Canadian mining equities suffered in Q3 due to a fall in metal prices across the board, especially gold prices, find an EY analysis.
The index declined 15% during Q3 2014 after a 9% gain during Q2 2014. The fall was in line with the S&P/TSX Composite index, which also dropped 15% during the third quarter. The London Metal Exchange index (LMEX) decreased 4% during the quarter.
“In the last quarter, companies continued to focus on strengthening their core businesses by accelerating development of projects, increasing production, managing costs and adding attractively priced assets to their portfolio for strategic objectives,” says Bruce Sprague, EY’s Canadian Mining & Metals Leader. “Still, the M&A momentum we witnessed over the last few months is unlikely to die down soon, as companies will continue to look for attractively priced assets for a long-term strategic advantage.”
According to the Canadian Mining Eye: Q3 2014, some of the factors affecting the overall decline in the index include:
- The growing uncertainty around the global macroeconomic situation, which led to investor caution and fuelled the decline in metal prices over Q3 2014.
- A stronger U.S. dollar, which hurt prices of industrial metals.
- Nickel prices, which saw the biggest decline among base metals with a 14% drop over the quarter, after witnessing a gain of 20% over Q2 2014 following Indonesia’s ban on nickel ore exports.
The Canadian Mining Eye tracks Canadian mining sector performance of 100 TSX and TSXV mid-tier and junior companies with market capitalizations at the end, broadly falling between CDN$2.1b and CDN$160m.