For miners 2016 amounted to the fifth year of the industry downturn, albeit with a renewed sense of better days ahead with rallies for gold, silver, copper, zinc, iron ore and coking coal. The following are our picks as the year’s top stories:
10. Rubicon’s hubris — Rubicon Minerals kicked off the year with a shocker: at its Phoenix gold mine under construction in Ontario’s Red Lake camp, contained gold ounces in the indicated resource category had plunged 91% from a 2013 resource estimate, while contained gold ounces in the inferred category had fallen 86%. The company halted all work and spent the rest of the year in restructuring mode to stave off bankruptcy.
9. Renewed bullishness over Argentina — With the pro-business former mayor of Buenos Aires Mauricio Macri assuming the presidency of Argentina in December 2015, the first half of 2016 was filled with optimism that Argentina would be more welcoming of foreign investment in its underdeveloped but promising mining sector. Macri moved quickly to reverse previous administrations’ 10-year interventionist course with removal of currency and investment restrictions and the settlement of past debt disputes, but many wonder about a coming backlash.
8. Miserable uranium — Uranium touts will go on about nuclear power plants under construction in Asia giving support to uranium prices, but the reality is that 2016 was the worst year for uranium prices in 11 years. At press time, the spot price for uranium oxide at www.uxc.com was only US$18.74 per pound. Mid-year, Cameco tabled its worst quarter financially since 2005, with CEO Tim Gitzel lamenting: “I can say that this [second quarter] has probably been the toughest quarter in the toughest market we’ve seen in the last decade, and our results reflect just how challenging the environment is … uranium demand remains low and prices are very depressed.”
7. Potash troubles and a mega-merger — Potash prices likewise suffered from oversupply in 2016, but Canada’s two biggest fertilizer companies Potash Corp. of Saskatchewan and Agrium dug deep and responded with a US$36-billion merger proposal in September that will create Canada’s third-largest natural resources company.
6. Surprise recovery in gold, iron ore and met coal — Sometimes it’s easy to forget just how bleak the markets looked in January 2016, but the introduction of “negative interest rates” in major economies around the world lit a fire under gold prices, driving spot prices as high as US$1,365.40 per oz. in mid-2016 from lows of US$1,060 per oz. six months earlier. Even more surprising was the doubling in iron ore and metallurgical coal prices in sustained rallies over the year.
5. M&A — Two more themes that emerged in mergers and acquisitions in 2016 were major Western companies unloading higher-risk assets in developing countries, mostly for cash (e.g., Batu Hijau, Tenke Fungurume, Eldorado’s Chinese assets ) and decent-sized miners scooping up less-developed gold assets in Canada and other safe jurisdictions (e.g., Goldcorp buying Kaminak and Tahoe buying Lake Shore Gold). On the supplier side, the biggest deal was Komatsu’s industry-changing acquisition of Joy Global.
4. New diamond mines and giant stones — Canada welcomed two diamond mines in 2016: De Beers and Mountain Province Diamonds’ Gahcho Kué mine in the Northwest Territories and Stornoway Diamond’s Renard mine in Quebec. The diamond scene was also livened up by Lucara Diamond’s mining of several shockingly large stones — the 1,109-carat Lesedi La Rona and the 813-carat Constellation diamonds — made possible by new processing technology that doesn’t destroy larger stones.
3. Mineral discoveries — While there continued to substantive mineral discoveries made around the world in 2016, three that stick out are Ivanhoe Mines’ Kamoa-Kakula copper find in the Democratic Republic of the Congo, Agnico Eagle Mines’ timely Amaruq gold discovery in the Northwest Territories and NexGen Energy’s monster uranium resource at Arrow in northern Saskatchewan.
2. Trump rally — Donald J. Trump’s surprise victory in the U.S. presidential election in November boosted global markets, with the greenback hitting 14-year highs, and the U.S. stock market surging, including the Dow Jones Industrial Average roaring towards 20,000 — a level it has never surpassed. The Trump rally extended to major industrial metals, particularly copper and zinc, which are now trading at US$2.50 per lb. and US$1.19 per lb. to the relief of long-suffering base metal miners.
1. Fort McMurray wildfires — The city of Fort McMurray, Alta. — ground zero of Canada’s massive oilsands industry and thus one of the country’s largest mining centres — was swept up in May by a beast of a forest fire that forced the evacuation of the entire 88,000 population, destroyed 2,400 homes and buildings, and closed many oilsands facilities. Alberta suffered a triple whammy in 2016 of wildfires, low oil prices and a provincial government hostile to the oil industry. Calgary has seen its unemployment levels soar above 10% this year — the highest level among major cities in Canada.