Mining Investors Must Manage Risk as Geopolitical Concerns Rise

Mining companies face diverse risks, but geopolitics is at the top of the list for many.

At the Prospectors & Developers Association of Canada convention, known as PDAC, a leading Canadian resource sector expert stressed that although the mining sector presents opportunities, it’s important to properly assess risks before jumping in.

Jackie Przybylowski, metals and mining analyst at BMO Capital Markets, said risk modeling is a difficult job, but essential in evaluating investment storylines in the industry.

Mining analyst warns about geopolitical concerns

Przybylowski spoke at length about mining sector risks during a panel at the blockbuster mining conference. “What we’re seeing today is that there’s really no safe place to do business anymore,” she said. “It’s challenging all over.”

In her view, diversification is an important part of managing risk, and she encouraged investors to use this strategy. “Managing the risk, being diversified, is probably the key,” she explained.

As far as companies go, the expert said they also have a responsibility to handle risk.

“Whether that is bringing in partners to manage the capital spend or the risk to any one company, or just the way the deals are structured with international lenders … but certainly it’s going to be challenging,” she told the audience.

ESG, geopolitics keeping executives up at night

Executives in the resource industry see geopolitics as their second top concern out of 10, according to a survey from EY. It climbed up four spots in the latest version of the survey and falls just behind ESG, which is the biggest worry for mining executives.

“Companies that can demonstrate their ability to future-proof their business models to better deal with disruption and changing commercial relationships will ultimately gain a competitive advantage,” said Theo Yameogo of EY Americas and Canada.

“As the interplay between ESG and geopolitics increases, so too does the amount of regulation needed to comply with,” added Yameogo, who is the firm’s mining and metals leader. “This evolving landscape requires mining and metals companies to pay close attention to how tax and regulatory changes across jurisdictions will impact operations.”

Watch the video above to see mining executives discuss the challenges they face today.

According to BlackRock, geopolitical risk has declined from the peaks seen in 2022. However, that doesn’t mean it’s gone — the firm notes in a recent report that “market attention remains elevated amid this turbulent geopolitical environment.”

Russia’s invasion of Ukraine remains a top geopolitical risk for investors, but in the mining sector there are many other examples.

Przybylowski pointed to Panama as a clear example of a previously safe jurisdiction that has become more risky for mining companies. Notably, First Quantum Minerals (TSX:FM,OTC Pink:FQVLF) has seen its copper mine suspended due to a dispute between the Canadian mining company and the government of Panama.

Investor takeaway

Risk assessment is increasingly becoming critical for investors in the mining space. All market participants will need to stay on top of their due diligence and make sure to adjust to evolving trends in geopolitics and other arenas.

And don’t forget to follow us @INN_Resource for real-time updates!

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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