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Beyond the downturn

A focus on financial discipline and innovation in Canadian mining

Highlights and analysis

The top priority for Canada’s large mining companies going into 2017 will be capital allocation, directing money to the right projects and advancing them with the necessary funding in place, says Liam Fitzgerald, PwC’s Canadian Mining Leader. It’s also important that companies retain lessons learned over the last few years about prudence, resilience and financial discipline.

The mine of the future will embrace innovation and non-traditional ideas to overcome challenges and achieve success. The sector may also see new players from other industries enter the mining business, trying to take over and redefine mining in segments such as lithium.

An interview with Liam Fitzgerald, PwC Canada Mining Leader

Whether Tesla Motors or other non-mining companies make a bigger play in the mining sector…that'll be the key indicator of whether the incumbents will still rule the mining sector in 15 years’ time

Liam Fitzgerald, PwC Canada Mining Leader

TSX: The big picture

The 230 mining companies listed on the TSX made up 11% of the market’s total $2,596 billion market capitalization as of August 31, 2016. That figure represented a 3% increase in the relative weight of the sector from a year earlier, even as the number of mining companies listed decreased by 12%. The market data highlights the importance of mining to the Canadian economy. 

In the 12 months ended August 31, 2016, and despite gold prices dropping lately, the market capitalization of all 230 miners increased by 44%, crushing the 8% gain racked up by the overall market. Mining stocks led all industries in terms of trading volumes in the first eight months of the year, with activity almost twice as high as that of the No. 2-ranked oil and gas sector.

The impressive rally in the price of gold was one of the most significant drivers of valuations. Sixty percent of the mining companies listed on the TSX have exposure to gold, whose value gained as much as 22% by the middle of the year, as investors sought a haven in the face of global economic uncertainty. 

Market capitalization by sector of the total TSX (As of August 31, 2016)

Beyond the Downturn: Market capitalization by sector of the total TSX
Pie chart

Volume traded on TSX by sector (As of August 31, 2016)

Volume traded on TSX by sector
Chart 2

The Top 25

Five companies broke into the top tier with explosive valuation growth driven by rising prices of precious metals. The new entrants to the Top 25 are: Pan American Silver Corp., First Majestic Silver Corp., OceanaGold Corp., Alamos Gold Inc. and Torex Gold Resources Inc. Among the other 20 companies, 11 saw their valuations more than double over the 12-month period.

Although at least 17 of the top 25 miners on the TSX have exposure to gold, it’s more than just bullion prices that are driving valuations. Cash flow analysis shows the largest companies are focused on operating cost reductions, restoring balance sheet health and continued disciplined capital allocation. To help implement this strategy several companies have increased investment in technology and innovation to improve efficiencies and reduce risks.


Number of companies by market capitalization
Chart 3

Number of companies by market capitalization
(As of August 31, 2016 and 2015)


The economic downturn has reduced the tolerance level for risk in the industry at the same time as geopolitical volatility has been on the rise. As a result, many mining companies are looking to diversify their portfolios, adding assets in markets considered relatively stable—such as North America and parts of South America—to offset the risks of projects in more troubled locations, including many regions of Africa. Some mining companies that still face weak commodity prices continue to focus on consolidation. 

Cash flow analysis for the top 25 Canadian mining companies
($ million CAD)

Adapting well in volatile times

Beyond the downturn highlights an industry in better shape than it has been in several years, with investment beginning to flow back into strategic acquisitions and capital projects as we near the end of 2016. Many of the gains have been driven by gold, although certain base metal prices have begun to rally.

However, the future remains unclear as there is a possibility that significant political and economic uncertainty around the world could translate into downward pressure on commodity prices in 2017.

But the positive takeaway from this report is that many companies are adapting well to these volatile times by imposing disciplined capital allocation, making savvy deals, rebalancing their portfolios for risk and employing new technology and innovations to improve performance and safety.

Two mining workers walking in a tunnel

Interview with the experts

Transaction of the year: Centerra and Thompson Creek

Even before Centerra Gold Inc. learned about the financial troubles at Thompson Creek Metals Co. Inc., it knew it wanted to diversify its portfolio. The Toronto-based company’s key asset, the Kumtor gold mine in the Kyrgyz Republic, was profitable but carried political risk.

Centerra has reduced some of that risk with projects in Ontario, Turkey and Mongolia. In 2015, for example, it formed a joint venture with Premier Gold Mines Ltd. for joint ownership and development of the Greenstone Gold Property in the Geraldton-Beardmore Greenstone belt in Ontario. But it was Centerra’s decision to buy Thompson Creek for US$1.1 billion, announced last July, that’s proving truly transformative. 


"For Centerra, one of our key objectives was to diversify our portfolio. We felt that Thompson Creek provided that opportunity to us."

Darren Millman CFO, Centerra Gold Inc.

Looking past short-term volatility

A year and a half after merging with AuRico Gold Inc., the new Alamos Gold Inc. is focused on insulating itself as best as possible from the unpredictable forces that define so much of the sector.

With three operating mines in North America and exploration and development projects that extend to Turkey, the intermediate-sized miner is carefully building a diversified portfolio of assets to reduce risk.


“The benefits of diversification are that if one asset is underperforming, the others can be outperforming to make that up, and we've seen that throughout this year.” 

Jamie Porter, CFO, Alamos Gold Inc.


Forecasting $5,000 an ounce but exercising the law of discipline

The Chair and Chief Owner of McEwen Mining is extremely optimistic about gold prices, but he’s less certain whether base metals will follow the precious metal’s lead.

The Western world’s big experiment with monetary stimulus, fears of more terrorist strikes and geopolitical risk in Ukraine and the South China Sea are just some of the volatile forces that will drive investors to gold as a haven, says Rob McEwen. 


“Two thousand [dollars an ounce] is an easy shot. I’m beyond that. I’m up at $5,000.” 

Rob McEwen, Chair and Chief Owner, McEwen Mining

Contact us

Kevin Chan

Kevin Chan

National Mining Leader, PwC Canada

Tel: +1 416 941 8321

Monica Banting

Monica Banting

Partner, Eastern Canada Mining Leader, PwC Canada

Tel: +1 416 941 8233

Mark Patterson

Mark Patterson

BC Mining Leader, PwC Canada

Tel: +1 604 806 7160

Maxime Guilbault

Maxime Guilbault

Quebec Mining and Metals Leader, PwC Canada

Tel: +1 514 205 5448

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