Mining Market Pivot on the Horizon

“We’ve managed through some very difficult periods, the pandemic, the tragic war in Ukraine and the impact of all of that on supply and demand, but we are seeing a shift,” BMO Capital Markets Chief Executive Officer Dan Barclay told some of the world’s most influential mining industry players as they gathered for the open of BMO’s 32nd annual Global Metals, Mining & Critical Minerals Conference. “There is a marked improvement in the economic outlook, with more optimism and confidence. The market environment will pivot in the near term.”

Some 1,500 were gathered at the event, which started on February 26 and runs through March 1, in Florida, that has come to be regarded as a barometer of industry sentiment, and which this year added a critical minerals stream to reflect the energy transition ambitions and commitments of governments, economies, communities, and companies around the world.

”Since we last came together, our environment has continued to evolve dramatically,” Barclay said in his opening remarks. “This year, we are excited to welcome significant attendance from leaders of end-user companies, like major automakers that are keen to secure supplies of the feedstock minerals needed for electrification.”

As the 2023 panorama unfolds, prices for most commodities represented at the event – base, precious and critical minerals – are strong, and the industry is abuzz across the board as companies and investors position themselves to supply global demand.

“We are seeing base metals and critical minerals companies poised to move forward with the next generation of projects to supply electrification, renewable energy and general population growth and wealth creation,” said BMO Capital Markets Base and Precious Metals Analyst Jackie Przybylowski, noting as well that producers are facing an increasingly challenging supply-side backdrop.

“Whether it’s regulatory issues, geological/technical challenges, and/or ESG-related constraints, in general it has become increasingly difficult for companies to permit and grow their production bases,” she said.

Strong secular demand comes at a time when companies have been disciplined with capital allocation and balance sheets are particularly strong, said BMO Metals and Mining Analyst David Gagliano, noting, however, that valuations for the sector are lower versus broader market indices.

“There’s a valid argument to be made that the re-rate in this sector hasn’t even started yet,” he said. “I think that’s part of the reason why attendance at the conference is so strong this year.”