By Andrew Cheatle, Executive Director of the Prospectors & Developers Association of Canada
If you are in any way involved in exploration and mining, then chances are the acronym “PDAC” is one you haveheard of before. It might even summon images of thousands of geologists, mining executives, government officials, students and financiers gathering in Toronto every yearfor the world’s largest annual industry event. But there is so much more to the letters P. D. A. and C. than you might realize.
The Prospectors & Developers Association of Canada (PDAC) is the leading voice of Canada’s mineral exploration and mining industry,working on behalf of more than 8,000 corporate and individual members, and effectively mining worldwide.
PDAC’s mission is to promote a globally responsible, vibrant and sustainable minerals industry. As the trusted representative of the sector, PDACencourages best practices in technical, operational, environmental, safety and social performance. The work is carried out by a Board of Directors, 16 committees, and a team of permanent staff.
The association was formed by a group in 1932 to fight a Bill being proposed by the Government of Ontario that would have negatively impacted the industry. They won, and continued fighting for the betterment of their livelihoods through the new association,which grew in size and stature as the years progressed.
These humble beginnings ultimately set the foundation for the PDAC as it’s known today.
The strength of Canada’s exploration and mining industry
The mineral exploration and mining industry makesmodern life possible, while alsocontributing to the economic and social prosperity of communities across the country. More than 550,000 Canadians workin the industry, contributingan estimated $57 billion to Canada’s GDP annually. Operating in some of the most remote parts of the country, it is proudly the largest private sector employer of Aboriginal peoples.
Canada is recognized as being the global leader when it comes to mineral exploration. According to SNL Metals & Mining, 45% of the 1,800 companies with exploration budgets in 2015 were headquartered in Canada, accounting for 32% of global exploration spending in that year.
Not surprisingly, Canada also leads the world in mine equity financing, accounting for more than 60%.Additionally, Canada is also home to hundredsof mine service and supply companies that operate around the world, and continues to attract the largest share of global non-ferrous mineral exploration budgets.
Canada’s globally recognized expertise has emerged over the course of more than a century. The root of success is its rich mineral endowment and natural capital. However, resource wealth alone is not enough. The transformation of natural capital into improved quality of life for Canadians has arisen through the application of intellectual capital and resourcefulness to all aspects and all stages of the industry. Geoscience investments, regulatory innovation, fiscal policy, infrastructure – in each of these areas, and more, Canadians have found ways to manage their mineral wealth responsibly. The combination of industry expertise, good governance and innovation has helped make Canada an exploration and mining superpower.
World-class discoveries continue to be made and turned into new mines in Canada. Proof of this is in the rankings. Canada ranks in the top five globally with respect to the production of 14 major minerals and metals (calculated by value of production).
Canada is:
- First in potash
- Second in uranium and niobium
- Third in cobalt, aluminum, tungsten and platinum group metals
- Fourth in nickel, salt, sulphur and titanium
- Fifth in diamonds, cadmium and gold
The production of these minerals and metals has generated significant economic benefits for Canadians, including over $10 billion paid to various levels of government in the form of taxes and royalties, and additional billions spent on local businesses during exploration, mine construction and mine operation. Many of these expenditures have involved training for, employment of, and procurement from, Aboriginal or northern people, businesses and communities.
The ability of the industry to sustain these economic benefits is not guaranteed however, as most mines eventually close. Additional mineral deposits must be brought into production to sustain the economic opportunities created by the industry. While there are a number of companies working to bring known mineral deposits into production, many known deposits are not economically viable to mine. New discoveries must constantly be made to replace the pipeline of projects moving into production.
Sustaining mineral exploration in Canada must be a critical part of any strategy to sustain the economic benefits generated by the industry.
Challenges
The industry, which only recently has started to show signs of improvement, is still in the midst of a prolonged downturn in exploration financing that has had a significant impact on the junior exploration sector. Juniors have accounted for the vast majority of new discoveries in Canada over the last decade, so ensuring they have access to capital is crucial for sustaining exploration.
One of the fiscal policy innovations that have helped juniors raise money for high-risk exploration in Canada is the flow-through shares mechanism, which allows juniors to pass on certain exploration expenses to high net-worth individuals. These individuals help to finance exploration in exchange for a reduction of their personal income taxes. This system, which really took off in 1986, catalyzed an explosion in the number of juniors operating in Canada, and exploration expenditures in the country. In addition to helping make Canada a hub for mine equity financing, it also attracted the largest share of global non-ferrous exploration budgets, particularly after the introduction of the federal Mineral Exploration Tax Credit (METC) in 2000.
Canada has since lost its status as the top exploration destination, slipping behind Australia, which has adopted a financing scheme for juniors that is modeled on the flow-through shares system. While there are many factors affecting Canada’s attractiveness as an exploration destination some of the key ones include:
- The rising costs of making a discovery in Canada, as companies search for mineral deposits in more remote parts of the country and also at depth. Remote exploration project costs are up to 2.27 times more than non-remote projects, while very remote projects face costs up to six times more, hindering exploration and economic development in these regions. The average depth of discovery in Canada has also risen.
- Increasingly large tracts of prospective land are being withdrawn, reducing the ability of companies to access Canada’s vast resource endowment. In Ontario, for example, the provincial government committed to withdrawing 50% of northern Ontario from exploration activity.
- The regulatory system is characterized by increasing levels of uncertainty, including with respect to implementation of the Crown’s duty to consult and accommodate Aboriginal people, creating delays in project approvals and increased costs for companies and communities.
Overcoming obstacles
Sustaining exploration in Canada is critical to sustaining the economic benefits generated by the industry, as without exploration there can be no discoveries, and without discoveries there can be no producing mines.
To enhance the competitiveness and responsibility of Canada’s mineral exploration sector, PDAC has focused its attentions on two top priorities:
- Enhance Access to Capital: Renewingthe federal Mineral Exploration Tax Credit (METC) and maintaining the flow-through share system.
- Facilitate Access to Land:Developing strategic investments in infrastructure to unlock the resource potential of remote and northern Canada.
Thesepriorities were given to the Government of Canada in PDAC’s recommendations for Federal Budget 2017.
PDAC continues to advocate for improvements to Canadian capital markets that allow companies to cost-effectively raise money from a wider range of investors. This includes support for the range of new prospectus exemptions brought forth by various securities regulators over the last few years. These exemptions help to ‘democratize’ Canada’s capital markets by allowing a more diverse array of individuals to invest in grassroots exploration.
PDAC is also working in partnership with regional industry associations across Canada to ensure that mineral potential is factored into land withdrawal decisions, and to support effective implementation of the Crown’s duty to consult Aboriginal people.
PDAC Convention
The work of PDAC culminates at its annual convention in Toronto every March. Ithas brought the world’s minerals industry together for more than 84 years.
The International Convention, Trade Show & Investors Exchange draws thousands of investors, analysts, mining executives, geologists, prospectors, students and government officials from over 100 countries. In 2016, more than 22,000 professionals were in attendance, despite the economic challenges being faced by the industry across the world—a testament to the caliber of the event.
The cutting-edge learning and collaborative opportunities are unmatched by any other event. The Convention offers a Capital Markets Program, Aboriginal Program, a variety of Short Courses and Workshops, Mineral Outlook Luncheon, and Keynote Session. PDAC also hosts the thought-leading Corporate Social Responsibility (CSR) Event Series, addressing issues such as diversity, gender, water, artisanal mining and climate change.
Bringing government, key influencers and decision-makers together means that the latest trends, technologies and challenges affecting our sector are brought to light to ultimately help Canada remain a global leader.
PDAC and the World Economic Forum (WEF) co-hosted the inaugural International Mines Ministers Summit (IMMS) that brought together 16 Mines Ministers from around the world at the PDAC 2016 Convention. Led by Canada’s Minister of Natural Resources, the Honourable Jim Carr,the IMMS provided an important setting for the international mining community to discuss and work on resolving issues affecting the industry. In addition, 25 Federal Parliamentarians, six Provincial and Territorial Ministers and two Premiers also attended.
The PDAC 2017 Convention will be held at the Metro Toronto Convention Centre (MTCC) from March 5 to 8. More information is available on the PDAC website:www.pdac.ca/convention.