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Mining sector woes continue to limit economic growth in the territories in 2016

25th February 2016

By: Creamer Media Reporter

  

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TORONTO (miningweekly.com) – Declining metal and mineral prices, rising global inventories of most mining commodities and easing growth in the Chinese economy will weigh on the economies of Canada’s Aboriginal territories economies, said the Conference Board of Canada on Wednesday.

Nunavut and the Yukon were expected to see positive yet modest growth in 2016, but the economy of the Northwest Territories (NWT) would remain virtually flat this year, according to the board’s latest Territorial Outlook.

"All three territories faced difficult economic conditions in 2015 and the hard times are not over yet. The mining sector will continue to face headwinds as most of the same conditions that prevailed last year are expected to continue over the next couple of years," said associate director for provincial and territorial forecast Marie-Christine Bernard.

"On a more positive note, public investment in much-needed infrastructure will help the economies of Nunavut and Yukon return to growth this year," she added.

The board expected real gross domestic product (GDP) growth in 2016 to advance by 2.7% in the Yukon and 1.2% in Nunavut. Real GDP growth in the NWT would be virtually flat, forecast to hit 0.7% this year. 

Resource development was expected to eventually pick up as additional mines came online at the end of this decade and into the 2020s.

According to the Conference Board, the Yukon's economy is expected to get back into positive territory in 2016, following three years of decline. Despite the commodity price slump and easing demand for base metals on the global market, Yukon's mining industry was poised to increase output by 5.4% in 2016 as base metals miner Capstone processed higher-grade ore at Minto.

However, Capstone recently announced that it could cease openpit mining in August if metal prices did not improve. If this occurred, there would be no producing mines in the territory and it would significantly hamper economic growth, the board warned. Also, no new mines were expected to move into the development phase over the near term. This would weigh on the territory's construction industry, which was expected to see little growth over the next two years

However, strong government spending would help offset some of the slowdown in mining. Yukon's 2015/16 capital budget was the largest in the territory's history and many investments in health facilities, schools, and other infrastructure were expected in 2016.

Moreover, Yukon was becoming a tourist destination with overnight visits projected to increase by 2.5% in 2016. The weaker Canadian dollar, lower gasoline prices and an increased awareness of Yukon as a tourist destination were all factors benefiting the territory's tourism industry.

Nunavut could expect a more positive outlook, as public-sector projects and mineral exploration helped turn the economy around over the medium term. The public sector would be investing in infrastructure in the next few years, including the construction of the $143-million Canadian High Arctic Research Station, in Cambridge Bay, and the $300-million upgrade to the Iqaluit airport.

Both projects were slated to continue until 2017. As gold producer Agnico Eagle continued to cut back gold production at its Meadowbank mine, Nunavut's mining output was expected to see a 3.6% dip this year before picking up again in 2017.

On a more positive note, exploration spending was on the rise in Nunavut, going from $158-million in 2014, to $203-million in 2015. Among the three territories, Nunavut was expected to see the most exploration spending, the bulk of which would be done by senior companies. In total, Nunavut's economy was forecast to expand by 1.2% in 2016 and to grow at an even stronger pace in 2017.

Meanwhile, the shutdown of De Beers Canada's Snap Lake mine, in December, would be a blow to the NWT's economy. The mine produced about 1.2-million carats in 2014 and accounted for about 13% of the territory's diamond mining output.

The start of production at the Gahcho Kué mine – expected in the third quarter of 2016 – should help offset some of the impact of the closing of Snap Lake, enabling NWT's economy to grow by 0.7% in 2016. As production ramped up at Gahcho Kué in 2017, the Northwest Territories would see much stronger economic growth and job creation.

Edited by Samantha Herbst
Creamer Media Deputy Editor

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