A turnaround in commodity prices is building, but solutions to inter-provincial challenges will need to be found for Saskatchewan’s mining industry to prosper in the future.
Grant Isaac, Cameco’s senior vice-president and CFO, and Fred McMahon, the Walker Chair of Economic Freedom Research at The Fraser Institute, gave a presentation on mining’s future in Saskatchewan at the 2018 SREDA Forum in Saskatoon. Commodity cycles are typically driven by unplanned events or shocks. They’re also nested in broader global growth, trade and tax policy cycles. To predict a specific commodity’s potential, all of these factors must be examined.
Key Lake Mill – Photo provided by Cameco
Isaac said the right conditions are building for some commodities. “I think we’ve lived through the price sags that have destroyed a lot of supply, and demand is starting to realize that the supply might not be there. We’re starting to see the right combinations for price appreciations for commodities to go up.” However, a misalignment with commodity cycles in the areas of global growth, trade and tax is the type of thing that can put head winds into those commodity recoveries.
While Cameco is headquartered in Saskatoon, its customers are throughout the world, which gives the company a wide perspective in all kinds of global markets and the associated challenges. In commodities, sags last longer than spikes. The spikes are short and tend to be steep.
“The sag that follows tends to be quite pronounced and prolonged. One third of the time, you’re in a rising price scenario, while two thirds of the time, you’re living through very tough conditions,” said Isaac. “There’s no up and to the right in commodities. You have to live through these features.” There are a few areas that worry Isaac, notably inter-provincial challenges in the trade cycle, something he called one of the most dangerous things happening in Canada right now. “You can have a great policy jurisdiction and it can be a great place to invest but you have to be fully engaged in the challenges of getting your products to tide water,” said Isaac.
In Canada, uranium can only be transported by truck. “We’re subject to the whims and vagaries of various ports and opinions of the leaders in those jurisdictions where those ports are in terms of the risk of our products. Saskatchewan needs to be engaged in that,” he said.
Photo provided by Cameco
McMahon presented findings from the Fraser Institute’s annual Mining Survey, saying booms can be relatively good for Saskatchewan. He noted the long-term commodities cycle trend is down, which he attributed to improved technology and recycling processes; economies consume less commodities per capita as they grow from the development stage to service-driven. The last commodities super cycle was driven in part by China’s growth and appetite for raw materials. “That magnitude of demand shock to the system… I don’t think we’ll see a super cycle like the last one anytime in the future,” he said.
However, the news for Saskatchewan is “spectacular,” said McMahon. Out of 91 global jurisdictions, the province ranked second for both mining potential and investment attractiveness, and third in policy and perception. He said these rankings, which are keenly followed on a global scale, are crucial ways for Saskatchewan to attract investment. The province ranked second in the world for its availability of labour and skill. “You have a very active and good mining community here. That leaves the industry in a strong position to boost Saskatchewan in the new economy.” Saskatchewan’s score has consistently risen in the mineral potential category, something he attributed to the province’s forward-thinking mining policy that attracts people here to explore.
The Fraser Research Institute’s annual Mining Survey is available for free download at: www.fraserinstitute.org