New PwC report: Canadian miners adapting well in volatile times

By Ellsworth Dickson

PwC has just released a new report entitled Beyond the downturn: A focus on financial discipline and innovation in Canadian Mining that highlights the impressive performance of TSX-listed miners. For example, in the 12 months ended August 31, 2016, the market capitalization of 230 listed miners increased by a remarkable 44%, “crushing the 8% gain racked up by the overall market.” Indeed, the report noted that mining stocks led all industries in terms of trading volumes in the first eight months of the year.

During the four-year downturn of mining stocks, the companies that survived (hopefully) learned valuable lessons regarding “prudence, resilience and financial discipline” said PwC.

“Diversified miners will need to be careful regarding choices about where capital is deployed in terms of both commodity and jurisdiction,” said Liam Fitzgerald, Canadian Mining Leader, PwC. “They’re going to have to continue to make sure costs are managed and balanced with geopolitical risk.”

This means that the top priority for large Canadian mining companies going into 2017 will be “capital allocation, directing money to the right projects and advancing them with the necessary funding in place,” he added.

It is encouraging to see that the mining sector is ending the year in a stronger position than a year ago. However, there is a great deal of uncertainty and volatility in commodity prices and mining stocks themselves. While gold prices have recently declined due to gold sales by ETFs, the prices of other commodities such as copper and zinc have increased which bodes well for the base metal sector going forward.

The PwC study also reported: “Looking into 2017 and beyond, expect to see a growing reliance on new technologies that digitize and automate processes. Barrick Gold’s deal with Cisco Systems Inc. to improve productivity and efficiency by embedding technology in every aspect of the mining process serves as a prime example. The mine of the future will embrace innovation and non-traditional ideas to overcome challenges and achieve success.”

“The mine of the future will be one that, first of all, optimizes that nexus of energy, water and waste in a way that creates maximum value for the company, but also influences a shared value relationship with local communities,” said David Greenall, a Director of PwC’s consulting group on sustainability. “It will also be one that is low carbon and resilient to extreme weather.”

“There’s a fundamental need to work with First Nations to address the value that’s inherent in the mineral resource, in terms of sharing between the community and the mining company,” said Greenall.

To access the PwC report, go to https://www.pwc.com/ca/en/industries/mining/canadian-mine/beyond-the-downturn.html