Mining News

Positive Trends in Canadian Investment

Posted by Cheryl Rutledge on 7/28/2015 11:35:36 AM

Alexander Collen, Taylor Jackson, and Kenneth P. Green

Despite relatively low financing in the mining industry for the first quarter of 2015, and decreasing mineral exploration spending in Canada, Canadian miners still seem to be receiving significant investment capital. SNL Metals and Mining Research tracked US$82.92 billion worth of mining and exploration worldwide from January 2013 through March 2015, and found that approximately 14 percent of regional investment went to Canada, behind Australia (15 percent), Asia/Middle East (20 percent) and Latin America (17 percent). From 2013 to 2014, Canada saw the largest year-over-year increase, with investments doubling from US$3.2 billion to US$6.6 billion, while global mine financing only increased by four percent.

During this period, Canadian companies (as opposed to Canada itself) raised the most capital, at approximately US$22 billion. The amount raised 2013 was US$8 billion, of which 19 percent was allocated to Canadian operations. In 2014, the amount raised rose to US$11.6 billion, of which 35 percent was allocated towards Canadian operations, illustrating a sharp increase in favor of Canadian operations.

The most financed Canadian projects were gold mines, followed by base metal and silver mines. Following these were coal, platinum group metals, potash and phosphates. Canada attracted approximately half of all diamond investment. The SNL report stated that 2015 has been an ‘abysmal’ year worldwide. January saw only US$500 million worth of mining investment. February and March saw investment levels recover to US$1 billion in each month. Canada performed relatively well again, rising to attract around one third of all investments during this time.

The increased levels of investment seem to come at the same time that investor perceptions regarding Canada’s mining policies have improved. According the Fraser Institute’s 2014 Survey of Mining Companies, Canada went from having three of the top 10 ranked jurisdictions in the world in 2013, to having five in 2014, both in the Policy Perception Index (PPI) and Investment Attractiveness Index.

The nation’s improvement in PPI is what is most remarkable. Ten out of the 12 Canadian jurisdictions rose in the worldwide PPI rankings between 2013 and 2014. The most notable improvements were in Manitoba, Nova Scotia and Quebec, whose ranks improved by 18, 17 and 12 positions, respectively.

The areas in which there were the most notable improvements from the provinces included less concern about uncertainty concerning environmental regulations, regulatory duplication and inconsistencies, taxation regimes and uncertainty over which areas would be protected as wilderness, parks or archaeological sites. Nunavut, Nova Scotia and Manitoba seem to have been the most consistent to improve across these areas.

Nova Scotia and Nunavut’s environmental policy encouraged three percent of respondents to invest in 2013, rising to 12 and 13 percent, respectively in 2014. Levels of regulatory duplications and inconsistencies encouraged only eight percent in Nova Scotia and three percent in Nunavut in 2013, though these figures rose to 17 percent and 20 percent respectively in 2014.

The category which saw the most significant improvements across provinces was perceptions on taxation regimes. Manitoba’s taxation regime went from encouraging 12 percent of respondents to 33 percent of respondents. In the Northwestern Territories, Nova Scotia and Nunavut, the percentage of respondents encouraged to invest by the taxation regime rose by 12 percent, nine percent and 11 percent, respectively.

Quebec’s improvement was in part due to different changes. The Fraser Institute’s survey shows that the reducing level of uncertainty concerning the administration, interpretation and enforcement of current regulations encouraged 36 percent of respondents to invest, up from 23 percent in 2013. Political stability was deemed by 46 percent of respondents to encourage investment in the region, up from 30 percent in 2013. Finally, 75 percent of respondents said that security in the region encouraged investment, up from 61 percent in 2013.

Two improvements in the remaining policy categories are also worth noting. First, Alberta’s policy performance regarding disputed land claims improved significantly, with 42 percent of respondents saying it encouraged investment; an improvement of 28 percent from the year before. Second, Nova Scotia’s socioeconomic agreements and community development conditions went from encouraging 23 percent of respondents to invest, up to 40 percent.

The improvements mentioned are only some of the more notable achievements across Canadian provinces and policy areas. Although the increased investment levels and perceptions of policy seem to be linked, a causal relationship shouldn’t necessarily be inferred. Indeed, much of Canada has recently seen a downturn in exploration spending and amongst a significant downturn in commodity prices; having stable and competitive policies will only become more important. Governments may want to keep this in mind moving forward.

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