Fiscal results for the first half of 2010 have been strong for most Vancouver mining companies, according to Ernst & Young, and all indications point to continued prosperity.
“Long term, things look particularly strong,” said Tom Whelan, Ernst & Young’s Canadian mining leader.
He believes the global downturn created a fundamental supply gap as mining companies curtailed production or cut projects to remain solvent. Add increasing concerns about the nationalization of natural resources taking place around the world and a decrease in new projects and he predicts that supply gap could continue for a while.
Whelan said, “You think of some of these global strategic risks that are popping up such as resource nationalism concerns in the [Democratic Republic of Congo], countries that are raising royalty rates, the difficulties in getting new projects approved … it really speaks to the long-term supply.”
Many firms used debt to finance growth prior to the recession. Lenders have since tightened up lending practices and Whelan does not see an end to that any time soon.
“Our view is we do not see a return of transactions that are funded via debt, so that really leaves limited options for [mergers and acquisitions] in the mining industry.”
Check out next week’s print edition of BIV for a deeper look at what the rest of 2010 may have in store for Vancouver mining companies.