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Access to capital drops steeply in miner risk survey

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(Kitco News) - Large-cap companies saw economic downturn, uncertainty and environmental concerns as top risks while smaller cap worried about commodity prices, according to KPMG.

On Thursday, the consultancy and accounting firm released its report, Risk and Opportunities for Canadian Miners.

"This year's survey again found commodity pricing is the top risk faced by mining leaders, both with regards to the industry as a whole (49%) and their own companies (58%)," wrote the authors of the study.

"Of note, large-cap companies saw economic downturn and uncertainty (44%) and environmental risks, including new regulations (39%) as a greater risk than commodity prices (34%). Despite global volatility, there is a high level of optimism among mining executives, with two-thirds confident about their company's own growth – despite being surveyed amidst a global pandemic."

KPMG said that a higher proportion of companies feel optimistic about their own outlook and growth in the next 12 months.

"Organic growth and technological transformation are identified as key strategies for growth as is M&A, reflecting the majority of mining companies who agree on the need for the industry to consolidate and embrace new business models. While the cyclical nature of commodity prices is tied closely to global growth, the sector has strengthened balance sheets and generally sought to improve its capacity to withstand volatility. The macroeconomic outlook is also encouraging, with worldwide government stimulus and structural shifts in energy production sending strong price signals for future demand.

Dropping steeply in risk concerns was access to capital, which was third in 2020 and now eighth in this year's study.

"While the pandemic may remain with us, to varying degrees across different jurisdictions, there are signs of early recovery. Significant capital is flowing, as governments look to kick start economic growth. Construction, particularly a focus on green energy transitions, will support demand for raw materials," wrote the authors of the study.

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