Following an 8% quarter-over-quarter gain in Q4 2018, gold prices continued to increase by 1% in the first quarter of the year. This was due, in part, to the possibility of fewer US Federal Reserve rate hikes in 2019 and will likely continue to benefit gold prices in the near-term.
“Gold production estimates are up in Canada with several major projects expected to begin or expand production this year,” says Jay Patel, EY Canada Mining & Metals Transactions Leader. “Capital expenditures are also increasing reflecting renewed confidence in the sector.”
Base metal prices also faired well in Q1 2019. A surge in demand for electric vehicles (EVs) boosted nickel prices by 22% following a 15% decline in Q4 2018. The outlook for nickel remains positive with ongoing demand for stainless steel and reduced inventory levels.
Similarly, zinc and copper prices increased by 19% and 9%, respectively, in the first quarter and are likely to benefit in the near-term from declining inventories and tight market conditions.
“Improving market conditions are inspiring new confidence in the mining and metals sector and putting growth back on the boardroom agenda,” says Jeff Swinoga, EY Canada Mining & Metals Leader. “To stay competitive in a transformed operating landscape, miners must develop bold strategies that accelerate productivity, improve shareholder returns and win investor confidence. The qualities that define long-term success aren’t the same as they once were.”
EY research suggests that mining and metals deal activity will continue to shift from divestment-led to investment-led with a focus on replenishing portfolio growth options in the near-term.
Special section – Q&A with Marie Inkster, President, CEO and Director, Lundin Mining
The EY Canadian Mining Eye Q1 2019 features an interview with Marie Inkster, President, CEO and Director, Lundin Mining, who discusses the importance of culture, license to operate and technology on the path to growth in the mining and metals sector.
Inkster tells EY: “All companies need to be intentional in how they enable honest, transparent and open discussion with the communities where they operate, and how they respond to their questions and concerns. This is true throughout the lifecycle of a mine, from early exploration through post-reclamation monitoring. Even before the first drill hole there must be open and transparent engagement with the community and other stakeholders, and that will set the tone for the entire project.”
To access the complete interview and the Canadian Mining Eye Q1 2019, visit www.ey.com/ca/miningeye.
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