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TORONTO (miningweekly.com) – Canadian mining equities showed modest signs of improvement during the first quarter of the year underpinned by higher commodity prices and continued cost management, professional services firm Ernst & Young’s (EY's) ‘Canadian Mining Eye: Q1 2014’ has found.
The index gained 13% during the first quarter ended March 31, compared with an 8% loss during the fourth quarter of 2013. It also outperformed the S&P/TSX Composite index, which gained 5%, and the London Metal Exchange index, which lost 6%.
"The first quarter proved a positive start to the year. We expect modest strengthening of investor confidence in the sector to continue and drive new transactions and financing opportunities for Canada's midtier and junior miners,” EY Canadian mining and metals leader Bruce Sprague said.
Over the next quarter, EY said that it expected depressed share and asset prices to create opportunities for companies to acquire assets at lower prices. However, deal execution would continue to be a challenge, as was seen with deals in the first quarter. More funds are also expected to come from private equity players.
Despite the fact that some midtier companies were able to tap equity capital, fund raising still remains difficult for juniors. EY encouraged juniors to continue to be creative in their approach to raise money. Those with good-quality assets, advanced projects and strong management teams were best positioned.
EY said that while some analysts expected positive movement in gold prices, uncertainty over metal prices persisted and would continue to drive some companies to opt for hedging their future gold production.