Ottawa said ready to act — `Come home,’ Canadian

Delegates to the annual Investing in the Americas conference were apprised of numerous mineral opportunities throughout Latin America. At the same time, however, they were reminded that the grass is not always greener south of the Rio Grande and that Canada still has considerable exploration potential.

“The Labrador Voisey Bay discovery is an excellent example of successful grassroots exploration in Canada,” said Anne McLellan, minister of Natural Resources Canada. “This deposit has all the markings of another Sudbury, Thompson or Kidd Creek — without a doubt, elephants do exist in Canada.” The Northern Miner heard McLellan make the case that Canada still has great mineral potential. Emphasizing that Canadian expertise has led to several important discoveries, she cited the Victor deposit in Ontario, Cominco’s Kudz Ze Kayah massive sulphide project (which features the ABM deposit) in the Yukon, Bell Allard in Quebec and the Pipe Deep deposit in Manitoba. “The discovery of diamonds in the Northwest Territories in 1991 is perhaps the most vivid recent demonstration of Canada’s untapped potential,” McLellan said. “It is likely that our unprecedented diamond exploration activity will result in Canada soon joining the ranks of the world’s leading diamond-producing countries.”

The minister also said the Canadian government is prepared to address challenges related to improving Canada’s investment climate, such as environmental regulatory regimes, aboriginal issues, land access and land tenure.

Towards this end, the government launched a federal Regulatory Reform Initiative in response to recommendations from the Whitehorse Mining Initiative and demands from industry.

Specifically, this program will address the Fisheries Act and the Fish Habitat Policy; land use decisions; definitions of waste and recycling; the permitting process north of the 60th Parallel; environmental and economic factors as they affect regulatory reviews; and improvements to policies and practices which fall under the Canadian Environmental Assessment Act. “These issues will require time to be resolved,” the minister conceded, adding that consultations will involve the provinces and territories. At the same time, she pointed to initiatives already being made by provincial and territorial governments to attract mining investment.

In Newfoundland and Labrador, provincial corporate taxes paid can be credited against mining taxes payable for the first 10 years of a new mine. Quebec allows a 175% deduction for grassroots exploration, and New Brunswick allows a 150% deduction for mineral exploration and development expenses. Ontario offers a 3-year mining tax holiday for new or expanded mines, and British Columbia allows mineral tax to be deducted from provincial corporate income taxes.

Representatives of several Latin American countries were also busy promoting the potential of their geologic districts. Most of the interested North American-based companies appear to be have focused their efforts on gold and copper projects in Chile and Peru. Those countries received high praise for their efforts to privatize mining interests and improve their investment climates.

Venezuela, on the other hand, was given a much lower rating, despite an announcement that companies operating there will now be permitted to make a portion of their gold sales outside the country. Argentina, Bolivia and Ecuador were praised for having made progress in adopting reforms, and considerable interest was shown in the sleeping giant of Brazil. Delegates from Brazilian mining companies were openly seeking joint-venture partners to explore for gold and other targets in the country. And Brazilian officials said discussions are being held to update the Mining Code and relax investment regulations. This proposal was put before the Brazilian congress last May, but was defeated by three votes. Another vote is expected shortly. Central America was also shown to be an area of increased interest. Panama’s copper-gold potential, for example, has advanced to the point where feasibility studies are being carried out. And for the first time, a delegation from Nicaragua aggressively welcomed potential foreign investors to help revitalize that country’s war-torn economy.

Financing for Latin American projects was also discussed. Victor Flores, chief investment officer for United Services Advisors, predicted that development capital will become scarce now that the latest Latin American investment cycle has come to an end. He went on to debunk some “Latin American mining myths,” including the notions that projects there are easy to finance; that these countries all have modern, flexible mining codes; and that development is quicker and less expensive than in North America. His views were echoed by Clive Johnson, president of Bema Gold (TSE), a junior which has spent more than six years working to bring into production its Refugio gold joint-venture in Chile.

“Don’t be misled by the amount of exploration going on in your countries,” Johnson warned Latin American delegates. “The tough money is production financing, and many juniors may find it difficult to finance their projects.” Major mining companies were well-represented at the conference, and were clearly interested in the projects currently held by their junior counterparts. “We think we (the majors) will end up with a number of these projects,” said one senior executive. “We also think Latin American countries have become aware that juniors are not always able to follow through on the commitments (they make) in certain countries.”