Lower commodity prices will hold back mineral exploration in Canada's territories, cooling previously-robust economic growth in the territories this year, a recent report suggests.
Real gross domestic product (GDP) in the territories is predicted to grow by a tepid 0.5 percent in 2013, according to The Conference Board of Canada’s Territorial Outlook: Autumn 2013.
“A once-thriving mining sector is now reevaluating development, and exploration plans due to lower commodity prices and tight capital markets, which makes it difficult for mining companies to obtain financing,” says Glen Hodgson, Senior Vice-President and Chief Economist at The Conference Board of Canada.
“However, the outlook beyond this year is more promising,” he adds. “Economic growth in the territories over the next few years is expected to easily outpace growth in most other Canadian regions.”
Real GDP in the territories as a whole is expected to expand by a more robust 3.2 percent in 2014 and 4.2 percent in 2015, the report says. While a given mining project is never guaranteed to proceed, favorable global demand for metals suggest that Canada’s mining potential is bright over the next decade—particularly in the North.
This year, Yukon’s mining industry saw production and staffing cutbacks, according to the report. Victoria Gold delayed construction of its Eagle mine by a year, and Yukon Zinc and Alexco Resource announced they were cutting production and laying off workers in the summer.
Economic growth in the territory will be limited to 0.6 percent this year. But with two new mines expected to begin construction, Yukon’s economic prospects will be more positive next year, with real GDP expected to rise by 5.7 percent.
The Northwest Territories is expected to have the weakest regional economy in Canada this year, the analysis says, with no real GDP growth is forecast.
However, the subpar economic conditions are expected to be short-lived.
The next five years offer better prospects for mining and the economy, as new mines begin production, and Ekati and Diavik remain in operation. Real GDP growth is expected to rise by 1.3 percent in 2014 and 2.5 percent in 2015.
Lower production at Agnico Eagle’s Meadowbank mine and a slowdown in mineral exploration will limit Nunavut’s economic growth to 1.6 percent in 2013. Next year, economic growth is forecast to reach 3.7 percent.
Development of Baffinland’s Mary River iron ore project will kick the construction and transportation industries into high gear next year, officials predict. A number of federal, territorial and municipal government projects are also slated to begin construction in 2014.
About the Report
The Territorial Outlook, published twice yearly, examines the economic and fiscal outlook for each of the territories, including output by industry, labor market conditions, and the demographic make-up. This forecast is funded through the Conference Board’s Centre for the North. The Centre’s main purpose is to work with Aboriginal leaders, businesses, governments, communities, educational institutions, and other organizations to provide insights into how sustainable prosperity can be achieved in the North. Over its five-year mandate, the Centre for the North will help to establish and implement strategies, policies and practices to transform that vision into reality.