Impacts of COVID-19 on the Canadian mining industry

April 7, 2020 | Derek Hoffman

Co-authored by: Eliane Leal da Silva, Business Advisor

In the face of globally imposed restrictions to encourage social distance, numerous Canadian mining companies are being affected by the COVID-19 outbreak. Mining projects have slowed down, production has been suspended and site activities are reduced in some cases. This article aims to provide a high-level overview of how the coronavirus crisis has affected the mining sector and provides information on the response by the Canadian federal and provincial governments.

Impact on mining industry

The mining sector is highly globalized and dependent on commodity prices. The COVID-19 crisis, along with recent actions by OPEC+ members, has lead the drop in global stock markets and a corresponding deterioration in some commodity prices due to decreased economic activity, all of which directly affect mining operations worldwide.

A drop in the Chinese consumption of raw materials is impacting some commodity prices including oil and gas. The demand for fuel has already dropped and natural gas prices have fallen to a record low, all contributing to a reduction in Canadian mining supply and production.

With the expectation that the outbreak will disrupt the global economy for several months and with worldwide dependence on Chinese manufacturing, the falling of stock prices and mineral demand is unavoidable.

Projects in the exploration and development phase are also being impacted with field activities being cut, suspended or delayed, thus adversely affecting supply of commodities at the global level over the longer term.

Mining as an essential service

In order to comply with international restrictions, federal and provincial governments in Canada have put in place guidelines to help prevent the spread of the virus. One of the measures that has been taken by Canadian provinces is the implementation of a list of essential services during the COVID-19 pandemic.

The provincial government of British Colombia has declared a state of emergency putting in place a list of essential services. They announced that such services are those of daily activities essential to preserving life, health, public safety and basic societal functioning. Businesses that ensure global continuity, supplying mining materials and products (e.g. metals such as copper, nickel and gold) and that support supply chains are included. The following are examples of these services: (i) mining operations, production and processing; (ii) mineral exploration and development, including sand, gravel and aggregates; (iii) mining supply and services that support supply chains in the mining industry including maintenance of operations, health and safety.[1]

Similarly, the Ontario government has declared that services (i) ensuring the global continuity of supply of mining products and materials, and (ii) that support supply chains in Northern Ontario are considered essential services during the coronavirus crisis.[2]

Alberta has also taken the same approach and included on its list of essential services, businesses and services that supply products to the mining and mineral production and distribution sector.[3]

Likewise, Saskatchewan released on March 25, 2020 an essential services list to address COVID‐19 and has allowed certain business services to continue which includes the production, processing and supply chains of the mining sector.[4]

Quebec has also established a list of priority services and activities, including (i) industrial facilities (in particular in the aluminum sector) and (ii) mining facilities. However, these activities must be reduce to a minimum.[5]

Although mining businesses and related services are considered essential in Canada and therefore can continue to provide services in locations accessible to the public, they are still required to comply with risk mitigation measures, such as sanitation stations and appropriate distancing between customers.

For those employees that are required or permitted to continue working on various mining sites including some offices and other facilities, it is recommended that mining companies provide a written notice on their status as an essential service provider, safeguarding employees from being questioned by law enforcement officials or ostracized by members of the public.

Addressing pandemic issues

In order to properly address uncertainties and protect employees, mining companies have been implementing internal measures to ensure compliance with government restrictions and ensuring that guidelines are followed to reduce COVID-19 spread.

Many Canadian mining companies have announced the implementation of a number of protocols regarding the COVID-19 pandemic, such as physical distancing, work-from-home policies, corporate travel bans, limits on the number of employees permitted to meet in person, enhanced cleaning and sanitizing regimens, as well as action plans with directives for safety to avoid the spread of the Coronavirus.

During these unique and challenging circumstances mining companies are forced to carefully address the specific issues impacting the mining industry as a result of COVID-19 such as personnel safety and supply chain issues; but also address other issues that can impact their activities such as data/information security as a result of personnel working remotely, maintaining regular communication with employees, financial impacts on suppliers and commodity markets, layoffs and other HR concerns, dealing with various creditors and landlords, financing arrangements, evaluation of various government economic support initiatives, continued compliance with regulatory requirements, and disclosure requirements for public companies, among many others. Miller Thomson’s Mining Group is ready and available to help guide your businesses on the various issues through this pandemic.

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[1] List of Essential Services in British Columbia. Retrieved from: https://www2.gov.bc.ca/gov/content/safety/emergency-preparedness-response-recovery/covid-19-provincial-support/essential-services-covid-19. Accessed on April 1, 2020.

[2] List of Essential Services in Ontario. Retrieved from https://www.ontario.ca/page/list-essential-workplaces#section-10. Accessed on April 1, 2020.

[3] List of Essential Services in Alberta. Retrieved from https://www.alberta.ca/essential-services.aspx. Accessed on April 1, 2020.

[4] List of Essential Services in Saskatchewan. Retrieved from: https://www.saskatchewan.ca/government/news-and-media/2020/march/25/allowable-business-services. Accessed on April 1, 2020.

[5] List of Essential Services in Quebec. Retrieved from: https://www.quebec.ca/en/health/health-issues/a-z/2019-coronavirus/essential-services-commercial-activities-covid19/. Accessed on April 6, 2020.

 

Miller Thomson is closely monitoring the situation around the COVID-19 pandemic to ensure that we provide our clients with the appropriate support in this rapidly changing environment. For additional information, please see our COVID-19 resources page.

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