Chile tops for mining investment

For the second straight year, Chile has been selected as the most attractive region in the world for mining investment in a survey of companies conducted by the Fraser Institute.

Executives from companies representing almost $667 million in global spending on mineral exploration were asked to rate regions based on their mineral potential and mineral-related policies.

Results were reported in the form of indices. The Mineral Potential Index (MPI) rates a region’s attractiveness based on its geology, whereas the Policy Potential Index (PPI) is a composite index that measures the effects of government policies such as regulation and land use. These scores combined to form the overall Investment Attractiveness Index (IAI), with PPI accounting for 40% and MPI for 60%.

Chile dropped to 92 from 94 in the previous year out of a possible 100, with Nevada nipping at its heels at 91, up from 84 in the previous year. Rounding out the top five were Western Australia (88), Quebec (85) and Brazil (82). Bringing up the rear were Washington state (11), California (12), Wisconsin (16), South Dakota (23) and Colorado (24).

Among Canadian jurisdictions, Quebec was number one, with 85, followed by Ontario (81), the Northwest Territories (66), Nunavut (60), Manitoba (59), Newfoundland and Labrador (55), British Columbia (54), the Yukon (50), Saskatchewan (48), New Brunswick (48), Alberta (47) and Nova Scotia (32).

“Jurisdictions like Chile, Australia, Quebec and Nevada, which bolster attractive geology with mining-friendly policies, do well on the overall investment attractiveness index,” says Liv Fredricksen, who co-ordinated the survey. “Other jurisdictions, like British Columbia and Indonesia, which also have excellent geology, are hurt by their policies, which have lowered their score.”

Chile’s ranking is the result of high scores on both the MPI (96) and PPI (85).

Toronto-based Barrick Gold has outlined reserves of 9.4 million oz. gold in the Pascua-Veladero district in northern Chile, so it’s not surprising that Alex Davidson, Barrick’s vice-president of exploration, agrees with Chile’s ranking.

“Chile is an excellent place to both explore and invest,” he says. “But we look at prospectivity first, prospectivity second and prospectivity third. Only after we decide how prospective something is will we look at its political climate.”

Other companies, such as Reno-based Glamis Gold, place greater emphasis on investment potential. “You can’t start a new mine in California with the laws they have in place for metal mines,” says David Hyatt, Glamis’s vice-president of U.S. operations. “California might have great mineral potential, but with their rules, . . . forget it.”

Nevada, the top-rated North American jurisdiction, ranked highly on the MPI (92) and had the best policy potential (89). Western Australia ranked third on the MPI, and tied New Brunswick for 14th place on the PPI, with 73.

British Columbia is thought to have the most unattractive policies in Canada for procuring new mining investment. The province rated a mere 30 on the PPI, despite ranking 70 on the MPI.

“B.C. continues to score low despite recent changes in policy, demonstrating that the perception of a jurisdiction’s business climate is as important as its actual policies,” says Fredricksen.

The 159 participants in the survey included 27 senior mining companies and 132 juniors, which together represent US$240.7 million, or 70%, of the US$340.30 spent on mineral exploration in Canada in 2002. The survey represents about US$36.5 million, or 26%, of the exploration dollars spent in the U.S. in 2002, and US$73.5 million, or 22%, of amount spent in Australia.

The survey includes all Canadian territories and provinces (except Prince Edward Island), the Australian states, selected U.S. states, Argentina, Bolivia, Brazil, Chile, China, the Democratic Republic of Congo, Ghana, India, Indonesia, Ireland, Kazakstan, Mexico, New Zealand, Peru, Philippines, Russia, South Africa, Turkey, Venezuela and Zimbabwe.

The Fraser Institute is a public policy organization based in Vancouver.