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By Kenneth P. Green
and Taylor Jackson
The Fraser Institute
CALGARY, Alta. / Troy Media/ – In recent years, depressed commodity prices have plagued Canada’s mining industry. One recent report showed that spending on exploration – the lifeblood of the industry – dropped for the fourth consecutive year and is at its lowest point since 2005.
Amid conditions like these, when prices are low and profits are uncertain, onerous regulatory costs and uncompetitive policies can discourage investment in exploration, thereby diminishing the chances that a viable deposit will be found and eventually developed into a producing mine.
While Canada performs well as a whole in offering an attractive policy environment for mining exploration, a number of Canadian provinces and territories continue to fall behind. And policy uncertainty appears to be the main culprit.
Every year the Fraser Institute surveys miners around the world to determine which jurisdictions are attractive – or unattractive – for investment, based on policies and geology.
Again, in general, Canada performs quite well. Saskatchewan and Manitoba rank number one and two this year in overall attractiveness for investment. Quebec also ranks in the global top 10, followed by Ontario (18) and British Columbia (27) – although both Ontario and B.C. dropped in the rankings compared to last year.
Despite the relatively strong performance of these provinces compared to their international competitors, a number of policy issues continue to hold much of Canada back.
For example, in every Canadian province and territory involved in the survey, uncertainty stemming from disputed land claims or regulation is among the top two greatest deterrents to investment.
And in many cases, respondents were much more deterred by these issues in Canadian jurisdictions when compared to others in Australia, the United States and Europe.
Why is this important? Because in a highly competitive industry, uncertainty can seriously dampen investment and drive it elsewhere. If explorers or miners are uncertain about whether they’ll be able to access land or how regulations will impact their activities, they’ll be less likely to invest, which means fewer jobs and lower revenue flowing through provinces and territories.
In addition, it’s also the little guys who are most hurt by uncertainty. When results for the survey are separated by type of company, explorers (not the larger producer companies) are much more deterred from investing due to land and regulatory uncertainty.
For example, in B.C., 72 per cent of explorers indicate that uncertainty from disputed land claims deters investment, compared to 60 per cent of producers. Likewise, due to uncertainty resulting from existing regulations, 49 per cent of responding explorers in B.C. indicate this deters them from investing compared to only 36 per cent of producers.
Quebec is another province where explorers struggle much more with uncertainty than the large producers, while in Ontario explorers and producers are equally concerned about issues surrounding regulation and land claims.
Simply put, despite Canada’s overall performance, there’s certainly room for improvement. If provinces and territories are keen to attract more investment in mining, and the high-paying jobs associated with such activities, reducing uncertainty would be the place to start.
Kenneth P. Green is senior director and Taylor Jackson is a senior policy analyst in Natural Resource Studies at the Fraser Institute.
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