The road to recovery for Ontario's mining sector is paved in gold
Ontario is one of the top mining jurisdictions in the world. In recent years, the jurisdiction has been in a downturn.
The province, which is home to more than 40 operating mines, is the largest producer of gold, nickel, copper and platinum metals in Canada. Ontario’s mineral production is valued at $9.2 billion with more than $4 billion annually invested in research and development (R&D), exploration, construction and equipment.
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In a recent article by NorthernLife.ca, industry stakeholders agreed that Ontario is falling behind as a mining jurisdiction. The article spotlights that while the province has shifted its focus to the Ring of Fire, which many believe is moving slower than anticipated, key figures see the government neglecting other parts of the province.
“All we hear about is the Ring of Fire. Let me explain something about the Ring of Fire. It's not the only thing going on in this province. I'm sick to death of it,” said Gino Chitaroni, president of the Northern Prospectors Association.
“We have a lot of projects out there that could be economic very shortly, but we have to encourage them,” Chitaroni said. “I don't see it happening.”
To learn how Ontario is challenging the situation, we interviewed Michael Gravelle, Ontario Minister of Northern Development and Mines to discuss how Ontario is working to improve its current situation and reestablish itself as the powerhouse mining jurisdiction we all know.
Fall from grace
According to the Fraser Institute Annual Survey of Mining Companies: 2014, Ontario ranked #23 internationally for investment attractiveness, falling nine spots from last year. The province ranked #9 among the top 10 attractive mining jurisdictions in Canada despite being one of Canada’s geographically larger jurisdictions.
The survey, which was comprised of 122 jurisdictions worldwide, included comments such as:
“Revision of the Mining Act to include near-veto powers against exploration of First Nation traditional land use areas contrary to treaty assurances.”
“Provincial regulations different from federal regulations. Government entities not addressing First Nations consultation issues.”
“Lack of transparency, extreme conflict over land use with First Nations groups, high costs of permitting and new poorly organized regulations.”
“Poor decisions on infrastructure and lack of provincial First Nations agreements related to developments in the Ring of Fire.”
“Abandoning the mining industry and forcing it to deal directly with native groups, and providing support to native groups for negotiations, but not to junior mining companies.”
While Canada’s overall scores improved significantly in 2014, by almost 10 points, Ontario remained in the bottom category. One of the biggest problems for the province, especially with junior miners, has been raising capital.
“Globally, the junior exploration sector is experiencing difficulty raising capital because of a decline in investments resulting from lower commodity prices,” said Garry Clark, executive director of the Ontario Prospectors Association.
He continues, “While Ontario remains the top exploration jurisdiction in Canada, exploration spending in Ontario is down. Spending totaled $600 million in 2013 and $507 million in 2014, compared with $962 million in 2012.”
In addition, Ontario’s two largest mineral exports, gold and nickel, endured some of the most volatile commodity prices in recent years.
Despite the disappointing rankings, no other mining jurisdiction in the world has the level of mining expertise found in Ontario.
“It is important to understand the significance of the mining industry to Ontario’s economy,” said Gravelle. “There are 42 operating mines right now, and more people employed in the mining sector than there were 10 years ago. The mining supply and service sector employs 50,000 people. Nearly 25 percent of all exploration in Canada is done in Ontario.”
The mining sector for Ontario has been off to a great start in 2015. Earlier this year, the province announced its intentions to renew its mineral development strategy, which was first established in 2006. Needless to say, it couldn’t have come at a better time.
“Since I was re-appointed Minister of Northern Development and Mines in 2013, we have focused much effort on putting the necessary building blocks in place to foster private sector investment and secure future economic opportunity for First Nations and Northern Ontario,” said Gravelle.
The province’s Ring of Fire project, which is located in Northern Ontario, has dealt with lingering issues including a lack of infrastructure commitments from industry or government.
Global engineering firm Hatch sees the Ring of Fire as one of the most exciting areas of opportunity for the company in Ontario.
“There are many challenges presented by the geography, lack of infrastructure and social licensing which require new ways of thinking, and that makes it so exciting,” explained Jan Kwak, Hatch’s managing director of mining and minerals processing.
“For instance, a construction strategy would probably require starting in the winter when the ground is frozen and it is easier to transport materials to the site. During the winter, we would need to create an island of solid ground where we can set up camp, store material and equipment, and use as a base to expand from when the ground thaws in summer.”
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To combat this, the government has established the ROF Infrastructure Development Corporation to provide $1 billion for investment in everything from infrastructure, signing of the landmark Framework Agreement with Chiefs of the Matawa First Nations as well as supporting education, training and health care initiatives for the First Nations.
According to Gravelle, Ontario’s government has taken important steps to modernize the province’s Mining Act to maintain a vibrant and competitive mineral development sector.
“Ontario’s clear laws and updated mining regulations are part of our commitment to promote mineral exploration and development, while respecting Aboriginal and treaty rights as well as the environment. Since updated regulations became mandatory we’ve worked closely with industry to guide them as they adapt to the process. I believe our province provides operational certainty for industry, just one reason why we have remained a leader in exploration spending.”
Another important aspect for Ontario’s recovery is incentives. The need to support companies at different stages of the industry cycle is vital for Ontario’s resurgence.
“We have flow-through share financing of public companies which serves as a permanent tax credit for individual investors as well as a tool for junior exploration companies to raise funds,” said Gravelle.
“Our government also works with industry associations to support mineral development and exploration activities with grants to prospectors through the Ontario Exploration Corporation. Not to mention, the Ontario Geological Survey has world class open data sets which make valuable geological information easily accessible to industry as they work to identify mineral exploration targets.”
One of the many bright spots for Ontario is its innovation in new technologies. The province has been actively involved in newer technologies in the mineral sector that are being used globally to make mines safer, green and more efficient.
“The mining supply and services sector in Ontario is of enormous economic significance, generating a direct economic impact of $6.6 billion in gross output value,” said Gravelle. “Our government recognizes the value of maintaining our position as a global leader in mining sector innovations. That’s why we’ve committed in excess of $4.5 million in the past five years to support mining supply and services companies in expanding their export capacity and increase sales to international markets.”
According to Gravelle, to maintain its competiveness, Ontario needs to maintain a business climate that attracts investment
“I certainly recognize that it is vital that Ontario maintain a business climate that attracts investment and I believe we’re doing just that. For example, one of the most important indicators of investment attractiveness is exploration spending and, from this measure, it’s clear that Ontario remains a leader.”
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He added, “We are the top jurisdiction in Canada and among the top jurisdictions in the world. In fact, the size of Ontario’s provincial mineral industry is comparable to the mineral industry of entire countries around the world.”
It’s true. In 2003, exploration expenditures in Ontario were $193 million; in 2014, that figure was over a half billion dollars. The mineral production side reached $11 billion in 2014, up from $7.1 billion ten years ago.
“I believe our province is very well positioned for a bright future in mineral development. To ensure that our large, industrial partners continue to be competitive globally, we announced on April 7, 2015 that the Northern Industrial Electricity Rate (NIER) program, a $120 million program to reduce electricity costs for large, industrial companies, would be permanently funded,” Gravelle said.
Moving forward, Ontario is expected to improve greatly. There are a significant amount of new gold districts opening up in Ontario, including an array of new mines set to open in the next two years.
“As Minister and most importantly, as a Northerner, I have a deep appreciation of the tremendous economic potential of the vast resources that are located primarily in the Northern part of the province. Our government has been driving economic development in Ontario with a major focus on the mining sector—an industry of tremendous significance to our economy,” said Gravelle.
“My mandate is to increase the prosperity of Northern Ontario and lead a mineral sector that is healthy, competitive and sustainable. And I’m proud to say that we are succeeding—Northern Ontario is well positioned as a world class destination for investment.”
British Lithium Pressured Due To Calls for Electric Cars
The British demand for lithium is set to reach 75,000 tonnes by 2035 as the government works towards their ban on the sale of high-polluting diesel and petrol vehicles within the UK. This comes as automakers worldwide continue to insist on the benefits electric vehicles will have on slowing the rate of climate change.
It is estimated that the UK will require 50,000-60,000 MT of lithium carbonate a year by 2035 for battery production to satisfy government needs. This is assuming production remains at 1.2 million vehicles per year, and the amount of lithium required does not increase.
British Lithium, which hopes to begin constructing a quarry to produce 20,000 MT of lithium carbonate a year in a $400 million investment, are not without competitors, both within the UK and abroad.
Competition For Lithium Rises In Europe
After only five years after its initial launch, Cornish Lithium is setting its sights on becoming a UK powerhouse in mining lithium, aiming to begin commercial production in under four years. Jeremy Wrathall, a former investment banker and current managing director of Cornish Lithium, had the future in mind when founding the company.
“In 2016, I started to think about the electric vehicle revolution and what that would mean for metal demand, and I started to think about lithium,” he said in an interview with AFP. “A friend of mine mentioned lithium being identified in Cornwall, and I just wondered if that was a sort of unrecognised thing in the UK.”
Lithium was first discovered in Cornwall around 1864 and has not been mined again since 1914 when it was produced as an ingredient in fireworks. Now, however, Cornish Lithium is reportedly in the testing stage to see if the metal can be produced commercially to meet the growing demand required for the electric car sector.
Despite Cornwall’s close historic ties to mining lithium, Wrathall insists that the project is purely commercial.
Cornish Mining Revival For Lithium Production
“It’s not a mission that drives me to the point of being emotional or romantic,” he says. “It’s vitally important that we do get this technology otherwise Europe has got no lithium supply.”
The European Commission has also stated their goal to end the sale of new petrol and diesel cars by 2035 to aid the environment. That being said, the majority of lithium extraction currently relies on power provided by environmentally damaging fossil fuels─a slight contradiction.
Alex Keynes, from the Brussels-based lobby group Transport & Environment, is adamant that mining for lithium should be done sustainably.
“Our view is that medium-to-long term, the majority of materials including lithium should come from efficient and clean recycling.
“Europe from a strategic point of view should be looking at securing its own supply of lithium.”
Despite growing competition from abroad, British Lithium Chairman, Roderick Smith, continues to place importance on the mining of lithium within the UK.
“Imagine what the UK economy would look like if we lost our automotive industry,” Smith says. “The stakes are high for the UK.”
Smith expects the UK to compete with other European countries to secure a lithium battery plant in the near future.