Top executives from North America’s biggest metals producers are bracing for a turbulent 2023 marked by recession, geopolitical risks and an uncertain investment climate that could change the face of mining.
The year “is going to be seen as the start of serious change — in the way mines operate and are held accountable,” Barrick Gold Corp. Chief Executive Officer Mark Bristow said in an interview. “The scenario that’s playing out across the globe is a very interesting dynamic, and honestly I don’t think anywhere is perfectly safe to invest right now.”
The industry has navigated through both challenges and opportunities in the past year, ranging from surging input costs and supply-chain snags to soaring demand for metals deemed crucial to economic growth and a global shift from fossil fuels. The heads of North American miners expect some such trends to continue through 2023, along with some new themes.
The spat between First Quantum Minerals Ltd. and Panama’s government over a copper mine in the Central American nation may be a sign of things to come. Countries are cracking down on foreign firms mining their resources, both to seize on the rush to secure critical minerals and boost revenue in cash-strapped jurisdictions.
“There’s increased demand for taxation by a lot of governments based on what they believe are mining companies making more money because of higher prices,” Lundin Mining Corp. CEO Peter Rockandel said in a Jan. 5 interview. “But I don’t think they’re considering the inflationary pressures we face.”
Precious and base metal producers alike have faced pressure to fork over higher taxes and curb exports, sometimes facing the risk of expulsion.
Barrick’s Bristow said the precious metals sector requires “considerable consolidation” in the near term, but “no more stupid M&As.” Declining output and old assets make smart investments hard to come by, but he expects the industry will get acquisitive. The world’s second-biggest gold producer will be focused on “the junior part of the market” this year “where it fits with our exploration focus,” he said on Dec. 28.
Meanwhile, copper miners are headed for a round of deal-making in advance of rising long-term demand for the wiring metal.
“We’ve seen for the first time in a long time M&A start to pick up and personally I think that theme is going to continue,” Lundin’s Rockandel said. “A lot of the big companies are talking about the challenges of finding more copper and wanting to grow their production.”
Brazilian giant Vale SA is also looking to sell part of its base metals business, which includes a chunk of the nickel-rich Sudbury basin in Canada, in the coming months.
The mining industry had $67.5 billion in announced mergers and acquisitions last year, a 17% drop from the prior period, according to data compiled by Bloomberg.
Bullish on bullion
Gold producers expect bullion prices to rise this year as investors seek shelter on concerns of a global recession and challenging market conditions. Gold averaged just above $1,800 an ounce last year.
“I’d be surprised to see gold at any less than $2,000 per ounce a year from now,” Ammar Al-Joundi, CEO of Agnico Eagle Mines Ltd., said in a Jan. 6 interview. “This environment where you’ve got runaway government deficits and the highest inflation in decades is really positioning gold as demonstrably the best hard currency in the world.”
Base metals face supply challenges as recession fears undercut economic growth and hurt demand. The producers anticipate this will change within a couple of years when old mines are exhausted and the global appetite grows for metals needed to electrify economies.
“The demand created through electrification is going to be significant, and it’s difficult to see today where the new supply is going to come from to fully satisfy that,” Teck Resources Ltd. CEO Jonathan Price said in a Dec. 8 interview. “We expect to see an under-supplied copper market for some time yet, which will be very constructive for prices.”