As the global mining industry approaches its first quarterly earnings season since the global outbreak of coronavirus, market observers say they believe companies will project only one thing about their operations: anything could happen next.
Giant multinational mining companies are scheduled to release earnings for the first quarter in the coming weeks, including BHP Group, Anglo American PLC and Glencore PLC. Ahead of these disclosures, officials for the U.S. Securities and Exchange Commission said April 8 that the coming earnings season will "not be routine," and have urged public companies to provide as much information as they can in earnings releases and analyst calls about how the COVID-19 pandemic may impact their current status and future operating plans.
For the mining industry, the virus is creating operational and logistical risks as more nations implement shutdown orders and social distancing measures. Observers said they expect mining companies to identify the heightened risk created by the potential for an identified coronavirus infection at mine sites in far-flung parts of the world, which has caused some nations to fear that fly-in, fly-out operations may put workers in jeopardy.
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John Koenigsknecht, an attorney with Chicago-based law firm Neal, Gerber & Eisenberg and veteran of mining industry financial exchanges, said in an interview that some of his clients have voiced concerns about the coronavirus, frequently on a site-by-site basis. Mining companies are preparing plans for weathering various COVID-19 mitigation scenarios in response to outbreaks at mines or government travel restrictions and shelter-in-place orders, he said.
The uncertainty facing the mining industry is "not something that I have or anyone may have seen in recent times to this scale," said Koenigsknecht. "It's a two-pronged uncertainty. We're trying to get our heads around how we flatten the curve and deal with this pandemic. At the same time, you deal with the impact to the capital markets and the economy in general. It's not like a housing crisis or a financial crisis, which is more financial and structured."
As of April 9, more than 230 mine sites across 32 countries had been disrupted, according to data compiled by S&P Global Market Intelligence's Metals and Mining Research team. Country-wide containment measures have slowed global supply chains, including the traffic of raw materials. Attorneys predict a coming wave of force majeure declarations on supply contracts due to the virus' unprecedented impact on transportation and trade.
At the same time, future demand for metals, ranging from copper to diamonds, is uncertain as economists question how quickly state economies will recover from fighting the pandemic, including China. Some companies have pulled their 2020 output guidance, and analysts expect more firms to take similar actions as individual countries' responses to the pandemic develop.
CIBC World Markets analyst Oscar Cabrera said in an interview that most mining companies would have only been affected by the pandemic as early as March. As a result, he expects firms to use their first-quarter disclosures to speak to the "fluidity" of their individual situations.
"Until we know when companies can go back to a new normal, they won't be able to tell us at what levels they can produce, and in the supply chain, we won't know what the demand looks like," Cabrera said.
The rapidly-declining U.S. coal sector has given investors examples of how companies could in the future disclose operational risks heightened by the coronavirus, said Ben Nelson, Moody's senior credit officer and lead coal analyst. Nelson pointed to Alliance Resource Partners LP and Contura Energy Inc., which both withdrew their previously-announced guidance for 2020 as they idled mines in conjunction with the pandemic. Nelson said that at the moment, it will be difficult for any mining company to say they can prevent an outbreak at a mine site.
"As you look across the landscape today, it would be hard for any company to say they can prevent a situation like that," said Nelson in an interview. "There's an unpredictability that goes along with whether someone at your site comes down with coronavirus infection, because a lot of that could go down off-site."