Legislative uncertainty and lack of transparency have knocked Ontario from 10th among the world’s mining jurisdictions to 22nd, according to a recent survey published by the Fraser Institute, a British Columbia-based think-tank.
While most Canadian provinces rank among the top 10 of the 72 jurisdictions listed in the survey, including Quebec which once again ranks first, Ontario took the most drastic dive of the nation’s regions.
“There is deep concern about what’s going on,” says Fred McMahon, vice-president of international policy research at the Fraser Institute.
“The most gung-ho miner, the most committed environmentalist, the strongest aboriginal leaders should all feel the same way about certainty within the regulatory structure. When a process is uncertain, lacks transparency and is not predictable, good projects can be quashed while bad ones can be given the green light, and this is not good for anyone.”
The annual survey garnered responses from 670 companies from 72 mining jurisdictions around the world, on all continents except Antarctica. Combined, these companies represent exploration spending of US$2.9 billion in 2009, and $3.6 billion in 2008. Many of these respondents gave Ontario high marks for its taxation regime and access to skilled labour, but expressed major concerns about the uncertainty surrounding which areas will be protected as wilderness areas or parks.
This, says McMahon, is a direct response to the Far North Planning Act, and lands Ontario in the bottom 10 of the latter category. Similar concerns also find Ontario in the bottom 10 when it comes to uncertainty about native / aboriginal land claims, ranking just above Zimbabwe.
“It really sends a shiver through both exploration and development firms,” says McMahon, who also serves as one of the survey’s coordinators. “Miners spend years throwing money into the ground before they start making any money from the site, and therefore they need to have real faith in the stability of a jurisdiction to know their mine won’t be closed down in the future because of new land claims, new taxes won’t make it uneconomical, or that they won’t be allowed to mine somewhere after spending money there for years.”
While some of Ontario’s ranking slide may be expected given respondents’ concerns over policy and lack of government consultation, some of the results have provided a surprise. After revealing to a Quebec audience that their province was ranked as having a higher political stability than Ontario, the room burst out in laughter in reflection of that province’s efforts to separate from Canada, says McMahon.
Despite the concerns specific to Ontario, the survey also indicates that the general level of confidence among mining firms is rising.
As many as 333 mining companies said their exploration budgets will increase, nearly twice as many as those who said their budget would remain static or even decrease.
This optimism was also reflected in the fact that 64 per cent said they expect mineral prices to rise moderately, while 20 per cent said prices would raise significantly. Of those minerals, 20 per cent of respondents expected a rise in gold and copper, with 10 per cent expecting jumps in the price of silver, nickel, platinum, zinc and coal.
These numbers are significant for much of the respondent base, as 56 per cent consists of exploration companies, and 17 per cent consisting of producers with more than $50 million a year in revenue. Company presidents made up 39 per cent of those who answered the survey, while vice-presidents made up 16 per cent, and managers 25 per cent.
This breakdown has made the survey a significant tool for governments and financial institutions around the world, says McMahon, who is asked to speak about the survey in countries such as Canada, Mexico, Chile, Australia and Chile.
Ruling political parties frequently make use of it to gain a sense of how their policies are viewed by the mining community, while some institutions use it as part of the due diligence process, says McMahon.
He says he’s been told by more than one mining company that some banks use the survey as a factor in determining whether to extend loans working in jurisdictions identified in the document.
