Canadian miners performance beats global indexes in Q2
Canadian mining equities continued to show strong signs of improvement during the second quarter of the year, driven mainly by a recovery in metal prices, the latest EY’s Canadian Mining Eye published Tuesday shows.
The index — which tracks the sector performance of 100 TSX and TSXV mid-tier and junior companies with market capitalizations between $1.4b and $55m in Q3 — gained 9% during Q2 2014, outperforming global indicators.
In comparison the S&P/TSX Composite index gained 6% and the London Metal Exchange index increased by 7% in the same period.
“The second quarter proved mining equities are capable of sustainable improvement,” said in a statement Bruce Sprague, EY’s Canadian Mining & Metals Leader. “Overall, we anticipate the third quarter to continue to show positive trends with mixed expectation on metal prices.
Nickel and diamonds the winners
The report also shows Canadian mining equities remained volatile, reacting to the movement in gold prices. Base metal miners, which constitute 13% of the firms that make up the index, witnessed just a 1% gain over Q2 2014.
Nickel jumped about 20% in the quarter, gaining 37% in the first half of 2014 as Indonesia banned shipments of unrefined ores in January.
Gold prices gained 9% in the first half of 2014, but made only a 2% gain in the quarter, given geopolitical concerns in Iraq and Ukraine, and the European Central Bank’s stimulus.
The diamond market rebounded strongly after the global recovery and polished diamond prices saw a 15.8% increase in 2011. While prices for the precious stones went down in 2012 by 11%, they began to surge again early last year as a result of growing demand in China and India and the economic recovery in the U.S.
More recently, polished diamond prices increased 4.5% in the first half of 2014 with further upside expected in the second half of the year.
For the short-term EY’s experts anticipate certain metals, such as copper, to decline due to lower consumption driven by the slowdown in China’s real estate sector, which accounts for 50% of the country’s copper demand.
“However, when the market begins to focus on medium-term copper shortfalls, we expect the level of investment to increase,” the study concludes.