Bringing a mine from discovery to production is a long, expensive, and time-consuming process with thousands of mineral prospects explored for each new mine eventually developed. For this reason, mining companies seek out stable, predictable, and transparent policy environments for mining investment.
Results from the recent Fraser Institute Annual Survey of Mining Companies suggest that the province is becoming more attractive to mining investment with miners rating the province higher for a fifth consecutive year. However, despite this vote of confidence, B.C. could go further and become a global leader in mining.
The mining survey is based on the opinions of mining executives and assesses the effects of different public policy factors on attracting or dissuading investment.
British Columbia has been included in the survey since its inception in 1997, when the province ranked last of Canadian mining jurisdictions assessed. Since then, the survey list has expanded to include countries, states, and provinces around the world, yet B.C. has lagged both within Canada and globally despite excellent geological prospects.
But there’s still plenty of room for improvement. On the basis of pure mineral potential, B.C. ranked fifth of 112 global mining jurisdictions and leads Canada in terms of geological attractiveness. Yet on the basis of mining policy, British Columbia ranked 32nd and behind Alberta (ranked 3rd), New Brunswick (7th), Newfoundland and Labrador (9th), Saskatchewan (12th), Yukon (19th), Manitoba (26th), Ontario (28th), and Nova Scotia (29th).
To continue its upward track, B.C. policymakers must continue to provide policy certainty and stability; however, this has not been the case in recent years. A recent study by the Fraser Institute looked into why B.C. has continued to lag in the survey results and found policy uncertainty to be a key deterrent to investment in the province.
Uncertainty deters investment by increasing risk for investors, as it decreases their confidence in being able to recoup and profit from investments.
Uncertainty concerning disputed land claims was found to be a key deterrent to mining investment in B.C. The evolving relationship between Aboriginal peoples and government is a primary reason for this uncertainty, compounded by relatively few finalized treaties and a lack of clarity concerning industry obligations regarding the Crown’s “duty to consult.”
This situation can deter investment and exploration in areas where prospectors are uncertain if they will be able to develop any viable deposits discovered.
Uncertainty over which areas will be protected and unstable environmental regulations were also found to be factors deterring investment. Arbitrary removal of land from mining after significant mineral discoveries, lack of stability in environmental regulations, and the expropriation of legally obtained mineral claims all served to repel investment in the province.
These changes not only remove mineral wealth from development but also create delays in project approval that can compromise the viability of projects by causing them to miss the windows of high mineral prices and favourable market conditions.
Fortunately B.C. appears to be on the right track for encouraging mining investment, with improved ratings in these areas for a third year in a row. It also improved its ratings for political stability and availability of labour and skills, contributing to a higher score in the survey.
This is good news for B.C.’s economy, as the mining sector in the province was valued at more than $8.3 billion in 2012 and employed 32,625 workers at 37 producing mines and four smelters and refineries. It’s also good for government revenues, used to provide education, healthcare, and other essential services.
British Columbia’s economy and workers benefit greatly from mining and the province has improved its attractiveness to miners in recent years. However B.C. has the mineral potential to be Canada’s top province for mining investment and should focus on ensuring its mining policies are stable, predictable, and certain to continue to move ahead.
Alana Wilson is a senior economist with the Fraser Institute and co-author of the Survey of Mining Companies 2013.
Courtesy of Troy Media