Following several quarters of decline, the Canadian Mining Eye index increased by 5% in the first quarter of 2019.
The index, which tracks the mining sector performance of 100 TSX- and TSX-V-listed midtier and junior companies with market capitalisations falling between C$158-million and C$2.2-billion, is reflecting renewed confidence in the sector, as gold and base metal prices strengthened.
The gold price increased by 1% in the first three months of the year, building on an 8% increase in the fourth quarter, and EY says that fewer US Federal Reserve rate hikes are expected this year, which will benefit the yellow metal’s price in the near term.
The gold price strength coincides with strong estimates for gold production in Canada, as several projects are expected to begin or expand production this year, says EY Canada mining and metals transactions leader Jay Patel.
“Capital expenditures are also increasing, reflecting renewed confidence in the sector,” he notes.
Similarly, zinc and copper prices increased by 19% and 9%, respectively, in the first quarter and are likely to benefit in the near-term from declining inventories and tight market conditions.
“Improving market conditions are inspiring new confidence in the mining and metals sector and putting growth back on the boardroom agenda,” comments EY Canada mining and metals leader Jeff Swinoga.
“To stay competitive in a transformed operating landscape, miners must develop bold strategies that accelerate productivity, improve shareholder returns and win investor confidence. The qualities that define long-term success aren’t the same as they once were,” he adds.
EY states that mining and metals deal activity will continue to shift from divestment-led to investment-led with a focus on replenishing portfolio growth options in the near term.