Friday, 15 July 2011

The Canadian Mining Sector – Market Opportunity and Entry Strategy, Analyses and Forecasts to 2015

Canada is a key global mining nation, and along with many other industries, it suffered during the world financial crisis. A recovering global economy, continued investment in exploration and the emergence of new export destinations are, according to ICD, expected to contribute to the renewed growth of Canada’s mining industry.

London – July 15, 2011 – Canada is a mineral-rich country with substantial reserves, and Canada’s mining industry accounts for a significant proportion of global mineral production. It is the world’s leading producer and exporter of potash, and is a global top ten producer of uranium, iron ore, gold, nickel and copper.

The global economic crisis had a profound impact on the Canadian mining industry, resulting in a decline in its overall mineral production value in 2009. Collapsing mineral and metal prices, and uncertainty about the economic outlook, resulted in mine closures, production cutbacks and reduced exploration budgets. Despite these problems, Canada continued to be the world’s primary destination for exploration capital, accounting for 16% of global spending in 2009.

Barring further economic problems, 2010 is expected to see growth in Canadian mineral production, in both value and volume terms.

Canada’s mining industry to grow during 2010–15
The recent global economic downturn resulted in a decline in both mineral production and commodity prices, leading to a 9.6% decline in mineral production value in 2009. Collapsing mineral and metal prices and uncertainty about the economic outlook resulted in mine closures, production cutbacks and slashed exploration budgets.

However, with the revival of the global economy and the expansion of key domestic and foreign end-markets such as infrastructure, construction, agriculture, power and jewelry, the growth of Canada’s mining industry is expected to be robust.

In volume terms, non-metallic minerals will continue to dominate Canada’s production with an 80% share, followed by coal and metallic minerals. Coal was Canada’s top valued mineral with a total share of 14% in 2009, followed by potash, gold, iron ore, copper and nickel.

Canada continues to spend on mineral exploration
Despite a drop in mineral exploration spending in 2009, Canada remains a leader in mineral exploration, with 16% of the global spend. The largest proportion of this spend was on exploration for precious metals, followed by coal, uranium and diamonds.

This consistent exploration spend, combined with the development of modern geological mapping data, will add significantly to Canada’s proven and probable mineral reserves, resulting in the growth of the mining industry.

Sustained interest expected in Canada’s mining equipment market
Canada’s mining equipment market is expected to grow from US$2.9 billion in 2010 to US$4.0 billion in 2015, representing a CAGR of 6.5%. The discovery of more mineral deposits in Canada bodes well for the mining equipment industry, as many new mines are expected to become operational in the years to come.

Canada offers an encouraging mining investment climate
Over the past few years, Canadian mining investment indices have outperformed their counterparts in other geographical regions. Foreign mining companies from Europe, Australia, the US, Africa and China have continued to obtain direct listings or public offerings of Canadian holding companies.

The Toronto Stock Exchange (TSX) is home to the world’s largest mining companies and lists more than 50% of the world’s public mining companies. The Canadian mining industry has a strong international focus, which is evident from the activities of TSX-listed mining companies, which, globally, had over 9,300 mineral projects in various stages in 2009, of which 51% were located in Canada.

During the period 2004–08, TSX handled over 30% of the world’s mining equity, an indication of TSX’s strong appeal to mining operators and one of the principal reasons for Canada’s position as a world leader in the exploration business.

China emerging as an export destination for Canadian coal
Canada’s mineral industry is export oriented, and the US is one of the main destinations for exported Canadian minerals. Around 62% of Canada’s total metal exports are to the US; primarily iron and steel, aluminum, copper and nickel. In the non-metallic sector, nitrogen and potash are key commodities exported to the US market. The European Union is also an important destination for Canadian gold, nickel, iron ore, uranium and diamonds.
ICD research suggests, however, that countries such as China and India will emerge as important end markets for Canadian mineral exports, driven by increasing demand in these regions.

Foreign uranium investment restrictions to be liberalized
Existing government policy restricts foreign investors from acquiring more than a 49% interest in uranium mining projects. In March, 2010, however, the government announced that it intends to liberalize these regulations to avoid hampering the growth of the sector. The proposal is expected make the government’s policy on foreign ownership in this sector consistent with the recent amendments to the Investment Canada Act.

To purchase the full version of the report, “The Canadian Mining Sector – Market Opportunity and Entry Strategy, Analyses and Forecasts to 2015,” please click here.

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