Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
The mining sector, already a major contributor to the economy of Canada’s Saskatchewan, will be the main pillar to sustain growth in the province this year, shows the latest RBC Economics Provincial Outlook issued Wednesday.
The prairie province, which produces over 85% of Canada’s potash and 100% of the country’s primary uranium, will reach a real GDP growth of 2.9% in 2013 and 3.7%% next year, predicts RBC.
In 2012, the bank’s forecast for provincial growth steadily lowered to 2.4% as demand for potash — and in turn production— softened largely due to weak overseas demand.
However RBC says demand is picking up thanks to multi-year sales agreements settled late last year and early 2013.In fact, potash production numbers for the first quarter of the year are pointing to an impressive 26% increase over year-ago levels.
“Saskatchewan’s economy has traditionally been buffeted by swings in agricultural production, and in recent years the mining sector has been additional source of volatility,” said Craig Wright, senior vice-president and chief economist, RBC. “We expect the potash rebound to boost mining output by 4.5% this year and 5.0% next after growth of only 1.0% in 2012.”
A sizeable snowfall last winter sparked concerns that Saskatchewan’s agricultural production would be hindered by potential spring flooding, RBC says. By the end of May, however, Saskatchewan’s government reported that 67% of 2013 crops had been planted – this is only slightly below the five-year average (70%) for the that time of year.
“We project a relatively stable 3.0% growth for Saskatchewan’s agricultural sector both this year and next, assuming that normal growing conditions prevail in the fall,” said Wright.
The RBC Economics Provincial Outlook assesses the provinces according to economic growth, employment growth, unemployment rates, retail sales, housing starts and consumer price indices.
Saskatchewan’s mining industry employs over 30,500 people who work in over 20 different mining operations across the province, which supplies a variety of minerals in Canada and internationally. It is best known for being the world’s leading producer of potash, producing roughly one third of the world’s supply.
