Industry Stakeholders Urge Canadian Government to Support the Mining Sector to Avert Further Decline

The Mines Ministers of Canada’s provinces and territories convened in Cranbrook, British Columbia for this year’s mining conference. Industry leaders and other stakeholders took that opportunity to shed light on the plight of the Canadian mining sector. In addition, they proposed strategies which the government can follow to bring the industry back to competitiveness.

Production costs are on the rise

Every year, the Energy and Mines Ministers’ Conference (EMMC) brings together mines ministers in all levels of government, and other stakeholders to chart on collaborations and shared priorities. This year’s EMMC was the 76th and the key issues on the table were innovations and efficiency as drivers for competitiveness.

For starters, the background to the conference was not a good one. Canadian miners are experiencing high costs of production and this is worrisome. In early May, 2019, Barrick Gold (TSE:ABX) revealed that it expects its production costs in 2019 to rise to between $870 USD and $920 per ounce from $806 an ounce in 2018.

Rising production costs is not the only problem the industry is facing. For Canada’s diamond mining sector, there is more in terms of headwinds. Although the industry is just 20 years old this year, its future is uncertain as costs escalate. Also the size and grade of deposits is dwindling as well as unstable prices of the final product in the international markets.

Is the Canadian diamond industry on its deathbed?

For starters, Canada is the third largest producer of diamond in the world. However, it is apparent that the diamond which miners produce is not competitive in terms of the price it fetches. Notably, the global average price of a single carat of diamond is $100 USD. While competitors like De Beers sell at around $160, Canadian miners like Stornoway Diamond Corporation (TSE:SWY) sell at way below the global average.

Another problem the mining sector is facing is the rising competition from the cannabis industry. To be sure, investors seem to be rushing into the sector to cash in on the meteoric growth. As such, the mining sector, especially the junior mining sector, is finding it hard to get funding for new projects. However, this seems to be changing as companies like Nemaska Lithium Inc. (TSE:NMX) just secured funding to save crucial projects.

CMIF wants more government support

Nemaska announced on Friday July 19, that it had secured funding close to $600 million. The money will go towards ensuring the survival of a hard rock lithium mine project in Quebec. Nemaska has been facing huge problems including shifting evaluations and cost overruns and, resultantly, the value of its stock is down 80% from an all-time high registered in 2017.

During this year’s EMMC in BC, the Canadian Mineral Industry Federation (CMIF) submitted a proposal urging the government to help prop up the mining sector. The main argument was that compounded problems like costs were making the mining sector less competitive. The proposal seeks to boost the strategies set forth by the Canadian Minerals and Metals Plan (CMMP) aimed at averting further decline of the industry.

This article by Money News National is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Money News National has no position in the stocks mentioned. Thank you for reading.


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