Congratulations to all of Canada’s Top 40 mining companies. We never tire of putting Noranda (with revenues of $6.96 billion) at the head of the pack. It has held the No.1 spot for almost a decade. Inco ($4.33 billion) fills the No.2 slot, followed by Suncor ($3.39 billion), Potash Corp. of Saskatchewan ($3.31 billion) and Syncrude ($3.30 billion). Agrium, Falconbridge, Placer Dome, and Barrick Gold boast revenues of $2-billion-plus. Cominco, Boliden and Teck are members of the $1-billion-plus club.
Risk analysis plays a large role in evaluating potential mineral developments. Factors such as the socio-political climate are as important as favourable geology. They are doubly important to junior companies, which have no nest egg or other source of income to cover unforeseen difficulties.
The Fraser Institute, in Vancouver, B.C., publishes an important tool for assessing risk. Each year the Institute surveys mining companies to rate various jurisdictions as to whether or not they are well disposed to exploration and mining investment. The 2000-2001 ratings include Canadian provinces, selected U.S. states, Latin America, and regions in the Pacific Ocean.
The “final mark” on the Fraser Institute’s “report card” to governments is its Policy Potential Index. This is the summation of all the factors that have gone into the survey. Out of a possible high score of 100, Nevada tops the list (with 93) of best places for the mineral industry to invest. Next are Chile (87), Mexico (79) and Alberta (79). British Columbia (6) rates as the worst, as it has for each of the four years of the survey. Other Canadian places earned these ratings: Ontario (72), Manitoba (68), New Brunswick (67), Quebec (64), Saskatchewan (53), Nova Scotia (49), the Yukon (38), Newfoundland (34), the Northwest Territories (30), and Nunavut (21).
Foreign countries enjoy these rankings: Peru (75), Brazil (71), Argentina (63), Australia (61), South Africa (51), Indonesia (34), Papua New Guinea (33).
Other than Nevada, U.S. states finished in this order: Arizona (68), Utah (67), Idaho (58), Alaska (56), New Mexico (54), Wyoming (53), South Dakota (49), Colorado (41), Minnesota (39), Washington (28), Montana (27), California (24), and Wisconsin (21), well ahead of last-place British Columbia.
British Columbia did not finish last in every category. It ranked first in the categories no one wants to be first in: uncertainty concerning existing regulations; uncertainty over environmental regulations; regulatory duplications and inconsistencies; native land claims uncertainty; taxation; labour regulation; and uncertainty concerning wilderness and protected areas.
The last item brings to mind the problems at the Windy Craggy deposit in the northwest corner of the province. Exploration was advanced, results promising, and the permitting process begun. Then the B.C. government declared the area a wilderness park, and the project was scuttled with no hope of ever exploiting the deposit. Another sector of the mineral industry deserted the province when a ban was placed on uranium exploration in the 1970s. Although the ban was later lifted, the search for uranium never resumed.
Please forgive us if this sounds like B.C.-bashing. It is not meant as such, but only to illustrate that the Fraser Institute has identified the worst-case scenario for mineral investment in our own backyard, a Canadian province.
The Fraser Institute also recognizes many bright spots on the mining horizon. Based on current regulations and land use restrictions, Chile (with a 96 rating) edges out Nevada and Quebec (both with 93) as the most favourable place to explore and mine. They are trailed by Ontario (88), Peru (83), Brazil (83), and Mexico (80). If land use restrictions were taken out of the equation, Ontario and Nevada would share top spot with Chile (all at 99) followed closely by Chile, Alaska, Australia, Peru and Quebec (all at 97). British Columbia, too, rates a 97 when land use restrictions are excluded.
Respondents to the Institute’s survey rated the mineral potential in Ontario (100) ahead of Nevada (97), Chile (94), Alaska (91), Australia (89) and Peru (89). Quebec (83) and British Columbia (80) were right up there, ahead of Brazil, Mexico, Indonesia, South Africa, Papua New Guinea, Argentina and the other rated U.S. states.
Based on the combined Policy Potential Index and geological attractiveness, the best place to spend exploration dollars would be Nevada (95). Chile (91), Ontario (86), Peru (82) and Mexico (77) round out the top five. After Australia (75), Brazil (74), Alaska (74) and Quebec (73), there is a big drop in attractiveness to Arizona (60) and the rest of the pack. Wisconsin (16) brings up the rear.
The Fraser Institute’s survey is invaluable as a starting point for decision-makers. It quickly identifies where risk factors might impede exploration and development programs. Successful management teams are alert to the pitfalls in various jurisdictions. Losing a potential mine to red tape, delays or uncertain policy is not something anyone sets out to do.
The complete report is posted at www. FraserInstitute.ca Click the search button and enter “mining”; much more information is available at this site.
Canada is justly proud of these mineral producers. Their management teams are as resourceful as any in the world. They work diligently to expand their businesses and create value for their shareholders. The ability to look beyond the borders of this country and assess opportunity wherever it is unearthed, is key to their success. This is especially true of metals producers.