Industry Trend Analysis - New Projects, Improving Prices In Key Sectors To Drive Recovery - AUG 2017

BMI View: Canada ' s mining industry will experience a recovery in 2017, following a multi-year downtrend, supported by improving prices, a strong project pipeline and competitive advantages in technology and access to finance. Within in the industry, the gold and copper sectors will prove particularly resilient while the coal and nickel sectors face headwinds from falling prices.

Canada's gold, zinc and copper sectors will drive the mining industry recovery in the country, supported by rising prices, strong project pipelines and the country's leading position in technology integration into operations. As a top global producer of several commodities, evaluating the outlooks for key sectors in Canada highlights outperformers and underperformers. Our long-held view for the gold sector to gain investor attention and drive project development continues to play out, most recently exemplified by Japanese firm Sumitomo Metal Mining investing USD195mn for a 30% stake in IAMGOLD's Cote project in Ontario in June ( see ' Gold Sector Outlook To Brighten Up', June 25 2016). Additionally, Canada's role as global headquarters to a number of major mining companies, well-developed network connectivity, highly skilled workforce and increasingly environmentally conscious regulations will see the country emerge as a leader for mining technology innovation. Gold miners such as Goldcorp and Barrick Gold are making progress in the use of big data, Internet of Things and artificial intelligence through partnerships with Microsoft and Cisco Systems, respectively ( see ' Canada Gold Goes Green ' , January 10). More broadly, we maintain a positive outlook for gold prices, forecasting an average of USD1,250/oz in 2017 and increasing to USD1,450/oz by 2021, which will encourage exploration and project development.

Outside of the gold sector, already Canada's largest mining sector by value, copper and zinc will post solid production growth, due to strong project pipelines and improving prices. For instance, according to our BMI Mines Database, Canada holds 43 brownfield and greenfield copper projects compared to 14 operational mines, boosting the sector's long-term outlook as some projects remain in early stages. As for the zinc sector, outperforming zinc prices will continue to encourage project develop. For instance, Trevali Mining expects the Caribou mine, which began operations in Q316, to produce 40.8-42.2 thousand tonnes (kt) of zinc in 2017 and, in June, reported significant zinc-lead mineralisation at the Halfmile deposit.

Gold To Remain Dominant Sector
Canada - Mining Industry Value By Commodity (%), 2017f
f = BMI forecast. Source: BMI, Statistics Canada

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