Industry Trend Analysis - Canada Gold Goes Green - FEB 2017

BMI View: Canada ' s gold mining sector will continue to focus on paring down costs to remain competitive in a volatile gold price environment, increasingly through investing in alternative energy sources. Tightening environmental regulations will accelerate this trend.

Canadian gold miners will increasingly look to integrate alternative energy sources other than diesel to power mines in the country, supported by both economic incentives and policy initiatives. As the country serves as host to several of the world's largest gold mining companies with gold mines often in remote locations and harsh conditions, Canadian operations will prove well-positioned to embrace alternative energy sources. For instance, in November 2016, major miner Goldcorp outlined plans to power the Borden gold project in Ontario with electricity and a battery-powered underground fleet, eliminating approximately half of the operation's total greenhouse gases. Additionally, an on-demand ventilation system will require 50% less ventilation than traditional baseline diesel underground mines. The firm will partner with Sandvik Mining and MacLean Engineering to provide battery-powered underground vehicles, which will begin operating in H217 during the advanced exploration stage. In 2015, Barrick Gold reported 18.5% of the company's electrical power was sourced from renewable energy, and expects that share to increase.

Elevated Costs To Weigh On Growth Outlook
Canada - Gold Mine Production (moz) & Share Of Global Total (%)
e/f = BMI estimate/forecast. Source: BMI, USGS

Economic, Regulatory And Reputational Gains

Declining ore grades will drive costs higher at Canadian gold mines, incentivising miners to improve competitiveness. For instance, in 2016, Barrick Gold estimates all-in sustaining costs at the Hemlo mine in Canada averaged between USD830-880/oz, compared to an average of USD620-650/oz at core mines in the US and Latin America. Goldcorp, which estimates that consumption of electricity, diesel, propane and natural gas account for 15% of operating costs, cites both business logic and increasing emissions regulation in Canada as reasons for working toward eliminating diesel. In December 2016, Canadian Prime Minister Justin Trudeau announced the country's first carbon tax at CAD10/tonne. While the province of British Columbia already imposes a carbon tax of CAD30/tonne, this represents the first for Alberta and Ontario, and will quickly add up for miners. Barrick Gold, for example, produced 3.8 million tonnes of carbon dioxide in 2015.