Following a 5% drop in Q2 2018, gold prices decreased by another 5% in the third quarter. This decline was mainly due to the strong US dollar and the recent Federal Reserve rate hike of 0.25% in September. In the long term, while ongoing trade tariffs in US and China and seasonal demand could push gold prices upwards, the possibility of more rate hikes in the near future are likely to dampen that trend.
“Despite the decline in gold prices, most of the large-cap gold companies are looking to finish the year strong,” says Jay Patel, EY Canada Mining & Metals Transactions Leader. “Because of improving grades and production ramp-ups, most senior companies have maintained their production guidance for the year.”
Nickel prices decreased 16% in Q3 2018 compared with a 12% gain in Q2 2018. Still, nickel prices are expected to increase due to strong demand from rechargeable batteries used in electric vehicles (EVs) and declining inventories in 2018.
Copper and zinc prices continued to decline for the third consecutive quarter, with a 5% and 9% drop, respectively. Prices for both are expected to increase in the near term due to supply constraints.
“Cobalt is still one of the most talked about opportunities in mining,” adds Patel. “EVs are getting even more popular and we’re seeing that reflected in the demand for rechargeable batteries. We expect this trend to drive a big part of cobalt demand in the next five years or so, boosting prices.”
Special section – Q&A with Peter Marrone, Founder and Executive Chairman of Yamana Gold
The EY Canadian Mining Eye Q3 2018 also features an interview with Peter Marrone, Founder and Executive Chairman of Yamana Gold, who discusses the challenges mining companies face and where digital mining fits in.
Marrone tells EY: “I do believe being disciplined around digital mining is important and that we need to do our homework in understanding new technology/electronic computing or AI such that it’s beneficial for us. If we engage with the right third parties, pick the right partners and vet the knowledge we have with our partners, we hope to set a good course on innovation.”
To access the complete interview and the Canadian Mining Eye Q3 2018, visit ey.com/ca/miningeye.
The EY Canada Mining & Metals team is available to offer insight into the report’s findings.
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