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Gold rally, Chinese demand a boon to Canadian miners

  • Friday, July 31, 2020
  • Source:ferro-alloys.com

  • Keywords:China,Canada
[Fellow]Gold rally, Chinese demand a boon to Canadian miners

[ferro-alloys.com]Canada could see a wave of new gold deals and mines built in the coming months and years, thanks to strong bullion prices and improved demand for metals from China, EY analysts believe.

According to the consultancy’s Canadian Mining Eye index — which tracks the performance of 100 Toronto Stock Exchange and TSX Venture Exchange mid-tier and junior mining companies with market capitalizations of between $240 million and $3.6 billion— local miners are likely to continue benefitting from gold’s upward trajectory.

Prices for the yellow metal increased by 11% in the March-June period this year after a 6% gain in the previous quarter. The metal is expected to remain near historic highs on the back of US dollar weakness, government stimulus, geopolitical tensions and low interest rates, EY says.

That means that gold projects investors long shrugged off or ignored are suddenly back in reach for chief executives. IAMGOLD’s (TSX IMG), (NYSE: IAG) recent decision to move ahead with its Côté gold project in northern Ontario, Canada, is a case in point.

Construction at the $1.3 billion, open-pit project, in which joint-venture partner Sumitomo Metal Mining has a 30% stake, is slated to begin in the third quarter. Commercial production is expected in the second half of 2023.

Base metals, another sector with a strong Canadian presence, also saw an uptick in the quarter. Prices for copper, nickel and zinc climbed by 22%, 12% and 7% respectively. EY expects copper to continue rising, while nickel and zinc are projected to experience downward pressure in the near term.

“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,” Jeff Swinoga, EY Canada Mining & Metals Co-Leader, said in a statement.

The Canadian Mining Eye index reflected the investment environment with a dramatic 72% rebound in Q2 2020. That compares to a 29% decline in the first three months of the year amid the impact of the coronavirus pandemic.

“This activity is expected to continue as buyers remain cautious and focus on minimizing costs and maximizing shareholder returns,” Swinoga notes.

Merger of equals boom

EY also predicts more zero premium deals  — mergers of equals where no premium is paid by the buyer. This trend will be boosted by buyers’ current focus on minimizing costs, increasing liquidity and maximizing shareholder returns, the consultancy says.

A recent report from PwC highlighted that Canadian miners entered the pandemic crisis in a good position, as most boasted strong balance sheets and improved liquidity.

The consulting firm said last week that miners have generally weathered the pandemic well, with mines in Canada and other countries continuing to operate because of their essential status.

PwC related that companies will have to continue building on their efforts in cybersecurity; environmental, social, and governance (ESG); and mergers and acquisitions to position themselves for long-term growth.

(Mining.com)

  • [Editor:王可]

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