Canadian Mine 2021

At a glance

Canadian miners’ agility and buoyant prices for metals and minerals have helped the industry thrive throughout much of 2020 and into 2021.

Recent successes have put Canada’s mining companies in an enviable financial position, creating new opportunities for them to build on the momentum to further their growth in 2021 and beyond.

This is the time to embrace bold moves to digitally transform their businesses, accelerate progress on climate change and other ESG initiatives and create value through a more strategic approach to M&A activities.

Canada’s mining sector has continued to thrive after the initial uncertainty of the COVID-19 pandemic gave way to a resumption of operations and a recovery for commodity prices that has delivered significant gains to investors throughout much of 2020 and into 2021.

With a long history of developing effective health and safety protocols and working with governments and health officials, Canadian miners minimized disruption at the start of the pandemic by acting quickly and decisively. Companies streamlined communications, adjusted on-site work schedules to limit potential exposure, introduced new protective gear, directed technical and support staff to work from their homes and collaborated with industry associations to share information with one another in an effort to better protect people from the virus. They also supported local communities through donations and rapid-testing programs.

This agility put many Canadian miners in a good position to benefit as prices of commodities like gold, copper and iron ore began to rise last year and have generally remained strong in 2021.

“Canadian miners have built on their successes in navigating the COVID-19 pandemic to continue growing in 2021. With cash on hand and conditions looking favourable for further growth, now is the time to act boldly in embracing the next stage of change and transformation.”

Kevin Chan, National Mining Leader, PwC Canada

Accelerating growth for Canadian miners

Gold, for example, hit record highs above US$2,000/oz in August 2020 before settling down to an average US$1,771/oz for the year, representing a substantial increase from US$1,394/oz in 2019. The spot price for the precious metal was at a similar level—US$1,756.95/oz—on September 30, 2021. The industry continues to watch the price carefully as we enter the fourth quarter of 2021.

But the standout performer among commodities has been copper, which is a key ingredient in the ongoing shift to renewable energy infrastructure. Copper prices averaged US$2.81/lb in 2020, compared to US$2.72/lb in 2019, and have continued on an upward trajectory this year, hitting a record high in May. The spot price for the industrial metal was US$4.06/lb as of September 30, 2021. We expect the strong pricing environment for copper to continue amid high demand for the metal.

We expect a similar outlook for battery metals, such as cobalt, graphite, lithium and nickel, as demand is expected to outpace supply. We’re also looking to see more deal activity and strategic partnerships in battery metals and other critical minerals as miners look to seize the opportunity created by the transition to a low-carbon economy and industry players across the supply chain try to lock in their future supply.

We recently saw a move in this direction by one South African precious metals miner, Sibanye Stillwater Ltd., which signalled its immediate priority is to expand into battery metals, and we’ll be watching to see whether other precious metal mining companies follow suit. Canadian miners also have an opportunity to unlock value by positioning themselves for the expected growth of these resources, especially as federal and provincial governments in Canada focus on battery metals and critical minerals as a key part of the energy transition.

A time to act boldly

During this period of significant change, Canada’s mining sector finds itself in a strong position. Higher prices for gold, copper, iron ore and some other commodities have boosted many companies’ free cash flow and expanded their coffers.

At the same time, we’ve seen significant discipline from management teams. The uncertainty of 2020 demanded prudence, and companies responded by deferring capital expenditures, managing debt and returning dividends to shareholders. As a result, balance sheets, which were already very solid in 2020, have grown even stronger. Many of the larger companies are sitting on significant capital reserves and enjoying their best financial health in a decade or more. So how can Canadian miners build on this strength and momentum to accelerate growth in 2021 and beyond?

As the Canadian mining industry considers these questions, it has rarely been in a better position to act boldly. Explore perspectives on the path forward for Canadian miners below.

Key issues on Canadian mining companies’ growth agendas include:

How to accelerate adoption of transformative technologies, such as artificial intelligence, data analytics and cloud computing.

How they can play a key role in the shift to a low-carbon economy and incorporate environmental, social and governance (ESG) principles into their strategies.

How to create value in a market ripe for consolidation.

The possibility of geopolitical changes amid a complex business landscape that’s creating both challenges and new opportunities for the industry.

Perspective on the future for Canadian mining companies

How can Canadian miners accelerate progress on climate change and other ESG matters?

The pandemic has accelerated global expectations for a more sustainable economy. More than three-quarters (76%) of global mining and metals executives participating in our 2021 CEO survey said they were concerned about climate change and environmental damage, up from 57% a year earlier. This is leading many to increase their focus on their companies’ ESG performance as they accelerate efforts to reduce greenhouse gas emissions.

The rising focus on ESG matters represents a significant opportunity for Canadian miners, not only when it comes to playing a leading role in the transition to a low-carbon economy but also for long-term value creation. We’re increasingly seeing cases of shareholder value rising thanks to thoughtful ESG strategies, with shares of large and mid-sized public companies with higher-than-average ESG scores outperforming the broader market during the pandemic.

Customers’ priorities and preferences are shifting quickly, with some now willing to pay a premium for low-carbon mining products. Canadian miners have a chance to gain a competitive advantage by getting ahead of these trends. To do so, they should consider the full life-cycle impacts of their activities and look for ways to decarbonize their value chain.

A key aspect of the ESG journey is the rising momentum towards carbon neutrality or even net-zero emissions, a goal Canada is aiming to reach by 2050 and some Canadian miners are considering or already embracing as part of their own climate change targets. But we know miners face challenges in navigating a complex issue that will require major efforts to change how they operate. So what’s the path forward for Canadian miners? Explore insights from PwC Canada’s Mike Harris and Sarah Marsh on the road to carbon neutrality and net-zero emissions for Canadian mining companies.

The keys to creating value as the M&A momentum picks up in Canada’s mining industry

Mergers and acquisition (M&A) activities have been on the rise in 2021, reflecting the mining sector’s resilience during the COVID-19 pandemic as well as high prices for copper and gold.

Another key driver will come from miners looking to replenish reserves after curtailing their exploration and development ambitions over much of the past decade in the face of low commodity prices and limited access to capital. The lengthy dry spell has left the marketplace with many single-asset companies looking for larger partners. Other factors driving deal activity, especially in the Americas, include low interest rates, buoyant stock markets and the prevalence of special purpose acquisition companies (SPACs). Some SPACs have been targeting companies that have or will play a role in transitioning the economy to a low-carbon future.

As some Canadian mining companies look to M&A activities to help fuel their growth, it will be essential for them to avoid the mistakes of previous buying sprees, when the high premiums paid and large amounts of debt held the industry back for years. Executive teams will need to focus on capital discipline and shareholder value, especially given past difficulties attracting investors after large acquisitions failed to deliver the results they had expected.

So how can Canadian miners ensure better outcomes from the next round of deals? Explore insights from PwC Canada’s Michelle Grant and Lauren Bermack on the four key levers for creating value for your company.

How Canadian miners can take a strategic path to digital transformation

While Canadian mining executives have known for some time that technology plays a critical role in improving their companies’ efficiency and value, the pandemic has only accelerated miners’ digital transformation plans.

The push to transform continues to advance, with 70% of top executives at global mining and metals companies participating in our 2021 CEO Survey planning to increase their investments in digital transformation over the next three years. Helping drive these plans are other priorities uncovered in our survey: 72% of CEOs in the sector are looking to expand through organic growth, while 67% are looking to boost operational efficiencies. Digital transformation will be key to delivering on those priorities.

While Canadian mining companies are increasingly looking at digital initiatives like upgrades to their enterprise resource planning (ERP) systems, it’s important to establish a clear plan for how this will drive value before implementing such a large change. This requires a strategic approach that starts with a clear vision of what the transformation program is aiming to deliver and how the company will go about achieving it.

%

of top executives at global mining and metals companies are planning to increase their investments in digital transformation over the next three years

%

of CEOs in the sector are looking to expand through organic growth

%

of CEOs in the sector are looking to boost operational efficiencies

How Canadian miners can harness ‘unique opportunities’ for their industry

It’s an exciting time for mining companies, with many feeling more optimistic than they have for some time. Still, there are many risks that could impact miners’ ability to sustain their rising performance, including increased regulations, geopolitical uncertainties, supply chain disruptions, rising costs and climate change.

How can Canadian miners navigate this complex landscape? Explore insights from the Eurasia Group’s Robert (RJ) Johnston on the issues facing the mining industry and how companies can respond.