Canadian Prime Minister Stephen Harper's current trip to China is touted as an opportunity to create partnerships between the two countries. One positive outcome has just been revealed: Canaccord Financial of Toronto and a Chinese bank plan to establish a Canada-China Natural Resource Fund and give it an initial endowment of US$1 billion.
The fund intends to:
- Invest in both public and private natural resource and energy companies or projects in Canada;
- Promote interaction and sustainable development among Chinese, Canadian and other nature resources companies, and'
- Create opportunities for substantial returns on investment (be profitable) through the strategic and market-oriented allocation of the fund's capital.
Most of the public will find a "billion" to be an eye-popping amount. Those of us in the mining industry know it takes a lot more than that to create a modern mineral producer. The Ambatovy nickel project in Madagascar has a pre-production capital budget of $5.5 billion. The Galore Creek gold mine in British Columbia will cost $5.2 billion, maybe more, when it is developed. The Pascua Lama gold project that straddles the Chile-Argentine border is another $5.0-billion undertaking. The Long Harbour, NL, processing plant to treat concentrates from the Voisey's Bay nickel mine has an expected cost of $2.8 billion, and that comes after the billion dollars spent to put the mine in production in 2005.
Expansions at existing mines also carry hefty price tags. Doubling the pellet output of the Mt. Wright iron mine in Quebec will cost $2.1 billion. Growth spending in the Alberta oil sands begins at a couple billion and can reach $10 billion per project.
According to the Mining Association of Canada, our mineral producers have outlined $138 billion in spending for this country alone.
Our readers can now see that a billion dollars doesn't go very far when it comes to the extractive industries.
We applaud China's commitment to the Canadian resource sector more for its transparency than its munificence. That the Chinese and other Asian countries are already solidly invested in the Canadian mining industry is no secret. Their interests are largely intended to ensure that raw materials are available for their own growing economies. Canada just happens to have abundant resources suitable for the task.
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