Positive reports predict resurgence of Canadian mining industry
Two new reports are touting a Canadian mining industry resurgence. — Photo courtesy engine-driver.com
Coming off the recent upbeat tone of the Prospectors and Developers Association of Canada (PDAC) convention last week, two new reports are touting a Canadian mining industry resurgence, in the gold, coal and zinc sectors.
Canadian gold projects once shunned by miners in favour of more alluring opportunities overseas are regaining their sheen, as a weaker currency, new tax breaks and greater security of tenure are wooing miners to return home, states a recent Reuters report.
"Canada is, for all intents and purposes, one of the best places you can explore," said Ian Ball, president of Abitibi Royalties, in the report. "It had fallen out of favour a bit, but it is coming back quite rapidly."
Of 13 major equity financing deals announced by Canadian mining companies this year, 12 were focused on funding gold assets. And eight of those were specifically to fund work tied to Canadian gold projects, an indication of where investors see value the report noted.
"Everything is happening in Canada. One because it is a safe jurisdiction and two because of a much weaker Canadian dollar," continued Abitibi's Ball. The (the recent Federal) tax credits will help. Canada is experiencing a resurgence in gold, it is a cycle and we may well fall out of favour again, but right now Canada is coming back."
Anup Singh a noted market analyst also predicts a recovery in coal prices and states that an increase in zinc demand will buoy companies like Teck Resources.
“The massive drop in coal pricing has weighed on Teck Resources, as the company gets 39% of its revenue from steelmaking coal. Teck, however, should benefit from a gradual increase in coal pricing due to better economic activity in China and an expected increase in the pricing of Australian coal,” stated Anup Singh, market analyst. “Teck gets 31% of its revenue from zinc, and it is seeing an increase in demand and pricing in this segment. Demand for zinc is expected to exceed supply going forward, and this will allow Teck to improve its overall financial performance.”
Singh also states, “Steel consumption and demand in China will act as a key driver behind the recovery of this segment, and there are some positive signs in this area. Economic activity in Chinese factories is picking up, as the country's HSBC/Market Purchasing Managers' Index (PMI) reached a seven-month high last month.”
He concludes, “As economic activity picks up in China, Teck Resources' coal business should start getting better.”
Singh also notes, “Teck is seeing strength in its zinc segment, which accounts for 31% of its revenue. The price of zinc increased 13% last quarter, resulting in a 50% jump in its gross profit in this segment. As such, the growth in its zinc business is mitigating the decline that Teck is seeing in its coal and copper businesses.”
He observes that Teck's zinc business is being driven by the Red Dog mine. The company has accelerated zinc production at this mine by deploying higher mill throughput that lead to softer ores and better recoveries. As a result, its concentrate production in zinc expanded 13,000 tonnes, with leaden concentrated production increasing 12,000 tonnes, or 50%, in the last reported quarter. In addition, the company has restarted zinc production at its Pend Oreille mine. Teck expects to clock annual production of 44,000 tonnes in the second quarter.
He concludes, “Hence, it is clear that the company is trying to offset the weakness in the coal segment by aggressively focusing on the zinc business, and this is a smart move in my opinion.”
“Right now Canada is coming back,” is great news for the mining industry.
