Canada: the centre of the mining universe

Canada’s comprehensive mineral resources sector holds the keys to the future of the cleantech economy

 


 

It is no secret that Canada’s mineral resources industry is one of the biggest and best in the world, and a vital lever in the national economy. The sector is not just integral for the smooth functioning of Canadian society, in that it provides billions of dollars’ worth of export revenues, reliable energy supply and broad-based employment opportunities in a future facing industry, it also sits at the very centre of the international mining industry. What’s more, Canada’s resources space is set to play a leading role in the global decarbonisation process, as humankind faces up to the existential threat of climate change. Toronto Stock Exchange (TSX) and Venture Exchange (TSXV) provide a home to nearly half of the world’s publicly listed mining and exploration companies, and a first port of call for issuers with regards to guidance on key issues ranging from listing requirements to ESG best practices, reporting and disclosure standards.  

 

Recent years have shown that the modern day TSX investor is no longer solely focused on a return on capital from investments in the natural resources space, but also increasingly on responsibly sourced commodities with a low impact on the environment and communities in which they are extracted from. There also continues to be growing clamour for battery metals as the global electric vehicle (EV) industry moves up the gears, while the need to secure materials deemed ‘critical’ to the Canadian economy becomes ever greater in a polarising global market. However, the strength and diversity of Canada’s mineral resources industry – underpinned by over 150 years of extractive experience and the world’s biggest concentration of listed miners – positions the North American nation at the forefront of the global mining business as it transitions into a sustainable, clean tech industry that could well save the planet.  

 

A domestic behemoth

   

Canada’s domestic mining industry was comprised of over 200 active mines in 2019, producing more than 60 minerals and metals. Globally Canada is ranked 1st for potash production, 2nd in uranium and niobium, 3rd for nickel, aluminium, diamonds and platinum group elements (PGEs), 4th in cobalt and 5th in gold output. 

 

The sector generated C$109 billion – 5% of Canada’s total GDP – in the year before last, with $106 billion exported – 19% of Canada’s total exports – to global markets. Mining also supported 719,000 direct and indirect jobs, with employment primed to grow further in line with the estimated $82 billion set aside for mining projects over the next decade. 

 

A vast majority of the exploration and mining companies working within the domestic sector are listed on the TSX and TSXV, where they benefit from greater access to capital, visibility of transactions, analyst coverage, specialised indices and tailored listing requirements for junior explorers right through to the major producers. 

 

In 2020, $7.5 billion of mining equity capital was raised through Toronto and 57 new mining issuers came to market, contributing to a total mining market capitalisation of $521 billion. This was achieved after a rapid bounce back from the COVID-19 crisis across the commodities space, which continued into the first half of 2021.  

 

Mining financing activity was up 27% compared to H1 2020 and total capital raise grew by 146% to $6 billion –a remarkable 80% increase on the entire 2020 period. In terms of listings, TSX and TSXV welcomed 50 new issuers in the first six months of 2021, compared with 16 in the COVID-impacted first half of 2020. 

 

“It was an extremely good first half for us, and when we put that into context compared to our competitors globally as a stock exchange for mining companies, we continue to be the number one publicly listed venue for mining companies,” TMX Group’s head of business development, global mining Dean McPherson tells RGN. “We also lead in terms of number of new listings. Companies that are attracted to our markets are recognising that this is the place to be if you’re a mining company.” 

 

Global clamour for Canada 

 

In his role as head of global mining business for Toronto’s exchanges, McPherson is quick to highlight that the reach of Canada’s premier market goes way beyond exploration and mining firms in the domestic space. Latin America represents the largest pool of properties represented outside of North America, however you will find myriad TSX and TSXV issuers with projects in Europe, the Middle East, Asia and Australia. 

 

In fact, recent months and years have seen a growing trend involving Australia-domiciled mining companies investing in North and Latin American projects. This development is an antithesis to the traditional view of Australia as a rival sphere to the Canadian mining market, and comes at a time when the largest players in the space are looking to diversify and expand their global portfolios. 

 

ASX-listed Evolution Mining got the ball rolling in late 2019 with a US$375 million investment in the Red Lake gold complex in Ontario. The major also pledged to spend $50 million on exploration and $100 million on existing operations at the underground complex. Meanwhile, Australia’s largest gold producer Newcrest Mining made a secondary listing on TSX last year, with MD and CEO Sandeep Biswas citing a growth strategy in the Americas. 

 

“We’re happy to have Newcrest and think this is where they should be, considering their global strategy,” McPherson says. “I think that strategy points to why you are seeing this trend. Companies are responding to the scarcity of quality assets with a will to expand their operations globally. 

 

“I feel it’s only natural that companies will look to join our exchange to raise their profile as they find assets and execute on their strategies. Companies in Australia are looking for assets, particularly in Latin America, but also in Canada.” 

 

Exploration opportunities aplenty 

 

Perhaps most interestingly, BHP moved its exploration headquarters to Toronto in March of this year, in a move that chief technical officer Laura Tyler said would allow the Anglo-Australian company to be ‘closer to the action’.  

 

In August, the world’s biggest mining company confirmed it would be going ahead with the development of the US$5.7 billion Jansen potash project in the Canadian province of Saskatchewan. The company is also currently locked in a bidding tug-of-war with Andrew Forrest’s Wyloo Metals for TSXV-listed nickel explorer Noront Resources.  

 

BHP’s move for Ontario-based Noront – coupled with the major potash investment in Saskatchewan – demonstrates a growing belief within the company that the best opportunities to develop future-facing commodities and world-class assets are available within Canada.

 

Huge swathes of Canada remain fertile ground for mineral discovery, not least in the Province of Ontario, which is ranked among the top 10 jurisdictions in the world for mineral exploration spending, and is one of the leading regional producers of gold, nickel and PGEs globally, along with cobalt, copper, silver and zinc. 

 

The Ontario Government is also investing in initiatives to keep the mineral exploration and development sector competitive. Two examples are the Ontario Junior Exploration Program (OJEP) – a catalyst to increase mineral discovery rates and attract investment – and the Ontario Flow Through Shares Tax Credit, which stimulates exploration and improves access to capital. 

 

“To date, we have implemented several initiatives to relieve regulatory burden and streamline administrative processes,” says Ontario’s Northern Development, Mines, Natural Resources and Forestry and Minister of Indigenous Affairs Greg Rickford. 

 

“We have modernised our mining legislation, the Mining Act and have reduced red tape for industry. We have created and invested in programmes such as the OJEP and started working on a Critical Minerals Strategy for Ontario—a first for our province.”

 

Critical minerals 

 

A loose definition of critical minerals would be those that are essential to the economy of a country or critical for defence applications, or those in which supply could be disrupted from various factors including global demand and geographic, import or geopolitical risks. 

 

Ontario is a producer of several critical minerals including the commonly recognised battery metals, as well as lesser-known selenium, tellurium and indium. Other critical minerals present across Ontario’s varied geology include barite, chromite, fluorspar, graphite, magnesium, niobium, phosphate and uranium. 

 

The concept of a critical minerals sub-sector in mining has further solidified in the post-pandemic era, which has been characterised by a ‘build back better’ mindset among major governments aiming to kickstart the ‘green industrial revolution’. This global clean energy push will require vastly greater quantities of critical materials that are to be found in Ontario and other Canadian provinces. 

 

There have been concerted efforts on a Provincial and Federal level to begin building vertically integrated supply chains in several future-facing industries, not least the EV market in Canada and – more broadly speaking – North America, particularly after the US and Canada signed a joint action plan for critical minerals collaboration last year. 

 

Building an EV supply chain 

 

The main components needed for a jurisdiction to build a fully integrated EV supply chain include rich critical mineral deposits, strong environmental and regulatory frameworks, widespread use of renewable energies, battery metals processing infrastructure, a major auto manufacturing ecosystem and expertise in battery recycling. 

 

Canada is the only country in the Western Hemisphere able to tick all these boxes and manufacture EVs in-country from start to finish, according to business analyst Philippe Ferland from Invest in Canada. 

 

In a piece for the 2021 PDAC Convention in March, Ferland said: “Canada’s battery supply chain advantage begins with what comes from the ground…As a supplier, Canada ranks 4th in the world for cobalt, 3rd for nickel and 3rd for graphite.” In addition, there are several nascent lithium projects currently under development in the provinces of Québec, Alberta and Ontario. 

 

The next step in the chain requires mineral processing capabilities. Canada is among the top countries for refined nickel production and is increasing its capacity for cobalt, graphite, lithium and rare earth element processing, with plants being developed across the country. 

 

These facilities will be able to directly supply cathode and anode manufacturers as the next value-added stage of the battery supply chain. Cathode manufacturing, which accounts for around 55% of the total cost of an EV battery, presents a lucrative opportunity for Canada to supply the North American automotive market with a vital component for its all-electric fleet. 

 

ESG excellence  

 

However, as TSX’s McPherson points out, proponents of the global clean energy push are not just fixated on the end uses of today’s commodities and whether they can power the green industrial revolution. They are also concerned with the environmental and ethical footprint associated with any mined product, whatever it may be. 

 

“This new class of investors are asking questions like ‘how does mining impact the communities in which they are sourced?’ This is why we think it’s important for us as the home of the most mining companies in the world to step in and provide education and the tools for our issuers to meet these new challenges and ESG questions that are asked by investors.” 

 

In response to the ever-increasing plethora of ESG standards flooding the market of late, TSX last year created ESG 101 – an educational hub aimed at providing issuers with a comprehensive guide to the process of ESG reporting. The exchange has since built on this foundation with a primer document in partnership with Chartered Professional Accounting Association Canada, and recently struck another agreement with London-based information provider IHS Markit. 

 

The collaboration will allow all TSX and TSXV-listed firms to input their ESG data into the IHS global repository free of charge, affording them an opportunity to compare themselves against peers and evaluate different ESG approaches in order to gain insights into what investors are looking for. The repository currently incorporates 17 leading ESG standards and provides a useful framework convertor service for all participants. 

 

“This distribution network provides huge benefits for our issuers. I’m really excited about this partnership and we’ve got great responses from our issuers already,” McPherson proclaims. “The IHS joint venture is not the end either. We have a team that’s focused on different innovations and products that we can use to create and help our clients meet the new expectations that ESG has brought to the mining sector.” 

 

In the last decade, the mining industry has gone a long way to restoring a reputation damaged by years of local and global environmental damage and other various CSR mishaps in mining regions around the world, including across Canada. However, in a microcosm of the sector’s improving credentials, many Canadian resources companies are now leading by example in the ESG arena. 

 

This is evidenced by a recent top 50 ranking of Canada’s best corporate citizens by clean capitalism magazine Corporate Knights. Five mining companies made the June 2021 list, with Yamana Gold the highest ranked outfit from the sector. Teck Resources, Royal Canadian Mint, Agnico Eagle Mines and IAMGOLD Corp were also included in the annual chart, which evaluates Canada’s largest corporates using performance indicators such as ‘clean’ revenue and investment, board/executive gender and racial diversity and supplier score sustainability. 

 

Indigenous participation 

 

The rise and rise of ESG rhetoric and reporting in Canadian business has also shone a brighter light on the rights of indigenous groups across the country, which may previously have been a mere afterthought for mining companies advancing mineral projects on lands held by First Nations peoples.  

 

Nowadays, companies are encouraged to engage indigenous groups at the early stages of project development, as well as make agreements with groups to protect local environments and – in many cases – ensure indigenous communities share in the long-term economic benefits of a mining project. 

 

In Ontario, it’s estimated that 11% of the direct mining workforce is indigenous, with jobs ranging from early exploration through to mine closure. Furthermore, many indigenous businesses provide various services to Ontario’s mining sector, including environmental consulting, camp services and logistics. 

 

“We know that responsible stewardship in partnership with stakeholders and indigenous communities creates more jobs and economic opportunity,” says Minister Rickford. “Since taking office in 2018, under the leadership of Premier Doug Ford, our government has strengthened our mining industry and our relationships with indigenous partners across the North.”   

 

Government schemes like the $4.7 million Aboriginal Participation Fund (APF) are also creating new opportunities to build and strengthen relationships between indigenous communities, government and industry. APF supports education and relationship-building activities related to mineral exploration and development within indigenous groups in Ontario. 

 

The complete package 

 

The Canadian mining industry’s growing appreciation of indigenous participation within the wide-ranging ESG thematic is just one part of the parcel that amounts to the most comprehensive and progressive resources sector on the planet. 

 

There remains a rich abundance of minerals and metals in the ground sought after by a thriving exploration sector, along with world-class equipment and mining services, cutting-edge technological advancements, a sophisticated financing space within the world’s leading exchange for mining companies, plus business-friendly Federal and Provincial governments that understand the relationship between natural resources and clean technologies.  

 

And as the recent trend of growing foreign investment into the Canadian mining sector demonstrates, major, mid-tier and minor players from around the world are identifying Canada as the number one place to list, invest and develop projects in, as part of a global strategy. This incoming traffic only underscores Canada’s position at the very centre of the mining universe.