No Quick Fix: Sustaining Mineral Exploration and Mineral Production in Canada

Transcription

1 No Quick Fix: Sustaining Mineral Exploration and Mineral Production in Canada Nadim Kara, Senior Program Director Prospectors & Developers Association of Canada Quebec Mines Conference November 18, 2014

2 PDAC has a long and proud history Over 10,000 members 48 Directors (Board) 28 staff Multiple program areas ~200 committee members 25,000+ participants in 2014 Convention 2

3 Although the mineral industry has generated significant economic opportunities for Canadians Over 418,000 jobs in 2013 Major employer of Aboriginal people Over 1,600 mineral companies on TMX Over 3,000 service and supply companies Canadian Mining Assets Abroad totalled almost $150B in 2012, in 109 countries 70% of global mining equity finance capital raised on TMX in 2012 Over $70B in taxes and royalties paid to governments over the last decade Imported feed = higher cost Fabrication plants Recyclables Semi-fabrication plants Exploration Activities: Junior and Senior Companies and Prospectors Fabrication plants Metal mines/ concentrators Smelters Refineries Semi-fabrication plants Fabrication plants jobs in remote communities jobs in medium-sized communities Semi-fabrication plants Fabrication plants Fabrication plants Communities across Canada Major source for port and rail traffic jobs mostly in large cities 3 Source: NRCan

4 the ability of the industry to sustain these benefits is not certain 1. Declining Base Metal Reserves 2. Declining Production Volumes 4

5 Declining base metal reserves illuminate the importance of sustained exploration 5

6 while declining production volumes highlight the need to help discoveries become mines Gold Production in Canada, 1990 to millions of grams

7 while declining production volumes highlight the need to help discoveries become mines kt Nickel Production in Canada, 1990 to 2013p kt Copper Production in Canada, 1990 to 2013p 7

8 while declining production volumes highlight the need to help discoveries become mines 1400 Zinc Production in Canada, 1990 to 2013p kt

9 Each part of the problem requires different solutions 1. Declining Base Metal Reserves Response: We need to sustain exploration in Canada so we can continue to make the discoveries that might become the mines of the future 2. Declining Production Volumes Response: We need to create an enabling environment, in Canada, for existing discoveries to move into production 9

10 Reversing the Decline in Base Metal Reserves: Sustaining Exploration 1. Financing Mineral Exploration 2. Regaining Canada s Status as the Top Destination for Exploration Globally 10

11 Financing for Mineral Exploration Down Globally $5 000 $4 500 $4 466 $4 000 $3 500 $3 000 $2 953 Millions $2 500 $2 000 $1 962 $2 122 $1 500 $1 528 $1 000 $500 $- $1 011 $1 099 $354 $387 $228 $259 $302 $263 $78 $265 $644 $511 $503 $115 $446 $348 $357 $224 $300 $80 $127 $112 $141 $58 $222 $81 Mineral Exploration Financing All Exchanges. Source: GAMAH International Ltd

12 Source: Gamah International TSXV Junior Company Financings Value of Junior Company Financings Exploration Stage Companies Proposed/Arranged ($millions) Debt Financing (mil$) Flow-Thru Financing (mil$) Equity (non-ft) Financing (mil$) Value of Financings ($millions) Year Proposed Financings(mil$) Q Debt Financing (mil$) ,744 4,236 1,357 1,531 3, ,524 3, Flow-Thru Financing (mil$) , Equity (non-ft) Financing (mil$) ,108 3,115 3,600 8,220 13,633 2,707 4,775 8,156 6,837 6,001 2, Total (mil$) ,202 2,455 3,917 4,653 11,655 18,885 4,613 6,797 12,728 8,504 8,143 6,300 1,417

13 At the same time, juniors have been making a significant share of discoveries Percentage of Total 100% 80% In the last 5 years, Junior Companies accounted for 86% of all discoveries in Canada 60% 40% 20% Junior Companies Senior Companies 0% Mineral discoveries in Canada: Source: MinEx Consulting October 2014

14 What Can Be Done: Responding to the downturn in exploration risk capital Implement, sustain and enhance fiscal incentives for mineral exploration, particularly grassroots exploration Advocate to Ministers of Finance for reforms to the regulation of Canada s capital markets that facilitate capital raising 14

15 Canada is experiencing an absolute decline in the amount of money spent on exploration Australian, Canadian and Global Exploration Budgets (total amounts) Australia Canada Total Source: SNL Metals and Mining $20,5 $17,2 15 $13,8 $14,4 $10,9 $11,5 10 $7,5 $8, $5,1 $3,6 $2,8 $3,1 $3,2 $2,0 $2,3 $2,5 $1,9 $2,3 $2,2 $1,9 $1,4 $1,5 $0,7 $1,0 $1,6 $1,4 $0,5 $0,6 $0,8 $1,

16 as well as a relative decline in its share of global exploration budgets 100% Share of Global Exploration Budget: Canada / Australia 90% 80% 70% 60% 65,2% 67,4% 68,3% 66,4% 65,0% 69,3% 67,6% 68,8% 71,9% 73,6% 50% 40% 30% 20% 20,1% 19,9% 20,9% 21,2% 20,6% 17,1% 19,3% 18,0% 15,8% 13,3% 10% 0% 14,7% 12,8% 10,8% 12,4% 14,4% 13,6% 13,2% 13,1% 12,3% 13,1% Australia Canada Others

17 Exploration dollars are not going as far as they once did 17

18 Companies are looking deeper, and in more remote areas, to find deposits, raising the costs of exploration in Canada 18

19 Land access restrictions reduce the probability of making a discovery Closure: (5 sq km) Mining (5 sq kms) Advanced Exploration (5 sq kms) Preliminary Exploration (X10 s sq kms) Land Acquisition (X00 s sq kms) Area Selection (X000 s sq kms)

20 including ongoing uncertainty related to the Duty to Consult What is the actual trigger for the duty, particularly at grassroots stage? How significantly can grassroots activities impact Aboriginal and Treaty rights? Who leads / conducts the consultation process and what procedural aspects are delegated to companies (what does procedural mean)? What is considered adequate consultation, and who decides? What process is used by governments to determine adequacy? What happens when a permit is issued, and access is still denied?

21 What Can Be Done: Regaining Our Status as the Top Destination for Exploration ACTIONS TO SUPPORT EXPLORATION AND ENHANCE DISCOVERY RATES Promoting technological, methodological and process innovations to deal with exploration challenges

22 What Can Be Done: Regaining Our Status as the Top Destination for Exploration ACTIONS TO SUPPORT EXPLORATION AND ENHANCE DISCOVERY RATES Maximize the total land base available for mineral exploration by: o Minimizing land withdrawals o Improving the type, quantity and quality of available public geoscience information o Securing both a legal and social license to operate from project-affected communities, particularly Aboriginal communities

23 What Can Be Done: Regaining Our Status as the Top Destination for Exploration ACTIONS TO MOVE DISCOVERIES INTO PRODUCTION Catalyze infrastructure investments to enhance the economic viability of developing existing discoveries Enhance regulatory clarity, certainty and efficiency to bring projects into production in a timely manner

24 What Can Be Done: Sustaining Exploration Through the Capital Crisis THANK YOU Implement, sustain and enhance fiscal incentives for mineral exploration, particularly grassroots exploration Nadim Kara, Senior Program Director Advocate to Ministers of Finance for reforms to the regulation of Canada s capital markets that facilitate capital raising Participate in the Cooperative Capital Markets Regulator, and ensure the regulatory regime is favourable to non-revenue generating companies 24