So said RFC Ambrian Perth-based research head Duncan Hughes in his Metals & Mining Outlook for 2014 report, which was realistic about flattening cost-curves over and subdued prices over the next two years but much more buoyant further out.

It contrasts with RFC’s pre-Mines and Money London 2012 report, optimistically titled Mines and Money: More ups than downs, which said the commodity price softening that preceded the conference was “merely a bump in the road”, with the commodity super cycle set to continue, albeit at a more subdued rate, for “many years to come”

This year’s optimism was based on the back of ongoing strong demand from emerging markets and increasing production discipline forced on the industry from investors fed up with growth for growth’s sake, which has only brought destruction on miners and burned up shareholders’ precious dollars.

“In our view, capital allocation remains the dominant theme across the mining sector,” Hughes said in his report.

“The boom years of commodity price appreciation led to many extremely complacent capital allocation decisions.

“Numerous mining companies destroyed shareholder value through overpriced acquisitions and expensive, poorly executed greenfield projects.

“With mining industry capital expenditure and average debt levels expected to fall further over the next couple of years, we think investors in large/mid-cap mining stocks are likely to demand the return of excess capital.”

The equity and debt markets remained tough for the capital-constrained junior mining sector, Hughes added, although some recent signs had been more encouraging.

“The good news is that we expect the door to remain firmly open for companies able to demonstrate value-accretive growth, preferably with near-term production and an experienced management team,” he said.

“The recent ‘value destruction’ in the mining sector also suggests a clear preference for experienced management teams with ‘skin in the game’ [that is, management teams that are also shareholders].”

It continues themes reiterated as long ago as Mines and Money London 2012, when McEwen Mining CEO Rob McEwen told delegates that senior management’s short-sightedness was best highlighted by their lack of meaningful share ownership.

Beyond the looming protracted period of current carnage, Hughes said RFC saw longer-term value in the greenfields exploration sector, while current exploration spend was contracting across the mining industry, led by the majors.

BHP Billiton has reduced greenfield exploration expenditure in every metal except copper porphyry targets in Chile and Peru – a promising sign for the many Aussie juniors that have already identified opportunities in those Latin American countries.

“With most commodity markets currently in surplus, we expect relative mining equity performance to be influenced more by bottom-up fundamentals than top-down commodity preferences,” Hughes said.

“We believe the choice of commodity is much less important than the project’s position on its respective cost curve, its capital intensity and the quality of management.”

Although RFC expects the global economy to continue its gradual recovery through next year, Hughes noted Bloomberg consensus forecasts that all of the base metal markets are expected to be in surplus over the next two years.

“This picture also appears to be replicated across bulk commodities and precious metals,” Hughes said.

“Within the base metals, copper surpluses are expected to grow in magnitude, while surpluses for other metals are expected to moderate from very high levels.

“This suggests to us that copper’s historical outperformance is unlikely to continue in the short term, although its longer-term fundamentals still appear favourable.”