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File photo of copper pipe in a plumbing section.

With a long history of operating a resource-based economy, Canada still has a love/hate relationship with its resource industries.

Canadians love that our natural resources make us one of the world's most prosperous countries, but dislike the boom-and-bust cycles that signify, for some, an overdependence on resources.

The results of the C-Suite Survey remind us of this Canadian paradigm, but also show that it may be time for a new perspective. Commodity downturns and resource-industry cycles are no longer always in a cause-and-effect relationship. Prices for important commodities such as oil and copper have actually been making a quiet comeback since hitting financial-crisis lows in late 2008. Copper matched its pre-

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crisis-high price in 2011, although it has eased back. Oil prices are on an upward trajectory more than halfway back to precrisis highs. Gold just kept rising through the financial crisis to its record high of $1,800 (U.S.) an ounce in August, 2011, and prices still remain high by historic measures.

Although commodity prices have not always been a problem over the past five years, there is no doubt that we are trending near the bottom of a resource-industry cycle. Why? One reason is that some of the heated demand from the world's emerging economies in the past decade has somewhat cooled off.

However, other serious issues have emerged as well. Most of the high-grade, easily accessible resources have already been found, so companies now must go farther afield, spend more and often risk more to produce the same amounts. Operating costs are leaving companies with smaller profit margins and their ability to raise capital is challenging. As a result, companies can no longer afford megaprojects with delayed or uncertain payoffs. Everything they do must pay off, because impatient investors have many alternatives to resource equities – including commodity exchange-traded funds.

The survey asked resource executives what measures their companies have taken to prepare for a demanding future. Ninety-five per cent reported steps to control capital and operating costs. Almost three-quarters are engaged in mergers and acquisitions, working to align their producing assets with strategic objectives. Perhaps most telling, two-thirds said they are placing more emphasis on creating value for shareholders. These are all significantly high numbers, and suggest that resource executives are essentially looking at their businesses with fresh eyes.

When it comes to the mining industry, Canada can legitimately claim to be the world leader. This country has more mining companies, more M&A financing transactions and more overall mining expertise than any country in the world. However, we can't be complacent just because of what we have done in the past, because it's clear that the industry will change dramatically in the remainder of the 21st century. All Canadian resource industries will need to adopt an innovative approach through extensive research and development, use of technology, and promote an influx of new young talent. In a sector where commodity prices will be just one part of the formula for success, resource companies must find new ways to be competitive and profitable.

Lee Hodgkinson is a partner and national industry leader of KPMG's Canadian mining practice.

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