VANCOUVER — Canadian non-profit research group the Fraser Institute has released its annual Survey of Mining Companies, which gauges the geographic investment temperature by polling 690 exploration, development and other mining-related professionals.
The survey attempts to determine how mineral endowments and public-policy factors — such as taxation and regulatory uncertainty — affect exploration investment, with total exploration budgets amongst the participating companies totalling US$3.4 billion in 2013.
The report takes into consideration geologic and economic considerations, and includes jurisdictional mining policy in the form of the Fraser Institute’s policy perception index (PPI), with 112 mining jurisdictions ranked.
The PPI measures uncertainties surrounding administration of current regulations, environmental regulations, legal systems and taxation regimes, infrastructure, labour and skills availability, and security issues.
Sweden topped the PPI rankings with a score of 95.2 out of 100, followed by Finland, Alberta, Ireland, Wyoming, Western Australia, New Brunswick, Nevada, Newfoundland and Labrador, and Norway. Newfoundland and Labrador was the largest riser in Canada, with the province up nine spots year-on-year. Meanwhile, the Yukon dropped 11 spots to rank nineteenth.
One respondent noted a ruling by the Supreme Court of Canada in late 2013, which reiterated a prior ruling that the Yukon government needs to consult the Ross River Dena First Nation Council before granting quartz-mineral claims within its traditional lands.
The top-10 worst investment regions by PPI standards are Kyrgyzstan, Venezuela, the Philippines, Argentina–La Rioja, Angola, Argentina–Mendoza, Zimbabwe, Ivory Coast, Indonesia and Madagascar. The La Rioja and Mendoza provinces in Argentina were major decliners in PPI rating, with Mendoza maintaining an open-pit and cyanide mining ban and La Rioja rescinding Osisko Mining’s (TSX: OSK; US-OTC: OSKFF) Famatina concessions in early July.
Canada’s average PPI score decreased marginally year-on-year, though similar to 2012, three Canadian jurisdictions — Alberta, New Brunswick, and Newfoundland and Labrador — sat comfortably in the top 10. B.C.’s PPI score improved notably, reflecting sunnier respondent outlooks on political stability (+7 points) and labour and skills availability (+5 points). B.C. finished thirty-second overall on the PPI scale.
“First Nations rights and the debate about revenue sharing have stalled many projects in Manitoba, Ontario and elsewhere,” the vice-president of an exploration company wrote. “Other than raising capital in the markets, this is the greatest detriment to exploration in Canada today.”
Quebec, which was ranked first overall in the PPI survey from 2007 to 2010, continues to lose ground. The province dropped from eleventh in 2012 to twenty-first in 2013. The Fraser Institute noted that most respondents were critical of the province due to “lower ratings for uncertainty concerning the administration, interpretation and enforcement of existing regulations (-24 points), the legal system (-12 points) and the taxation regime (-10 points).”
The average PPI score for the U.S. increased in 2013, although only two of its jurisdictions — Nevada and Wyoming — were amongst the top 10. Utah and Washington were the only U.S. jurisdictions that fell in PPI scores, while the remaining states enjoyed at least slight improvements year-on-year.
A new addition to the survey this year was a section regarding “public opposition to mining.” Miners were asked a new question about whether public opposition was affecting the permitting and approval process at their projects. Over 36% of companies agreed that public opposition was a detriment to permitting, with 24% reporting that “permitting and approval was delayed by two to four years.” When asked about the cause of public opposition, the most common options were “environmental and water usage” at 59%, and “indigenous and aboriginal rights or title” at 32%.
“The greatest deterrent to investment is uncertainty around the planning and taxation regimes,” a senior executive of a producer noted, with more than US$50 million in revenue. “Investment decisions take more than five years to come to fruition, and if the regulatory frameworks are constantly changing to appease interest groups, it makes the investment decision difficult. In the end, this means that a higher-risk profile is attached to investment in those areas, and they are less competitive.”
Exploration budgets were also on the decline. According to the Fraser Institute’s mining company survey in 2012–2013, exploration spending of US$6.2 billion and US$5.4 billion were reported in 2012 and 2011.
“The investment climate for junior resource companies has been the worst in a generation this year,” added an exploration-stage company. “However, there are signs of life, so we can only hope we have seen the bottom.”
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