NUNAVUT
Mining is primarily an export industry and the harsh drop in the loonie over the past few months is aiding Northern exporters.
Drills prepare blasting holes in the Portage open pit at the Meadowbank mine. The dropping loonie and low oil prices are helping Northern miners. - NNSL file photo |
A bursting of the oil bubble and collapse in crude prices dragged the Canadian dollar down with it. The recent downturn is helping Northern mining companies on two fronts – higher export potential and cheaper fuel costs.
"For the diamond producers right now, the weak Canadian dollar actually helps," said Peregrine Diamonds CEO Tom Peregoodoff.
His company is not generating revenue yet so he hasn't seen the benefit of a lower dollar. He hopes to develop Peregrine's Chidliak project in Nunavut, in which case low oil prices would soften electricity costs.
Canterra Minerals CEO Randy Turner said lower fuel prices help exploration too.
"When you look at the big mines up there, the cost to heat all those facilities over the winter, even building the winter road, everything like that will be cheaper because of the lower fuel prices," he said.
Diamonds are quoted in US dollars, which are now worth about 20 per cent more than Canadian dollars.
"It's better for the diamond game with the difference in the dollar," said Turner. "You're mining in Canadian and selling in USD."
Tom Hoefer, executive director of the NWT and Nunavut Chamber of Mines, echoed those thoughts.
"If they get a bit of a break on fuel price and a bit of a price increase due to the loonie, that's good for them," he said.
Patrick Evans, CEO of both Kennady Diamonds and Mountain Province Diamonds, the latter of which is working on the major Gahcho Kué project, said the drop in oil prices is helping him on two fronts.
First is the obvious lower diesel costs. Evans said Mountain Province had budgeted a higher diesel cost and on final delivery he expects the numbers to come in well below that estimate.
"We're not yet able to project what those precise savings will be, but there clearly will be savings," said Evans.
The second way lower fuel prices are helping his projects is by opening up the labour market.
"As a consequence of the drop in the oil price, a lot of the oil companies in Alberta are cutting back on their capital projects," said Evans. "That's taken a lot of pressure off the labour market. People who could previously choose whether to work at Gahcho Kué or Fort McMurray really now only have one option, which is Gahcho Kué. That's an indirect benefit."
His single largest operating cost is labour and second is diesel fuel.
"We're not anticipating a drop in the labour rates but we're anticipating a better availability of labour than existed even six months ago," said Evans.
He expects that to benefit the project for both the construction and operating stages.
As far as the low loonie goes, that won't start benefiting Gahcho Kué until 2016, when the mine should be up and running. Mountain Province budgeted 90 US cents to the Canadian dollar and the loonie is currently tracking around 80 cents.
"It's a long time before now and next year when we start producing but if that trend continues, then we will see a material benefit as a consequence of the weaker Canadian dollar," said Evans.
