Social Confidence in Mining
Benj Galllander | March 2021
Last year gold had a delightful run, up a very handsome 24 percent.
It managed to surpass $2,000, peaking at $2,067. Currently it is
around $1,735. In 2018 the price was below $1,200. Silver has also moved up sharply, trading at an eight-year high. The price of iron ore is in major recovery mode as is copper. Numerous other commodities could also have an impact on the economy of Nunavut including diamonds and rare metals. Though it is not perfectly correlated and only one part of the equation, elevated prices in this sector bode well for the possibilities of future mining, making it more financially feasible.
Besides commodity prices, another key to successfully operating in the north is the “social confidence”. Effectively this is how
corporations fit into the territory’s social fabric, so that the people
living there have confidence in the resource development.
Along with social confidence, “social license” deals with particular
projects. Each of these must be analyzed individually in co-ordination with the local populace.
Resource growth is often a lightning rod as there are concerns about ecological degradation and harm to the local populace. Thus, people throughout the world, not only in Nunavut, often reject development. Those that meet the right criteria can offer jobs and wealth to local citizens, not only those directly employed by the projects, but the trickle-down impacts of people having money to buy goods and services.
Nunavut’s high unemployment rate could dramatically decrease with mining expansion. Naturally, there are trade-offs, and it is important to recognize that victimization in the past is not a reason to reject all endeavours. A critical factor in these trade-offs is government. Since the establishment of Nunavut in 1999, it has demonstrated that under the right conditions, it wants resource growth. This tone helps to give corporations confidence to invest in the territory.
Currently Agnico Eagle Mines and Baffinland operate in Nunavut. There are possibilities to expand their footprints as Agnico is doing with the takeover of TMAC Resources. By demonstrating success here, other companies might be enticed to this region. However, they must adequately satisfy social confidence and social licensing needs and of course, that takes time. It is not a given.
Where will commodity prices go from here? A clear crystal ball on
this is impossible to find. While not a hard and fast rule, to determine the future price, projecting where the USD will go is one place to start. Recently the United States has been printing dollars and increasing the debt like there is no tomorrow, to boost the economy. That should be bullish for commodities. Of course, the global economy is also an absolutely key factor.
Conversely, the gold price has trended downwards recently. That
could be because of the COVID-19 vaccine rollout, which means that the economy is moving closer -albeit still a distance- from
normalization. Another likely major reason is that gold often does
poorly at this time of year, as mid-March tends to be a time when it is down in worth. Lastly, cryptocurrencies, particularly bitcoin, are offering competition for gold for people who believe that the former is a good investment and perhaps a place to park money for safety.
Ultimately though, the key to successful investment in the mining
sector is that Nunavut is willing to be receptive to it with appropriate safeguards in place. Naturally, this is a balancing act to some degree, but hopefully an equilibrium can be found that will serve the needs of the people of the territory and the mining companies. Ultimately this could provide a lot of employment and improve the standard of living.
By: Benj Galllander
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Benj Gallander is a the co-founder & President ofContra The Heard. Benj is aregular guest on the Business News Network, writes the Contra Guys column for the Globe and Mail and writes for a number of magazines. He has also written several books on investing.