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
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
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
the ability of the industry to sustain these benefits is not certain 1. Declining Base Metal Reserves 2. Declining Production Volumes 4
Declining base metal reserves illuminate the importance of sustained exploration 5
while declining production volumes highlight the need to help discoveries become mines 200 180 Gold Production in Canada, 1990 to 2013 160 140 millions of grams 120 100 80 60 40 20 0 6
while declining production volumes highlight the need to help discoveries become mines kt 300 250 200 150 100 50 0 Nickel Production in Canada, 1990 to 2013p kt 900 800 700 600 500 400 300 200 100 0 Copper Production in Canada, 1990 to 2013p 7
while declining production volumes highlight the need to help discoveries become mines 1400 Zinc Production in Canada, 1990 to 2013p 1200 1000 800 kt 600 400 200 0 8
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
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
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 $81 Mineral Exploration Financing All Exchanges. Source: GAMAH International Ltd
Source: Gamah International TSXV Junior Company Financings Value of Junior Company Financings Exploration Stage Companies Proposed/Arranged ($millions) Debt Financing (mil$) Flow-Thru Financing (mil$) Equity (non-ft) Financing (mil$) 20 000 18 000 Value of Financings ($millions) 16 000 14 000 12 000 10 000 8 000 6 000 4 000 2 000 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Year Proposed Financings(mil$) 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Q2 2014 Debt Financing (mil$) 139 72 116 91 139 79 384 653 2,744 4,236 1,357 1,531 3,919 836 1,524 3,664 607 Flow-Thru Financing (mil$) 50 72 77 139 166 268 418 400 691 1,016 549 491 653 831 618 287 65 Equity (non-ft) Financing (mil$) 695 537 643 481 897 2,108 3,115 3,600 8,220 13,633 2,707 4,775 8,156 6,837 6,001 2,349 745 Total (mil$) 884 681 836 711 1,202 2,455 3,917 4,653 11,655 18,885 4,613 6,797 12,728 8,504 8,143 6,300 1,417
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% 1960 1970 1980 1990 2000 2010 13 Mineral discoveries in Canada: 1960-2012 Source: MinEx Consulting October 2014
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
Canada is experiencing an absolute decline in the amount of money spent on exploration... 25 20 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 $8,0 15 5 0 $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 $1,1 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
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% 1 2 3 4 5 6 7 8 9 10 16 Australia Canada Others
Exploration dollars are not going as far as they once did 17
Companies are looking deeper, and in more remote areas, to find deposits, raising the costs of exploration in Canada 18
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)
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?
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
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
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
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 nkara@pdac.ca the regulation of Canada s capital markets that www.pdac.ca facilitate capital raising Participate in the Cooperative Capital Markets Regulator, and ensure the regulatory regime is favourable to non-revenue generating companies 24