Canada Mining Report 2009

The economic slowdown has had a broad affect across the mining sector and 2008 was a year of volatility for metal prices and production within the mining industry. According to Natural Resources Canada, within the metals sector, the number one commodity produced in Canada; nickel, experienced a decline in value by 40.2% to CAD5.9bn (US$5.2mn) - despite an increase in quantity produced by 2.5% due to the falling of nickel prices. Its volume accounted for 13% of Canada's total mineral production.

Uranium experienced a slide in value to CAD1.4bn (US$1.2bn) as well as a slight decrease of 4.4% of production. Despite falling prices and lower production levels Canada remains the number one producer of uranium in the world. Zinc slumped 38.7% to CAD1.3bn (US$1.2bn) but production was up by 5.9% as its price tumbled through the sedan half of 2008. Gold was a solid performer throughout the year with an increase of 14.7% in value to CAD2.8bn (US$2.42bn) due to a 24.1% increase in the price of the commodity. Copper production in value and volume had a slight increase over the year and accounted for 9.7% of the country's total mineral production.

For the non metals, potash was the highest ranking commodity due to rising prices with a soaring increase of 192.9% in production value to CAD8.2bn (US$7.11mn) despite a decrease of 56.7% in volume. Potash contributed 41.2% of total non-metallic mineral production, and 18.6% of total Canadian mineral production and the country remains the number one producer in the world for the commodity. Diamond production value jumped 33.6% even with a fall of 13.7% in production to just 14.8mn carats down from 17.1mn carats in 2007. Coal was ranked 4th for its output value at CAD4.3bn (US$3.7bn) and experienced only a slight dip in production levels by 1.5% The iron industry was looking positive in the first half of 2008 particularly with the surging demand from China and their agreement to pay higher prices for iron ore, however the slowdown of the economy dealt a significant blow to the industry in Q408. In November 2008 the Iron Ore Company announced production cuts at its Newfoundland and Labrador mines and was reviewing its previous program for increasing capacity.

Despite strong copper production, and expansion up to the middle of 2008, the latter half of the year proved to be more tempestuous for the sector as the downturn in the economy had knock on effects for the performance of copper prices and for demand. As opportunities for credit were stifled, some mines were unable to secure the financing required to keep operating as falling metal prices made production unprofitable. In April 2009 copper prices were seeing a distinctive recovery though analysts were quick to point out that the surge in price and demand may not have the foundations of sustainable long term recovery. Much of the increased demand arrived from China and South Korea which are building up strategic reserves of metals. An advantageous arbitrage between the LME and the Shanghai Exchange also made for cheaper imports into China. As imports are not in response to domestic consumption it is expected to be a short lived recovery which will experience a correction as soon as reserves are stocked.

Despite such a volatile economy, significant mergers and acquisitions were seen throughout the year showing some degree of confidence in the long term recovery of the industry. Western Canadian Coal moved forward with the acquisition of UK based Cambrian Mining PLC doubling Western Canadian Coal's annual production capacity to 3.5mn tonnes and increasing their coal reserves and resources through the deal by 39% and 50% respectively. Teck also enhanced their portfolio in April 2009 with the acquisition of Global Copper Corp, whose principal asset is the Chilean copper and molybdenum deposit in Relincho.

As a well established mining country Canada looks fit to weather uncertain times ahead though production cuts and redundancies as well as suspension and closure of operations and mines have been experienced Stabilisation of many of the metal and mineral prices is expected at the end of 2009 with a slow recovery being witnessed in 2010, though recovery will vary depending on the commodity.