The down-trodden loonie is good for some miners
As the petals continue to fall from Canada’s “Wild Rose” province, more and more of Alberta’s miners and oilfield workers are packing up and heading back to the jobless places from where they came.
To date, more than 41,000 people have already been sent home from the oil sands thanks to what Moody Investors Services says is a ‘negative’ rating situation caused by the slash-and-crash in the energy sector.
There’s no question it’s a sad situation, but in fairness, when you look at the overall scheme of things, Alberta and its miners and developers have had a pretty good run of it.
In fact, the oil sands have been in commercial development since the late 1960s; almost half a century, and well beyond most other mining operations found anywhere else in Canada, or in the world, for that matter.
Sure I feel for those who have lost, or will lose, their jobs in the oil sands, but I also feel for those others who are now out of work across Canada thanks to the growing number of other mines that are also packing it up.
It’s hard to focus on any one group or sector within the mining industry that’s in more trouble than any others because, as we all know, it’s an industry-wide dilemma that continues to worsen with every passing month.
Like in all bad situations, however there’s usually something good to be found and as you read deeper into this issue, you’ll find a couple of mining stories that help keep the faith in the industry alive.
As a good and long-time friend of mine, Peter Howe, a Professional Engineer and founder of A.C.A. Howe International Limited, Toronto, told me recently, “The mining industry may struggle at times, like now, but it will never, ever die. The World can’t afford to let it.” I’m sure Peter is right, and that many others agree with him, but when you hear about the massive writedowns that have already taken place this year by industry giants like BHP Billiton PLC ($7.2-billion), and Barrick Gold Corp. ($3-billion), to name just two, it makes it hard to believe that the lingering impact of last year’s plunge in commodity prices isn’t still with us.
In fact, when you consider that 38 out of the 97 global mining companies with market capitalization of more than $1-billion are trading at less than book value, then I guess it’s safe to say, “We’re not out of it by a long shot.” Unless, of course, you’re a gold miner operating here in Canada where the lower loonie dictates the gap between the cost to produce and the value of the gold; always priced in U.S. dollars.
With that, it’s probably safe to say that those companies with producing gold mines here in Canada aren’t hurting as much as their peers in the oil and gas, iron ore, copper, coal, and nickel businesses, but it’s anybody’s guess what will happen when the loonie makes its return.
And it doesn’t seem likely that will be any time in the near future. But, for our miners producing domestic gold, the down-trodden buck is good for business.