The coronavirus outbreak has impacted various industries including the mining industry and there are now concerns about the global economy sinking into recession. Since the outbreak of the pandemic, several Canadian miners have been hurt as they have been forced to reduce operations or even shutter some projects because of restrictions encouraging social distancing to prevent spread.
The virus has been reported in 2009 countries and most countries have declared lockdown and suspension of nonessential services like mining. Currently, there are almost 1.5 million COVID-19 infections with a death toll of over 80,000. The pandemic and the responses from governments have made it for Canadian miners and since the outbreak over $282 billion in the market value of leading 50 miners has been wiped.
Mining companies shut operations because for COVID-19
With companies cutting operations the gloomy outlook has forced most miners to withdraw their 2020 cost and production guidance. For instance, Franco Nevada Corporation (NYSE: FNV) has withdrawn its gold equivalent ounce (GEO) guidance for 2020 following the temporary suspension of mining. Previously the company had projected attributable royalty as well as stream sales of between 550,000 and 580,000 GEOs.
Also, Yamana Gold (NYSE: AUY) has been affected by the pandemic after it was forced to suspend operations at the Malartic mine in Canada and Argentinian mine Cerro Morro following directions from the government to contain the spread of COVID-19. The Canadian mine remains closed but the company is in the process of resuming operations in Argentina after the government stated that mining is essential business.
Gold prices have been boosted during the crisis
However, despite the COVID-19 wreaking havoc across the economy, gold prices have nevertheless been boosted during the crisis. They have managed to establish above $1,550 an ounce throughout Q1 2020. Various central banks came with measures to cushion the economy from dipping into recession with interest rates being cut to near zero. In this kind of environment of low-interest rate, investors have been looking to buy gold and the increase in demand boosted prices.
If the situation continues for gold miners it will be a big boost because high gold prices could offset the losses incurred following the closure of mines. Although this could be a small boost it will nevertheless help companies in mitigating the temporary problem.
Mining Companies helping fight COVID-19
Mining companies have started initiatives to help efforts to fight the COVID-19 pandemic. For instance, Barrick Gold Corp (NYSE: GOLD) has pledged support in the countries it operates in to help fight COVID-19. The company has donated $530,000 for medical equipment to Zambia and the North-Western province where it operates copper mines. It has also announced $1.5 million funding in DRC for the fight against coronavirus.
AngloGold Ashanti Limited (NYSE: AU) that sold its assets in South Africa to Harmony Gold Mining in February has offered its mining hospitals to the Gauteng and North West provincial government during this crisis. The hospitals will be used exclusively for the isolation and treatment of coronavirus patients.
