Canada and global mining

The management of Canada’s mineral wealth and resources has had numerous benefits for the country. These benefits are the direct result of Canadians working here and abroad.

For the mining industry to continue to strengthen the Canadian economy it must do three things: invest in Canada; invest overseas; and purchase Canadian goods and services

Mining investment in Canada and abroad is strongly linked to trade and the well-being of the mining supply sector. In my view, there is no other sector of Canadian industry that is as strong globally as the mining industry. There may be bigger industrial sectors, but, in mining, Canadians are recognized as world leaders.

Consider these facts: Canada is among the top five in the production of 16 different metals and minerals; it is in the top 10 in terms of the total value of production; foreign mining assets owned abroad by Canadians increased from to $37 billion from $17 billion between 1992 and 1998; mining assets accounted for 16% of the value of all Canadian direct investments held abroad in 1998; Canadian companies are active in the exploration, development and mining of more than 3,000 mineral properties in about 100 countries; Canadian companies carry out about one-third of the world’s mineral exploration; and Canada regularly raises more than half the equity financing for worldwide mineral exploration and mine development.

The Canadian mining industry and its suppliers survived a difficult downturn in 1998 and 1999. Now, with improved metal prices, the industry is beginning to pick up.

A major exception, however, is the exploration sector, where activity remains at a seriously low level. Few outside the industry can recognize the economic contributions of a small band of highly competent financiers, geologists, geophysicists, geochemists and drillers. We could lose them, and if we do, it will be difficult to recover their unique abilities.

Suppliers need a strong domestic industry in which to develop and perfect their technologies for world markets. We can have education, research and development, and manufacturing here, and sell both here and abroad. We have been successful at this, however, we can not take our success for granted.

There is no reason why Canada can not be in the top few countries in the world where mining capital will be preferentially invested. We have the mineral potential and the know-how to continue to produce important economic benefits — without damaging the environment.

Federal, provincial and territorial governments need to ensure that tax, infrastructure, land access and environmental matters are well-balanced, fair, efficient and internationally competitive. Specifically, our exploration sector rapidly requires a re-introduction of a mineral exploration depletion-type tax shelter. Failure to make progress on these issues will continue to send negative signals to investors and, thus, could harm the Canadian economy.

In a free world, capital will flow to where the risk is low and the return high. The variables that can affect the movement of mining capital are in the hands of government. In this respect, Canada is engaged in a highly competitive battle for investment capital.

Whereas developed countries such as Canada, Australia and U.S. received the lion’s share of mining investment in the decades leading up to 1990, in the past decade about three-quarters of global mining investment has been made in emerging countries. This occurred because dozens of mineral-rich nations improved their reward/risk ratios by introducing democratic systems, reducing civil unrest and improving mining laws.

Canadian exploration and mining firms have been quick to recognize the benefits of these overseas projects. In 1992, Canadian junior exploration firms spent 60% of their budgets in Canada. Last year, this dropped to 30%. The majors spent even less, dropping to 20% from about 60%.

Canadian mining suppliers have successfully followed mining companies to new markets. The emerging countries in which so much of the new investment is being made are largely unable to supply a modern mining industry from domestic sources. Thus, there is a great potential for capital goods or services that can be provided by Canadian suppliers.

The Canadian mining industry enjoys good relations between mining suppliers and those who exploit the mineral wealth. This is good, because our competitiveness depends on it.

— The preceding is an edited version of speech given at the recent Mines Ministers’ Open Session Luncheon in Toronto. The author is the managing director of the Canadian Association of Mining Equipment and Services for Export.