The price of some commodities fell rapidly after hitting highs in March (on file).
When the price of metals and minerals boomed last spring, several analysts predicted the arrival of a new era of prosperity for the mining industry, propelled by the energy transition. However, a few months later, the industry is experiencing a slowdown.
Rising interest rates and a drop in global demand have caused the price of certain metals, such as nickel and copper.
The situation plunges the mining companies into a difficult situation. Should they invest in new long-term projects to meet the growing demand for these products? Or should they try to minimize current production costs, in order to overcome the difficulties associated with inflation and the threat of a recession?
You have to be optimistic to survive in this industry, says Chris Hodgson, president of the Mining Association of Ontario. Many were saying it was the start of a supercycle in March, but we can't really predict what will happen in the market.
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First Quantum Minerals, one of Canada's largest mining companies, reported net income of $629 million in the second quarter of 2022.
Despite this profit, the company's CEO, Tristan Pascall, says in a press release that the current economic climate is difficult due to inflation and weaker global demand for copper, nickel and gold.
Tristan Pascall is the CEO of First Quantum Minerals.
The company aims to minimize risk and reduce its costs in the coming months. We have overcome many obstacles over the past few years, and we will rise to this new challenge, adds Mr. Pascall.
The same goes for Vale, the mining company heart of the economic vitality of Greater Sudbury, Ontario.
The company reported net income of $5.25 billion in its second quarter, down $840 million from the previous quarter, due to lower nickel and copper prices in July, indicates Vale in a report published Thursday evening.
Vale's profits fell in the second quarter.
Added to this lower profit were higher production costs, especially with regard to transportation.
Despite this turbulence, the Brazilian mining company intends to offer a sum of three billion dollars to its shareholders next fall.
According to Hodgson, the best way to manage risk is to lower production costs. There will always be a demand for nickel and copper, especially in the coming decades.
“Our miners are used to s& #x27;adjust to the cyclical ups and downs in the industry, and they remain hopeful of making a long-term profit.”
—Chris Hodgson, President of the Mining Association of Ontario
He admits it's hard to save money in an inflationary environment, but the goal is to outperform competitors and produce at below-average cost, despite rising costs of key inputs , like diesel.
For entrepreneurs like Terry MacDonald, CEO of Copper Lake Resources, a mining exploration company looking for copper deposits in the Thunder Bay area , the mining industry has entered a supercycle despite this latest downturn.
If the price of copper has fallen lately, it is due to external factors, such as restrictions in China and the specter of a recession, and not the value of copper per se, he believes. In the long term, this entrepreneur is betting on the energy transition.
Copper will be a popular mineral in the transition energy.
In three to five years, when the economy turns green, there will be a shortage of copper. Global demand will greatly exceed supply.
While waiting for prices to rise again, Copper Lake Resources continues to study the geological characteristics of the soil in the northwest of the Ontario, in the hope of being able to develop new mines.
After all, Terry MacDonald is an optimist: The mining industry is only just entering an era of prosperity, says- he.