Financing mining in Quebec

In 2002, mining investment in Quebec amounted to roughly $752 million, a significant drop from the $1.2 billion recorded in 2001. The decline can be explained mostly by the completion of three major mining construction projects in 2001: the IOC pellet plant in Sept-les; expansion of the Raglan mine in Ungava; and the Magnola metallurgical plant in the Eastern twps.

Most of the mining investment in 2002 ($637.8 million), was spent on mine complex development. The remainder was applied to general work ($167.9 million), new facilities ($177.5 million), and repairs and maintenance ($292.4 million).

Total exploration and mineral deposit appraisal expenditures in 2002 amounted to $114.2 million, an increase of 11% over the $102.9 million spent in 2001. The increase confirms the upward trend that began last year, which witnessed a 9% jump over the $94.1 million recorded in 2000.

The increased expenditures for exploration and mineral deposit appraisal involved both off-minesite expenditures of $81.5 million, and on-minesite expenditures of $32.8 million. This increase is in contrast to the prevailing world situation. A recent survey by Halifax-based Metals Economics Group shows that world exploration budgets dropped by 14%, or US$300 million, in 2002 to US$1.9 billion. Quebec’s share of the worldwide exploration budget thus grew to 3.8% in 2002 from 3% in 2001.

Quebec’s mineral exploration attractiveness was also recognized on two occasions. The Prospectors & Developers Association of Canada bestowed its National Claim Tag Award on the Quebec government at the 59th annual conference of Canadian energy and mines ministers, held in September 2002 in Winnipeg, Man.

The province was also recognized by The Fraser Institute’s 2002-2003 survey of mining companies. In it, Quebec ranked first in North America and second worldwide for its overall investment climate for mining exploration, out of 47 jurisdictions surveyed. The ranking is based on mineral potential and government policies.

Quebec experienced a claim rush in 2002, with roughly 46,000 claims registered between February and May, including more than 42,000 in the Near North, covering an area of 2.2 million hectares. In all, 66,419 claims were registered last year, a substantial increase from the 42,226 claims in 2001.

The number of active claims in Quebec climbed to 154,159 at the end of 2002 from 101,220 at the end of 2001, a 52% increase. By comparison, the average number of claims registered annually between 1991 and 2000 was roughly 18,000.

The rush was triggered by the announcement in December 2001 of the discovery of two diamond-bearing kimberlite pipes (Renard I and 2) by Ashton Mining of Canada and Crown corporation Soquem on the Foxtrot property, 80 km north of the Otish Mountains. By late 2002, the two equal partners had identified eight diamond-bearing kimberlite bodies, namely Renard 1-8.

A total of $46.8 million was raised on Quebec capital markets during the first nine months of 2002 in the form of ordinary shares, flow-through shares and debentures for mineral exploration projects, compared with only $16.5 million over the same period in the previous year. However, only 38% of this amount ($17.6 million) was earmarked for exploration projects in Quebec, compared with 81% ($13.5 million) in 2001.

Money raised in the form of flow-through shares for mineral exploration in the province amounted to $4.4 million. According to the information filed with the Quebec securities commission, when junior mining companies are most active on financial markets, the total value of flow-through shares issued in Quebec for projects there should reach $10 million, roughly the average over the previous few years.

Last year was the first full year of activity for the Socit d’investissement dans la diversification de l’exploration (SIDEX), a partnership between the Quebec government and Fonds de solidarit (FTQ), a labour investment fund that acquires equity in mineral exploration companies. During the first nine months of 2002, SIDEX signed 17 investment agreements for a total of $6.1 million. Over the same period, Sodemex and Sodemex II invested 630,000 in exploration companies for projects in Quebec, and FTQ and Fondaction CSN (another labour investment fund) invested $730,000.

The Canadian Securities Administrators made a firm commitment to eliminate discrepancies in provincial and territorial securities legislation. As part of this regulator reform strategy, a proposal to harmonize legislation has been prepared. Its objective is to lighten the regulatory burden and make regulations more effective by proposing a blueprint for the adoption of form laws and regulations across Canada.

— The preceding is an excerpt from Summary and Highlights of the Quebec Mining Ministry in 2002, a publication of the Quebec government.