This article was provided by the Ontario Mining Association (OMA), an organization that was established in 1920 to represent the mining industry of the province.
An economic presentation at the most recent Ontario Mining Association board of directors meeting has helped to shed some light on forces impacting the international markets for the products and services of Ontario mineral producers next year. Gareth Watson, Vice President Investment Management and Research at Richardson GMP, met with Ontario miners on October 30 and shared his perspective through his paper “Looking Forward to 2014: Global Macroeconomic Views.”
“Canada can expect moderate growth in 2014,” said Mr. Watson. “Canada is reducing its deficit and getting it closer to zero, which bodes well relative to other countries.” However, he sees high personal debt levels as the biggest risk to the Canadian economy going forward. “A generation growing up on low-cost credit doesn’t help the situation.”
Mr. Watson believes Canada needs foreign investment for resource development but feels the government may be sending out mixed messaging on how sincere the welcome mat for foreign investment really is. Also, new pipelines are seen as important to future prosperity in Canada but he cautions “pipeline delays will subdue economic recovery.”
In his presentation, Mr. Watson took his audience on a bit of a trip around the world. He reviewed economic and fiscal prospects in the areas of the globe that matter the most to Canada – China, the United States, Europe and Japan.
“We have to throw out some of the old stereotypes about China,” said Mr. Watson. “China is no longer the lowest wage manufacturer in the world. China wants to be taken seriously as a global trading partner and it is starting the internationalization of its currency.”
“China wants to make its currency more internationally acceptable to facilitate trade,” he added. “China knows it can’t rely solely on exports anymore because Chinese people don’t always buy Chinese goods.”
He sees China as having an economy in transition that is moving to a more consumer oriented society. The world’s most populous nation will continue to have a significant impact on the Canadian economy and the markets for Ontario’s mineral products.
“The United States, Canada’s largest trading partner, has been recovering well from the 2008 recession and financial collapse,” said Mr. Watson. “The U.S. housing market is experiencing a price recovery and corporate America is strong.”
He warns, however, that “Washington (politics) is likely the greatest risk to the U.S. economic recovery. What good can come from threatening to default on your debt?”
He sees Europe with “a unified monetary policy but a fractured fiscal policy.” The European economy is projected to improve with a slow but steady growth rate and encouraging signs of recovery are seen in the economies of Spain, Portugal, Ireland and Greece, which have troublesome debt levels.
“Japan is a nation of savers but it is important to Canada,” said Mr. Watson. “Japan has discovered that you cannot save your way out of recession.”
Signs in these major global economies bode well for Canadian resource producers going forward. The recent gains in the Toronto Stock Exchange’s key indicies are encouraging also.
But going forward, he foresees no dramatic change in the value of the Canadian currency relative to the U.S. While his outlook for gold is not positive for the short term, he sees stronger base metals markets as major economics get back to building infrastructure and housing.
The enlightening presentation by Mr. Watson came with the usual legal disclaimers of investment houses. The OMA audience of about 60 mining executives was appreciative of him sharing his well-researched views and insights.