In recent years, it’s no secret that the mining and metals industry has struggled to capture the attention of investors and raise capital as the focus for many major miners has been tied to building out effective operations and less on growth and exploration. Little capital is dedicated to new innovation and risk taking has been limited, pushing capital in other directions.
Mining and metals companies have been competing for traditional capital with a new commodity: cannabis. Much of the capital that once went into the sector has changed course over to this new budding sector. The Canadian Securities Exchange reports that in 2018, cannabis companies raised close to $4 billion while mining and metals took home just $217 million.
Competition for capital continues to be problematic as companies turn attention from operations to growth — and need the investment to get them there. Some have turned to joint ventures and mergers as a source of new resources and funding, and others have looked to foreign investment. In a difficult financing environment, Canada has witnessed a rise in Chinese, often state-owned, capital and partnerships. But with a cloudy view of global economic growth and trade tensions, companies need to look to other options.
Canada and the mining and metals sector must think long term and collaboratively. The Canadian Mineral Industry Federation recently proposed six recommendations that federal, provincial and territorial governments can action to help boost Canada’s ability to attract new mineral investment. Two especially ring true for the Quebec market.
The first is to provide effective and efficient regulation of the mining industry, appropriate access to prospective lands, and continued and expanded investments in remote infrastructure.
And second, to invest in new exploration techniques and technologies, and provide financial support to catalyze private sector innovation investments to support progress in energy efficiency, environmental protection and business productivity.
Recommended support from the public sector, in tandem with greater intentions from miners to reallocate capital spending towards new projects and innovations, can help attract investor attention and rebuild global competitiveness. This summer we already witnessed improved capital movements coming out of Quebec, which are worth taking note. Here are a few examples:
- Nemaska Lithium announced a foreign investor, the Pallinghurst Group, will help finance up to $600 million of its Whabouchi project. The project is to convert spodumene ore from its Whabouchi mine into value-added lithium salts, which can be used for rechargeable lithium-ion electric vehicle batteries.
- Geomega raised $1.2 million in private share placement to build a demonstration plant for recycling rare earth elements from permanent magnets using a new processing technology that creates no acid waste – making it the first to do so in Canada.
- Radisson Mining Resources announced funding of $6 million, including investment from Rob McEwan, to fund the exploration and development of its historic O’Brien gold mine.
It’s encouraging to see that local and foreign investors are seeing value in the Canadian market and are keen to put capital into fruitful projects, like Nemaska, Geomega, Radisson and others, that are meeting new demands for new materials for battery technologies, sustainable resources and high returns on gold. Despite continued hype for cannabis, it’s clear there’s still money in the market for mining and metals companies who can work collaboratively, think long-term and show fundamental value.
PATRICK BERTRAND-DAOUST is the EY Quebec Mining and Metals leader. He is based in Montreal. For more information, please visit ey.com/ca/mining.