“As commodity prices continue to increase, appetite for investment in existing projects is expected to grow,” says Jim MacLean, EY Canadian Mining & Metals Leader. “In an effort to improve balance sheets companies are looking for lower-risk havens for investment and that means investing in proven assets.”
The recently published EY Business risks facing mining and metals 2017-2018 report identifies current challenges in the investment landscape. Regulatory risk and social license to operate appear as two of the top 10 business risks facing the sector.
From higher taxes and royalties to increased government share of ownership, governments around the world – including Tanzania and the Democratic Republic of Congo – are changing various mining laws and contributing to an uncertain investment climate for producers.
“Growth ambitions will continue to be influenced by commodity price volatility,” says Jay Patel, EY Canadian Mining & Metals Transactions Leader. “Improving Chinese economic sentiment and tight inventories suggest zinc prices will maintain their upward trajectory. Meanwhile, nickel prices are expected to remain volatile due to global oversupply countered by sustained high demand for stainless steel in China. Copper is expected to continue its climb thanks to declining supply, a weakening US dollar and Chinese industrial growth.”
Special section – Q&A with David Garofalo, President and CEO of Goldcorp Inc.
The EY Canadian Mining Eye also features an interview with David Garofalo, President and CEO of Goldcorp Inc. Garofalo discusses how gold remains a safe haven for investment as interest rates and inflation increase.
Garofalo told EY: “Stock markets are buoyant, unemployment is low and industrial utilization is high, all pointing to a coming cycle of high inflation and central banks trying to play catch up. History has demonstrated that gold does well as an asset class at the beginning of a monetary tightening cycle with central banks slow to remove excess liquidity, out of fear of tipping the economy into recession. Gold preserves capital as inflation eats away at financial assets.”
Read more from Garofalo on how he believes joint ventures might be the key reducing risk while moving forward and growing.
The Canadian Mining Eye tracks Canadian mining sector performance of 100 TSX and TSXV mid-tier and junior companies with market capitalizations at the end, broadly falling between CDN$3.3b and CDN$121m.
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