Canadian Mining Eye index sees first gain in a year (+4%): EY

Bruce Sprague, EY’s Canadian Mining & Metals Leader. — Photo courtesy EY/Amec

“While Canadian mining equities continued to face downward pressure due to weakness in metal prices, a few companies surprised investors with better-than-expected financial results, higher production data, accretive acquisitions and steady progress on planned projects,” says Bruce Sprague, EY’s Canadian Mining & Metals Leader. “While companies remain cautious about their capital expenditure and are focusing only on high-return, priority investments – that strategy seems to be paying off.”

The Canadian Mining Eye: Q2 2015 highlights the macro-economic concerns companies are dealing with that have contributed to a further slide in Q2 2015 prices, including:

• A strong US dollar bolstered by the expectations of a US Federal Reserve interest rate hike, lower global inflation expectations and weak physical demand in China put pressure on gold.
• Gold was also hit by the latest Greek bailout plan, which eased fears of Greece exiting the Eurozone, drying up safehaven purchases.
• Weak Chinese demand and the Greek crisis led to a continued slide in base metals.

EY’s report also features an interview with Aaron Regent, Founder and Managing Partner of Magris Resources, where he shares his perspectives on the industry. As part of that interview, Regent told EY, “For the industry overall, one of the top challenges over next few years will be managing through an environment of low commodity prices, which could last for some time. Companies will need to be very cost-conscious and to take steps to protect their balance sheets. Mining is a cyclical business and prices will recover at some point but it is always difficult to predict when.”

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$2.1b and CDN$160m.