Canadian mining companies still have to grapple with complex decisions on whether to slow or entirely shut down operations due to COVID-19.
Canada’s unemployment rate has taken a hit in the wake of the coronavirus, which has forced a drastic slowdown at diverse businesses across the country.
The federal government, led by Prime Minister Justin Trudeau, has rolled out increasingly aggressive measures to bring relief to companies, the most recent of which came on Monday (March 30).
According to the Mining Association of Canada (MAC), the country’s resource industry will benefit from the new approach, under which all businesses and non-profit organizations whose revenue has dropped at least 30 percent due to COVID-19 will qualify to have employee wages subsidized by up to 75 percent.
The program was originally announced on March 18 and has gone through a number of iterations since then. When it was first revealed, the wage subsidy was for only 10 percent and was available exclusively to small businesses; Trudeau acknowledged later that this was not enough.
The subsidy was increased to as much as 75 percent last Friday (March 27), but little other information was shared until Monday’s fresh announcement. More details about the program’s expansion are expected on Tuesday (March 31).
Mining’s key role in the Canadian economy
The mining industry employs 626,000 people in Canada, accounting for one in 30 jobs, and the MAC praised the move from the government in a Monday press release.
“As is the case with many sectors, mining has been heavily impacted by COVID-19, with multiple companies reducing or suspending operations at mines, smelters and refineries across Canada, resulting in tens of thousands of lay-offs of direct and indirect employees,” said President and CEO Pierre Gratton.
“The wage subsidy will help prevent further lay-offs, thus minimizing both the scale and extent of disruption to both businesses, employees and contractors, and better position the mining sector to resume operations and support the many thousands of individuals who depend on it for employment.”
Canada’s unemployment rate stood at 5.6 percent in February, but a recent report from Parliamentary Budget Officer Yves Giroux estimates it could pass 15 percent by the end of the year.
As mentioned, companies that qualify for the new initiative will have employee salaries covered by up to 75 percent; payouts are capped at C$58,700 per employee, which is a maximum of C$847 a week. The program will be backdated to March 15 and will last as long as 90 days.
According to the MAC’s latest set of statistics, Canada is a top five global producer of 15 metals and minerals, ranking first for potash, gemstones and titanium contentrate, second for uranium and niobium and third for graphite, indium, diamonds and platinum-group metals. Aluminum, cadmium, salt, sulfur, gold and mica round out the list.
Miners in Canada still facing COVID-19 pressure
It’s worth noting that although some Canadian mining companies have reduced their staff due to budgetary concerns, others have done so because the regions they operate in have ordered them to shut down, or as part of their own efforts to curb the spread of COVID-19.
Mining hotspots Quebec and Ontario, which are the country’s two top gold-producing provinces, have come to the forefront in discussions. On March 23, the Quebec government ordered non-essential businesses to close from March 25 to April 13. And while mining has been designated as essential, meaning companies can keep working as long as they minimize operations, a number of them have chosen to shut sites down completely during that time.
Among others, Agnico Eagle Mines (TSX:AEM,NYSE:AEM) put its properties in the province’s Abitibi region on hold for the period, and Eldorado Gold (TSX:ELD,NYSE:EGO) suspended work at its Lamaque gold mine. Probe Metals (TSXV:PRB,OTCQB:PROBF) called off its exploration.
In Ontario, non-essential businesses were told to close for two weeks starting on March 25. Mining has been marked as essential, but unlike in Quebec, there has been no order for companies to minimize operations. As a result, many companies are still at work, but some have enacted their own shutdowns.
Those include Alamos Gold (TSX:AGI,NYSE:AGI), which took its Island gold mine offline for two weeks on March 24, and Newmont (TSX:NGT,NYSE:NEM), which put its Musselwhite mine in the province on care and maintenance on March 23. Newmont did not share an end date for the break.
It remains to be seen what the coming weeks will bring as Canada’s provinces, territories and miners continue to react to COVID-19. Sentiment appears divided among market watchers about whether business should continue as usual — in a Twitter poll posted last week by the Investing News Network, respondents were split almost evenly when asked if mining should be seen as essential.
Mandatory quarantines due to #COVID19 have resulted in temporary shutdowns at a slew of mines across the world, but some areas have allowed companies to keep operating.
This week we want to know if you think #mining is an essential service. Let us know below.
— Charlotte McLeod (@Charlotte_McL) March 26, 2020
Timothy Chilleri, an analyst at Sachem Cove Partners, further wrote in a comment, “For any company who wants to be taken seriously from an ESG perspective, unsure how they can keep any mines running as if the virus impacts the workers/mine, their shut down and re-start become a regulatory affair, plus the optics of risking workers health.”
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.