Interview Opportunity - Mining Analysts Missing The Mark: Ernst & Young Report



    High Metal Prices are the New Normal

    TORONTO, Feb. 6 /CNW/ -

    
    What:  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,
           says a new report from Ernst & Young.

           Most mining analysts - the report says - are off the mark in their
           repeated predictions of a sharp decline in metal prices. While
           analysts are wary of straying too far from the comfort zone of
           historic averages, the mining companies - by their actions - are
           taking a far more realistic view.

    Why:
           -  Research shows that analysts' short-term metal price forecasts
              since the beginning of 2005 have been significantly adrift of
              where prices have actually settled, by anywhere between 20 per
              cent and 200 per cent! The result? Most mines and mining
              companies have been materially undervalued.
           -  More often than not, significant premiums have been paid over
              market prices. Over US$100 billion have been spent on the
              recent takeovers of Falconbridge, Inco, Phelps-Dodge and Alcan,
              as the key players fight it out for control of low-cost
              production across the globe.
           -  Research shows mining companies that have pursued growth
              through acquisitions have consistently outperformed those that
              have chosen to grow organically.

    How:
           -  The report's authors studied metal prices over more than a
              century, highlighting a number of periods that have been
              interpreted as cycles in the mining industry.
           -  The study shows that specific reasons were behind most of these
              cycles, which are unlikely to be repeated in the near future.
              For example, weak prices in the '90s resulted from a collapse
              of the Soviet Union, triggering the release of 50 years of
              accumulated stockpiles of minerals alongside a sharp reduction
              in domestic demand in the CIS.
           -  Layered on top of traditionally recognized economic cycles are
              major developments such as the industrial revolution, the rise
              of the U.S. economy, the Cold War, the collapse of communism,
              and, now, the industrialization of China and other emerging
              markets.

    Who:   Ernst & Young's mining sector leaders can provide more insight on
           the mining industry's current appetite for consolidation and the
           role valuations play in the sector.
    

    About Ernst & Young

    Ernst & Young is a global leader in assurance, tax, transaction and
advisory services. Worldwide, our 130,000 people are united by our shared
values and an unwavering commitment to quality. For more information, please
visit www.ey.com.

    Ernst & Young refers to the global organization of member firms of Ernst
& Young Global Limited, each of which is a separate legal entity. Ernst &
Young Global Limited, a UK company limited by guarantee, does not provide
services to clients.
    This news release has been issued by EYGM Limited, a member of the global
Ernst & Young organization that also does not provide any services to clients.





For further information:

For further information: or to speak to an Ernst & Young spokesperson,
please contact: Megan Bailey at (403) 206-5037 or megan.bailey@ca.ey.com; or:
Julie Fournier at (514) 874-4308 or julie.fournier@ca.ey.com; or: Amanda
Olliver at (514) 879-6556 or amanda.olliver@ca.ey.com; or: Kelly Peace at
(416) 943-3662 or kelly.peace@ca.ey.com


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