Ernst & Young Study Finds 'Consistently Disappointing' Metal Price Forecasts

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...The analysts/study authors, Lee Downham and Tim Williams, asserted that the market "is undervaluing mining assets by not fully appreciate how long demand will outstrip supply."

A recent study by Ernst & Young has revealed that, despite the high level of expertise found among metals analysts, "the accuracy of outcomes for the recent metal price forecasts has been consistently disappointing."

Meanwhile, study authors Lee Downham and Tim Williams also noted that "the pace of consolidation in the mining industry shows no signs of slowing. The continuing, robust levels of metal and minerals prices are fuelling the drive for growth through acquisition."

In their study, Downham and Williams found that US$70 billion in transactions took place in 2006 and that this year "may well see even more, particularly if BHP Billiton's recent offer for Rio proves successful."

"All of these transactions have taken place in an environment where commentators speak of the sector being near the ‘top of the cycle' and analysts predicting huge declines to current metals prices in the long term."

The analysts asserted that the market "is undervaluing mining assets by not fully appreciate how long demand will outstrip supply."

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