Sources available to offer insight on most recent mining and metals results
TORONTO, March 4, 2016 /CNW/ - The Canadian Mining Eye index gained 2% during Q4 2015, a significant improvement from a 17% decline in Q3. Looking beyond the last quarter, although the operational and financing benefits from leaner balance sheets and expected improvement in demand/ supply equation will affect the mining industry positively; further declines in metal prices are a risk the sector is focused on.
"The mining sector's profitability is under pressure globally as companies continue to restructure their portfolios to reduce their debt burden," says Bruce Sprague, EY's Canadian Mining & Metals Leader. "But it's not all gloom and doom. Canadian mining assets – whose production costs are incurred in Canada dollars – are expected to benefit in US dollar commodity trading, as the Canadian dollar remains weak compared to the US dollar."
Looking at individual commodities, many are still reporting declines. EY's Canadian Mining Eye: Q4 2015 highlights ongoing challenges with prices, which have been impacted by things like the economic slowdown and decline in manufacturing activities in China. Some of the price declines include:
- Gold decreased by another 5% in Q4, after a 5% decline in Q3
- Copper tumbled 9% during the quarter
- Nickel and zinc were down 15% and 16% respectively
"The debt-laden mining industry underwent significant portfolio restructuring in 2015 through asset sales, financings and streaming arrangements," says Jay Patel, EY's Mining & Metals Transactions Leader. "M&A activities may be subdued in the near term, but juniors with short timelines to production may see opportunities as M&A targets in 2016. At the same time, operational and financing benefits from leaner balance sheets will likely have a positive effect."
Special section – Q&A with Matt Manson, CEO of Stornoway Diamond Corporation
EY's report also features highlights from an interview with Matt Manson, CEO of Stornoway Diamond Corporation. Manson shares his industry insights, and told EY, "We had those at the top of the last cycle claiming the paradigm had changed and growth was here to stay. We have those at the bottom of the cycle today who are claiming the paradigm has changed and stagnation or further decay is here to stay. Both are, of course, wrong. Now the industry is going through a painful process of balance sheet repair."
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$1.6b and CDN$47m.
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SOURCE EY (Ernst & Young)
For further information: EY's Canadian Mining & Metals team is available to offer insight into the report's findings. To reach a spokesperson, or for more info, please contact: Leigh Kjekstad, [email protected], 604 648 3807; Sasha Anopina, [email protected], 416 943 2637; Julie Fournier, [email protected], 514 874 4308