The conservative think-tank – the Fraser Institute – has released its annual Survey of Mining Companies, on the most attractive jurisdictions for mineral investment. This year’s top three are Quebec, Nevada and Finland.
The Policy Potential Index is a composite measurement of the effects of government mining policies on mineral exploration and development that include environmental regulations, taxation, infrastructure, political stability, uncertainty over native land claims, labour issues as well as geological attractiveness and the interpretation of existing regulations.
“Quebec has always been viewed in a good light by the mining industry, primarily due to its favourable geology,” said Fred McMahon, coordinator of the survey and the Institute’s Director of Trade and Globalization Studies.
“But Quebec’s government also provides a favourable policy environment to go along with strong mineral potential. Mining companies feel Quebec’s stable policies provide them with the certainty that reduces risk for long-term projects. Year after year, the survey bears out that above all, mineral exploration companies value stability and certainty when it comes to government policy.”
This year’s survey represents the opinions of 372 mining executives and managers worldwide on the policy and mineral endowment of 68 jurisdictions on all continents except Antarctica.
Australia, Canada and the United States are divided by their states or provinces. The companies participating in the survey reported exploration spending of US$1.48 billion in 2007 – almost 15% of total global exploration of US$9.99 billion for that year.
The surprise showing was Finland which jumped from number 29 last year to the number three spot. Nevada has consistently remained in the top five positions.
One of the changes on the list was Chile which regained its traditional spot on the top ten list at number six from last year’s 27th spot. Labour problems were probably why the country scored so low in the previous year.
Fred McMahon said, “The commodity super-cycle is causing considerable amount
of stress in the mining world. Due to large increases in metal prices and profits, various Governments are re-opening or breaking previous agreements, unions are more prone to go on strike, and shortages of products and skilled workers are causing the economics of many projects to be reconsidered. All these issues will also affect a jurisdiction’s place on our survey.”
However, the wild movements of some key mineral producing countries that are normally thought of as stable with good governance indicates the annual survey might need to take a larger sampling of opinion or fine-tune their methodology. As one pundit confided to me, “a few negative comments about a jurisdiction can cause that province or country to unfairly drop notwithstanding the fact that the working environment is predominately good.”
Other jurisdictions that made the top ten list include – in descending rank – Alberta, Manitoba, Chile, Utah, Wyoming, Ireland, and Sweden. Although Alberta and Ireland have exceptional government mining policies in place, both countries are not considered major mineral producers.
Canada’s largest mineral producer, Ontario, moved up two spots this year to number 18, however the province was routinely in the top five at the beginning of the decade. Problems with Aboriginal land title, a powerful environmental movement, a controversial land-use policy in the late 1990s, low investment in geo-science initiatives and a major conflict with DeBeers over royalty payments at their Victor project near the James Bay coast continue to keep the province out of the top ten.
One exploration company president said, “Ontario better get its act together in regard to aboriginal and permitting issues or it will seriously fall from grace.”
Coming up just one spot behind Ontario, Canada’s most western province British Columbia has made tremendous strides from its doghouse position at the beginning of the decade. But mining memories run deep and many have still not forgotten the provincial government’s expropriation of the incredibly rich Windy Craggy deposit in the early 1990s.
A mining related company President said, “With the uncertainty of the land claim status with the “second or third” nations, there is absolutely no certainty that if you find something there will ever be an opportunity to extract the mineral value. … I believe it is a “waste” of money to explore in BC.”
Another exploration company President said the opposite, “BC has a well streamlined process that is clear and concise. … very few hidden surprises.”
Saskatchewan has dropped to 12 from ten – the third consecutive year the province has fallen. Newfoundland was the lowest ranking province at 22nd, while Nunavet plunged to 54th spot slightly below the Congo and California, a state not known for its enlightened mining policies.
Surprisingly, three American states have made it to the top ten. Nevada has traditionally been near the top, but Utah came in at number seven followed by Wyoming. Arizona was at number 14 while New Mexico took the 26 spot followed closely by Minnesota at 31.
While the United States is not thought of as a pro-mining country, many of the traditional mining states have good policy. As with Australia and Canada, the major problem getting sustainable mining projects developed is the disconnect between highly urbanized populations – heavily influenced by media-savvy environmental movements – and their lack of knowledge that mineral products are vital for their high standard of living.
The environmental movements will continue to challenge the mining sector’s “license to operate” in these countries as they do all over the world. The other major issue that affects Australia and Canada is Aboriginal title to lands. The severity of the problem varies from state to province yet when there is cooperation the resulting economic benefits are great.
The Vale’s Voisey’s Bay nickel project in Newfoundland and Labrador is a good example where slightly over half the employees are Aboriginal and about half a billion dollars has been spent of First Nations businesses to service the mining operations.
Australian states have all gone down in ranking in this year’s survey while South Australia, Queensland and Tasmania tumbled out of their previous year’s top ten rankings.
This year, South Australia ranked 15, Tasmania 20, Northern Territory 21, Western Australia 25, New South Wales 27, Victoria 28 and coming up last was Queensland at 29.
One exploration company staffer stated, “New South Wales [suffers from] current uncertainty in environmental requirements for exploration as the authorities go through changes. In this limbo period, we have been given conflicting advice which has hindered our exploration efforts…”
Another mining related company President stated, “Australia [suffers from] native title [problems], bureaucratic regulatory slowness, lack of available labor, cost blow outs, [and] timeframe issues. Australian development [is] being hindered through narrow approach to environmental hurdles.”
Honduras, which was added to the list this year, was considered the worst country to invest in. Other countries in the bottom ten include major mineral producers like Zimbabwe, Ecuador, Bolivia, India, Indonesia, Mongolia, Philippines and Venezuela, all countries with considerable political instability.
Regarding Indonesia, one exploration company manager said, “No security of tenure, transparency, etc. Shame, as it is technically one of the best countries in the world to explore.”
Another President of a producing company with more than US$50 million in revenue said, “Bolivia is blessed with mineral potential but at the same time has elected a government which is providing no “stability” for foreign investment and to the contrary is making public statements that discourage investment.”
“Mining is fully international business and these results reinforce the idea that jurisdictions must be prepared to compete on an international basis to attract mining investment,” McMahon said.
The complete survey is at www.fraserinstitute.org
Stan Sudol is a Toronto-based executive speech writer and mining columnist.