The mining industry was doing well in 2018, if a record dividend of $43 billion by mining companies is anything to go by. Amidst the successes so did a number of issues crop up, some which are already having a significant impact on investors sentiments. Contemporary issues touching on environment, sustainability as well as governance are some of the issues that could affect investor’s sentiments on Detour Gold Corporation (TSX:DGC), Centerra Gold Inc. (TSE:CG) and Pretivm Resources Inc. (TSE:PVG).
ESG Concerns
In the past companies only had to ensure employees safety. Increased regulation means such companies must ensure substantiality of natural resources and the environment at large as they go about their operations. Governance is also becoming a significant challenge, given the increased scrutiny from regulators.
“ESG is a growing concern among financial institutions globally and locally,” says Andrew van Sly, partner, and principal consultant at SRK (SA). “There are significant financial and reputational risks that they seek to avoid or mitigate,” he says.
While performing well in ESG space is always indicative of a company doing well in other spaces that appears not to be the case. ESG has become an existential threat that could take a toll on many mining companies going forward.
ESG is a growing concern, given the financial risks that comes into play for companies to remain compliant. In addition, there is always a threat of reputational risk for companies whose mining operations do not ensure high levels of environmental management and sustainability.
According to research firm PriceWaterhouseCoopers, mining companies need to pay attention to brand mining if they are to survive the ongoing onslaught because of ESG.
“To restore faith in ‘brand mining,’ leading miners need to prove they are keeping up with the pace of change. As an industry, this means transforming their reputation as efficient ‘converters of dirt’ to prominent builders of both economic and societal capital,” PWC in a report
Vales mishaps in Brazil following the Fundao disaster in 2015 has all but triggered increased scrutiny from environment watchdog groups as well as regulatory bodies.
Canadian Mining Stocks
Amidst the ESG concerns, Canadian mining stocks continue to offer an exciting value proposition as the price of the precious metal continues to rise. Concerns about the health of the global economy amidst raging geopolitical tension continues to evoke the safe-haven status of the precious metal.
Detour Gold Corporation is one of the best stocks for gaining exposure to Canada’s mining sector. The company operates a large-scale open pit operation in northern Ontario making it one of the largest gold-producing mines in the country. The company remains well positioned to generate significant value, and shareholder returns as gold prices continue to rise.
Centerra Gold is another worthy pick in the country’s mining sector. Based in Ontario, the company is engaged in the exploration, development and acquisition of gold properties around the world. The company owns the Kumtor gold mines in Kyrgyz Republic as well as the Mount Milligan gold-copper mine in British Columbia. The stock boasts of a 54.8% year to date return.
Vancouver-based Pretivm Resources owns the Brucejack gold project in British Columbia. With a market cap of about $2.4 billion, it is another worthy pick given its 17.7% year to date return.
