Resources and expertise keep this country at the forefront. But challenges remain
by Greg Klein
Clusters of Canadian mining activity. (Map: Mining Association of Canada)
Peak gold has already been called by a number of prominent observers. But without sufficient investment to spur exploration, the world faces declining resources of many other minerals too. At the centre of the conundrum sits Canada, home to one of the world’s most bountiful mining jurisdictions and many of its most important miners and explorers. Even so, the country faces five key challenges according to a Mining Association of Canada report released February 4.
Called Facts and Figures of the Canadian Mining Industry, the research relies largely on 2014 and 2013 data but emphasizes Canada’s stature in the world of mining. Over 800 Canadian companies currently explore more than 100 countries. Firms with Canadian headquarters accounted for nearly a third of global exploration spending in 2013.
Canada leads the world in mining finance, with the TSX listing 57% of the world’s publicly traded mining companies. The 331 miners raised $5.6 billion in 2013. Another 1,287 Venture-listed miners and explorers pulled in $1.3 billion the same year. “Together, the two exchanges handled 48% of global mining equity transactions in 2013 and accounted for 46% of global mining equity capital that year.” Impressive as that sounds, however, the dollar figures are declining. By May 2014 almost 60% of Canadian-listed juniors were down to less than $200,000 in working capital.
As a result, MAC points out, exploration’s share of spending has been shrinking, “indicating a shift toward defining known deposits and away from the riskier discovery of new ones.” Estimates for 2014 suggest that only 36% of exploration budgets went to actual exploration while the rest went to appraising more advanced projects.
In the current economic environment, the industry is focused on reducing costs, improving productivity and preparing for the next upswing.—Pierre Gratton, president/CEO of the Mining Association of Canada
Apart from resources unearthed by Canadians abroad, this country’s own share ranks Canada among the world’s top five countries for production of 11 major metals and minerals, MAC states. Canada comes in first for potash, second for uranium and cobalt, third for aluminum and tungsten, fourth for platinum group metals, sulphur and titanium, and fifth for nickel. With diamonds, Canada ranks fifth by volume and third by value.
As for gold, silver, zinc, copper, molybdenum and cadmium, Canada remains in the top 10 but once held top five positions. In part that slip reflects a 30-year decline in the country’s proven and probable reserves, especially in base metals. “Since 1980, the most dramatic decline has been in lead (97%), zinc (83%) and silver (79%) reserves, while copper (37%) and nickel (65%) reserves have fallen significantly as well,” MAC reports.
The news isn’t all negative. “Since 2009 gold, silver, zinc and copper reserves have increased, with copper levels not seen since the early 1990s and gold at record levels.” But that doesn’t appear to reflect a long-term trend. “Recent commodity price fluctuations and the corresponding difficulties junior miners are facing in raising capital indicate continued concern over the depletion of proven and probable reserves for the majority of Canada’s deposits.”
The group foresees “only a handful” of major Canadian projects coming into production over the next five years, a result of exploration cutbacks during the 1990s and early 2000s. Global exploration has also declined in recent years. Looking a little farther ahead, though, “this gap is slowly closing.” MAC counts over 100 advanced Canadian exploration projects identified from 2011 to 2014 among those that could “contribute to the $160 billion in potential mining investment Canada could see over the next five to 10 years.”
But standing in the way of that potential are five key challenges, the report cautions. Global economic trends have hit many commodity prices hard. Yet MAC takes an optimistic view of medium- to longer-term prospects from China, India and other emerging countries.
Among the hurdles of Canadian investment are the increasing difficulty of finding new discoveries, operating deeper mines, paying higher energy costs and meeting new regulatory requirements. To help overcome lagging productivity, MAC wants more government funding for mining R&D.
Canada’s regulatory burden comes across as an increasingly complex maze. MAC warns that new legislation will likely increase the number of necessary federal approvals. The group calls for greater co-ordination between federal agencies and their provincial and territorial counterparts, as well as between government agencies and aboriginal and public consultation.
Developing undeveloped regions of course calls for infrastructure. A separate MAC study found that building and operating a remote, northern mine costs from two to 2.5 times the cost of a similar mine down south. To lessen the burden, the group calls for tax incentives, infrastructure investments and public-private partnerships.
Finally, there’s the need for new faces. The Mining Industry Human Resources Council says the industry will need 121,000 new workers over the next decade. That number doesn’t even take into account an estimated 53,000 retirements over the same period, according to MAC. Where to look for replacements?
Not far, apparently. “Approximately 1,200 aboriginal communities are located within 200 kilometres of some 180 producing mines and more than 2,500 active exploration properties,” the report notes. While mining’s already proportionately Canada’s largest private sector employer of natives, “addressing the human resources challenge will take a large and co-ordinated effort by the industry, educational institutions and all levels of government in the coming years.”
MAC president/CEO Pierre Gratton said, “In the current economic environment, the industry is focused on reducing costs, improving productivity and preparing for the next upswing.” In his statement accompanying the report he added, “We are confident about the future demand for our products and the Canadian mining industry is focusing on getting in shape now to seize the growth opportunities ahead of it.”
Download Facts and Figures of the Canadian Mining Industry.
Geographical distribution of Canada’s mining assets in 2012. (Map: Mining Association of Canada)