheless, the rate of growth we forecast indicates that the country will remain one of the most significant players in the European coal, silver and copper markets.Downside RisksThe main downside risks to our forecasts are weak copper and coal prices, cheap coal imports and labour unrest in the sector. Due to our view for a sharp slowdown in Chinese economic growth and expectation for increased copper supply, we expect lower copper prices over coming years. We forecast copper prices to average USD6,450/tonne over 2014-2018, significantly lower than their 2011 average of USD8,826/tonne. Combined with falling ore grades in Poland, these lower prices will significantly disincentivise investment in the sector. Lower commodity prices will also have the effect of squeezing miners' margins, precipitating cutbacks and thus heightening the risk of industrial unrest. Poland's mining sector is comprised of strong unions and as such we highlight tense wage negotiations and potential strikes to affect the sector over coming years.The government's announcement in Q414 of its plans to split the coal sector into economically viable and unviable mines is likely to dent production growth over the coming years. Economically viable coal mines will be developed and invested in, while the mines deemed unviable will either be restructured or forced to close. It is estimated that only 1 in 3 Polish coal mines is profitable at current prices.New EntrantsDutch miner New World Resources (NWR) received approval from its board of directors to extract coal from the Debiensko mine in Poland. A feasibility study indicates that the mine has a reserve of 190mn tonnes of coal, allowing for average annual production of 2mn tonnes. NWR expects the first coal to be extracted from the mine in 2017. Total investment in the project will reach EUR411mn, which is modest compared with typical investments in mines, and appears to be good value in our view, considering that NWR has a 50-year licence to mine the resource. NWR is also looking to mine coal at a number of additional coal seams at the site.

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The Poland Mining Report has been researched at source and features BMI Research's mining and commodity forecasts for metals, minerals and gems, covering all major indicators including reserves, production, exports and values. The report also analyses trends and prospects, national and multinational companies and changes in the regulatory environment.

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