Mining index posts solid gain after Q2 drop

EY’s Canadian Mining Eye index gained 2% in Q3 2017, following a 7% decline last quarter, reveals the firm. Increases across the board in precious and base metals drove the gain.

“As commodity prices continue to increase, appetite for investment in existing projects is expected to grow,” says Jim MacLean, EY Canadian mining and metals leader, in a release. “In an effort to improve balance sheets, companies are looking for lower-risk havens for investment, and that means investing in proven assets.”

Read: Junior mining shows ‘delicate recovery’

Key commodity price changes in Q3 are shown below.

Risks

Regulatory risk and social license to operate appear as two of the top-10 business risks facing the sector, reveals an EY report.

From higher taxes and royalties to increased government share of ownership, governments around the world — including Tanzania and the Democratic Republic of Congo — are changing various mining laws and contributing to an uncertain investment climate for producers.

Read: Canadian mining companies know how to beat market downturns

Outlook

“Improving Chinese economic sentiment and tight inventories suggest zinc prices will maintain their upward trajectory,” says Jay Patel, EY Canadian mining and metals transactions leader. “Nickel prices are expected to remain volatile due to global oversupply countered by sustained high demand for stainless steel in China.”

Read: Chinese sectors to choose — and lose

He expects copper to continue to climb, thanks to declining supply, a weakening U.S. dollar and Chinese industrial growth.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.