What’s the outlook for Canadian mining companies?
Photo courtesy of Lundin Mining Corp.
It’s an interesting time for the mining industry in Canada. On the one hand, renewed mergers and acquisitions activity has brought the industry into the spotlight after years of speculation about when the sector would start to see more momentum. After a period of internal restructuring, companies are looking outward for opportunities.
On the other hand, the overall growth outlook is uncertain. While forecasts suggest prices for commodities like gold and other metals will stabilize in the coming years, there are few signs of a significant upswing. As our recent CEO Survey found, business leaders have become notably less optimistic about the economy and their own prospects in the coming years, and CEOs in the industry sector that includes mining companies were largely in line with that view.
A recent report from the Mining Association of Canada noted some of the challenges the industry is facing. While it pointed to several actions governments can take to increase competitiveness, the industry faces a number of issues that will require companies to continue to look inward as well.
Exploration and development will remain a significant challenge, particularly since junior mining companies will likely continue to find it difficult to attract investment. Royalty and streaming and private equity funding tends to favour more advanced projects, while debt financing is often out of reach for many smaller mining companies.
For larger mining companies looking to shore up their positions and replenish their reserves, that puts an even greater focus on funding exploration and development themselves and on deal activities.
While some companies may resist formal mergers, joint ventures are an alternative way of generating synergies and accessing the capital they need to position themselves for growth.
Cost controls will also continue to be a significant concern, and that, combined with the renewed deals activity, will put the spotlight on attracting and retaining talent in order to navigate the shifting environment. As our CEO Survey found, the availability of key skills was a top threat to growth identified by business leaders in the industry sector that includes mining. More than half of CEOs in the sector believe they can’t innovate effectively as a result of that skills gap.
For mining companies, 2019 will be a year of new opportunities. Recent merger activities are renewing prospects for growth and investment, but the challenge will be to harness the opportunities while avoiding the mistakes of the past.
The mergers are also creating a big shift in the Canadian mining landscape, with some of the bigger players reducing their presence here as a result of the new combinations. For those that find the right merger opportunities, uncover the best formulas for executing them and then layer on agile ways of working and other aspects of holistic digital transformation, the opportunity is there to become the next great Canadian mining company.
Senior Director, Consulting, PwC Canada
Tel: +1 416 687 8864
Quebec Mining Leader, PwC Canada
Tel: +1 514 205 5448
Director, Consulting & Deals, PwC Canada
Tel: +1 416 815 5323