Keeping an eye on mining

The overall outlook for mining remains strong after a key index that tracks the performance of Canadian mid-tier and junior mining companies ended 2020 with continued growth.

EY’s Canadian Mining Eye was up 9 per cent in Q4 2020 following a 10 per cent increase in the prior quarter.

While the price of gold remained stagnant at the US$1,900 level in Q4 due to COVID-19 vaccine breakthroughs and a weaker U.S. dollar, base metal prices continued their growth momentum on the back of strong Chinese demand. Copper prices increased 16 per cent after an 11 per cent increase in Q3, according to the report.

Nickel and zinc prices each recorded an increase of 14 per cent. Nickel prices are expected to remain bullish in the near term, triggered by the global economic recovery and accelerated production of electric vehicles. Zinc prices should also remain elevated owing to Chinese demand.

Iron ore prices are expected to remain high in the short term driven by tight supply conditions. The global iron ore market is expected to remain in deficit in the medium term amid a slower ramp-up in Brazilian exports and strong Chinese stainless-steel demand.

Jay Patel, EY Canada mining & metals strategy and transactions leader, says economists around the world expect U.S. inflation to rise in the coming months on the back of global economic recovery, supported by various governments’ fiscal and monetary stimulus initiatives.

“With inflation pressures rising, we can anticipate continued demand for precious metals,” he adds.

EY Canada’s mining & metals co-leader Jeff Swinoga says with economic recovery on the horizon, he is optimistic that the mining sector’s growth momentum will continue.

“We’re already starting to see how expected government stimulus packages – such as China’s new five-year plan for greener production, Europe’s Green Deal and the planned package from the U.S. – are driving sustainable infrastructure development and, in turn, greater demand for base metals like copper,” he says, adding that rare earth metals like nickel and cobalt are also benefiting from green-led initiatives, as the production of electric vehicles accelerates.

For more information, visit https://www.ey.com/en_ca/mining-metals/canadian-mining-eye/canadian-mining-eye-q4-2020

Advertising feature produced by Randall Anthony Communications with Prospectors & Developers Association of Canada. The Globe’s editorial department was not involved.