“Increased demand from China, along with the government’s infrastructure stimulus package, are helping to stabilize commodity prices and drive transaction activity,” says Jay Patel, EY Canada Mining & Metals Transactions Leader. “The good news is that Canada remains an attractive destination for foreign capital. Recent transactions show a trend toward zero premium deals to obtain cost, operation and corporate synergies — plus offer an opportunity to gain more diversified portfolios. This activity is expected to continue as buyers remain cautious and focus on minimizing costs and maximizing shareholder returns.”
Gold prices increased by 11% in Q2 2020 after a 6% gain in the previous quarter and are likely to continue their upward trajectory, underpinned by weakness in the US dollar, government stimulus, geopolitical tensions and low interest rates. Similarly, base metals also saw an uptick with copper, nickel and zinc increasing by 22%, 12% and 7% respectively. Copper is likely to continue rising while nickel and zinc are due to experience downward pressure in the near term.
“The mining and metals industry has fared quite well despite the challenging landscape brought on by the pandemic,” says Jeff Swinoga, EY Canada Mining & Metals Co-Leader. “This isn’t the first time this sector has had to face adversity. Having the right tools and strategies in place has helped them to weather through. Now, with the easing of lockdowns, stimulus packages and liquidity measures by global central banks, organizations can start to switch gears towards growth and transformation.”