Two upbeat repots into mining stocks in Canada put the sector firmly on investors’ radar this week, even as the gold price floundered. First quarter production figures added to the mining news flow, although these were not necessarily supportive for individual share prices.
PwC’s Canada Mining paper pointed to a solid start to 2019 for mining stocks, which have already recovered most of their losses after the aggregate valuation of the 218 mining companies on the Toronto Stock Exchange (TSX) fell almost 13% in 2018.
Dean Braunsteiner, National Mining Leader for PwC Canada, said: “Last year marked a turning point for the mining industry, and 2019 brings even more possibilities for companies to position themselves for the next stage of growth, exploration and development. While recent mergers were a sign of a wave of consolidation that will help companies better compete for capital, we can expect even more M&A activity in the near future. That creates a cascading effect of further deals as companies sell off non-core assets, which brings new opportunities for management teams to build the next big Canadian mining company.”
PwC acknowledged that junior mining stocks have also had to deal with the trend toward passive investment vehicles like ETFs. “With increased competition for investment dollars, some companies find themselves at a disadvantage on the equity markets,” it said.
Rival accountancy giant EY was also reporting on mining stock news with its latest Canadian Mining Eye. It noted that total gold mine production in Canada is now forecast to grow by 6% in 2019, faster than previous estimates.
“This improvement stems from increased exploration spending resulting in a strong buildup of the project pipeline in 2019” according to EY’s Eye. ”Major projects that are expected to begin production in 2019 include GoldCorp’s Borden project in Ontario, Agnico Eagle Mines’ Meliadine project in Nunavut and Barrick’s Hemlo mine in Ontario.”
Among the mining stock news driving the market, giant Anglo American (LON: AAL) posted a Q1 production drop as planned disruptions at its metallurgical coal division impacted figures.
Chief executive Mark Cutifani said: “Production is 6% lower in the quarter, with two planned longwall moves at metallurgical coal accounting for 80% of the reduction. Isolated production issues at Venetia (De Beers), Kumba Iron Ore and Platinum Group Metals made up the balance, mitigated by stronger operational performance from Copper, with a 4% production increase, and the ramp-up at Minas-Rio, which is ahead of plan following the restart of operations in December 2018.”
But he added: “By the end of the quarter we had increased our production run-rate, are on track to deliver this year’s production targets and our guidance is unchanged.”
Nevertheless, the figures weighed on the miner’s shares on the day. In further mining news, FPX Nickel (TSX-V:FPX) tweeted that its Decar nickel project ”has the potential to be a carbon neutral mine, marking a revolutionary step for the mining industry”. The junior nickel miner, which is based in Vancouver, cited the Engineering and Mining Journal’s latest Global Business Report to back its claim.
Gold stocks had a tougher time this week as the yellow metal came under pressure from strong US earning reports and housing data. A wave of better-than-expected earnings results from listed companies supported risk sentiment and put pressure on safe-haven gold.
“The safe-haven metals continue to be hamstrung by not much risk aversion in the world marketplace and by a strong US dollar on the foreign exchange market,” said Jim Wyckoff, senior analyst at Kitco.com, in a MarketWatch report.
That wasn’t enough to put off the gold bugs, of course. Stewart Thomson of Graceland Updates insisted this week that “a huge relief rally” is due for gold. He said: “The bottom line is that physical market demand softness is likely to continue into the summer but a big relief rally for the entire precious metals sector is imminent,” he said.