The Canadian Mining Story Economic Impacts and Drivers for the Global Energy Transition 2023
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 2 The infrastructure deficit in Canada’s North makes it one of the most expensive places to mine in the world. Investments in power, communications and transportation by all levels of government will help to connect the North to the rest of Canada, and allow for the responsible development of mineral resources there. Canada produces more than 60 minerals and metals through its mining activities. The total value of Canadian mineral production in 2021 was $55.5 billion, up 20% on the year before. The total value has tripled since 2002. In addition to extracting minerals from the ground, Canadian mining companies also process minerals by smelting and refining. As the industry changes, the quantity and value of refined metal production in Canada has become irregular due to the depletion of reserves and greater dependence on imported concentrates. Canadian refined metals production has actually declined since 2005 for key metals like nickel, zinc, lead and copper. Transportation costs have risen substantially for the mining industry in recent years: rail and road transportation costs have both increased by 50% in the past five years, with the majority of the increase happening since the end of 2020. Canada must support mineral production by building infrastructure – transportation, energy and communications. New infrastructure will help Canada’s extraction, processing and manufacturing industries by providing the resources that the industry needs, reliably and at a reasonable cost. Because of the weight and volume of mined materials, many of them are transported by rail. This makes regulation of Canada’s rail duopoly a priority topic for Canada’s mining companies. The Canadian economy broadly would benefit from a robust transportation data regime. The people of mining are diverse: they come from all corners of the country and all educational backgrounds. In 2021, the industry directly employed 403,000 people and indirectly employed an additional 263,000. This represents one in 31 people in the Canadian labour force. The minerals industry is an important employer of Indigenous peoples, providing jobs to 11,300 people in 2020. The mining industry is justifiably proud of its safety record. Rates of injury have declined substantially since 2011. The mining industry supports a successful, safe, high-paid, technically adept workforce. Through continued efforts, particularly in enhancing equity, diversity and inclusion in the sector, it will be possible to enhance the industry’s track record of success at hiring, training and retaining these skilled workers through the next generation.
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 3 Mining is essential to the global energy transition. Climate change is the critical issue facing the globe over the next century. Minerals and metals will help the world transition to a low-carbon future. Electricity networks to provide clean energy, electric vehicles, wind energy, photovoltaic solar cells, and battery storage all require mined materials. Canada fulfills the need for critical minerals better, using less carbon intensity, than most competing mining jurisdictions. We have one of the world’s cleanest electricity grids, with 82% of power from renewable or non-emitting sources. As a result, Canadian mineral products have among the lowest carbon intensity in the world. The economy of the future needs minerals and metals from Canada. To provide the resources that are required, Canada must create an investment and regulatory environment that works. Given the increasing demand for critical minerals for global carbon reduction, we need to bring new mines into production in the years ahead. Canada’s mining sector is a leader in the world. Canada’s mineral exports increased to record levels in 2021, making up 22% of Canada’s total merchandise exports. Investment in mining flows in both directions: Canadian mining companies hold assets in 96 countries, and have increased direct investment abroad to $106.1 billion. Foreign direct investment in Canada has also reached new highs: in 2021, it was $65.1 billion, which made up 6% of Canada’s total foreign direct investment. Free trade, investment and taxation agreements help facilitate the trade of mining products and investment flows. They reduce barriers for investment, enhance transparency and advance cooperation. Investment agreements, complete with dispute resolution mechanisms, provide mining investors with greater certainty over the investments that companies make in foreign jurisdictions. Part of maintaining Canada’s global leadership is ensuring that Canadian mining and supply sectors have access to modern and comprehensive trade and investment vehicles to meet the world where it does business.
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 4 Smartphones Canada’s mining industry is providing the responsibly-sourced minerals and metals that power the technologies of today and of the future. In turn, we’re helping businesses and their customers be confident in how they’re made. PRODUCTS THAT RELY ON MINING
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 5 SECTION 1 The Canadian Mining Industry: Contribution to the Economy Minerals and metals are the building blocks of the computers and smartphones we rely on, of the vehicles and public transit that get us places, of the buildings where we live and work, and of green technologies that help make the world a more sustainable place. Just as we depend on mining to provide the material we need for our daily lives, Canada relies on the industry as an integral part of the economy. Mining is one of Canada’s most important sectors and a major job creator in communities across the country. Mining experienced a strong return to form in 2021 after the challenges stemming from the pandemic in 2020. What follows is an overview of economic developments and indicators that help contextualize the economic trajectory of Canada’s mining sector. CANADIAN MINING INDUSTRY ECONOMIC OUTLOOK Canada’s Gross Domestic Product (GDP) was almost two trillion dollars in 2021. Mining, quarrying and oil and gas extraction contributed 7.9% of this value, or $156 billion as shown in Figure 1. In 2021, the sector made up a larger portion of Canada’s GDP than finance, construction, transportation or retail trade. Figure 1: The Contribution of Mining, Quarrying and Oil and Gas Extraction to Canada’s GDP1 $156.5 Billion Mining (including milling) and quarrying, and oil and gas extraction CANADA’S GDP, 2021 $1.8 Trillion All other industries 1 Data from Gross domestic product (GDP) at basic prices, by industry, monthly. Statistics Canada table 36-10-0434-01. Using 2012 constant prices.
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 6 Excluding oil and gas, mining’s contribution to GDP can be separated into four components: extraction, services, primary manufacturing and downstream manufacturing. The gross value added for each category is shown in Figure 2. Extraction includes the mining of metals, non-metals and coal. Metals mining, including gold, iron ore, copper and zinc, contributed $26.6 billion to Canada’s GDP in 2021. Nonmetal mining includes diamonds, potash and sand and gravel. The gross value added of non-metallic mineral production was $9.5 billion in 2021. Canada produces both coal for generating heat and energy (thermal coal) and coal for industrial processes like making steel (metallurgical coal). In 2021, Canadian mines produced 42 million tonnes of coal, a slight increase from 2020. The value added was $6.9 billion in 2021. In the mining context, services means activities including exploration drilling on contract, and contracted services at mines such as water or overburden removal. The nominal gross value added for mining services in 2021 was $12 billion. Primarymanufacturing for metals includes smelting and refining. Primary manufacturing for non-metals includes manufacturing using lime, cement, concrete and glass. In 2021, the gross value added by primary manufacturing was $17.7 billion. Downstreammanufacturing uses primary manufacturing products as inputs. Secondary metal products use primary products to produce iron and steel pipes, rolled steel products like wire, and foundry products. Tertiary metals products include cutlery, tools and hardware that require further processing. Downstreammanufacturing also includes miscellaneous metals products such as communications cables and motor vehicle stamping. Finally, services and custom work mean specialized activities like heat treating, engraving and coating or other custom work. Canada saw increases in all of these areas between 2020 and 2021. Figure 2: Metals and Minerals Sector GDP, 20212 $0B $10B $20B $30B $40B $50B Extraction Services Primary Downstream Manufacturing Manufacturing Coal Metallic minerals Non-metallic minerals Primary non-metallic mineral products Primary metallic minerals products Services and custom work Secondary metal products Tertiary metal products Miscellaneous metal products 2 Data from Gross domestic product (GDP) at basic prices, by industry, monthly. Statistics Canada table 36-10-0434-01. Using 2012 constant prices.
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 7 After relatively stable trends for the previous decade, the Covid-19 pandemic in 2020 caused a decrease in extraction, services, and both primary and downstream manufacturing. Extraction led all areas in recovering, with a large increase from 2020 to 2021. Real gross value added in the sector since 2008 is presented in Figure 3. MINING: A PAN-CANADIAN INDUSTRY Mining is a significant contributor to the Canadian economy and takes place in communities from coast to coast to coast. The direct and indirect wages and employment of approximately 665,000 people across the country (of which 403,000 are direct jobs), taxes and royalties collected by governments, and the capital expenditures required for project development and operation are only some examples of the essential role it plays. Mining takes place in almost every province and territory in Canada and Figure 4 illustrates the geographical location of Canada’s mining clusters and active mineral development regions. Details for each mine are presented in Annex 1. Figure 3: Real Gross Value Added, Mining Sector, Constant 2012 Dollars3 $0B $5B $10B $15B $20B $25B $30B $35B Downstreammanufacturing 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Extraction Services Primary manufacturing 3 Data from Natural resources satellite account, indicators. Statistics Canada table 38-10-0285-01. Using 2012 constant prices.
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 8 Extraction and processing take place where the minerals are found, but mining also has a measurable impact on the economies of Canada’s cities. Toronto is the global centre of mining finance. Between the TSX and the TSX Venture, Canadian exchanges have more than 1,170 mining issuers with a combined market capitalization of more than $520 billion. The fact that Canada is a key player in mining finance means that professional services related to mining and mining finance have had a chance to develop around the exchanges. Vancouver is a global centre of expertise in mineral exploration. There are approximately 800 exploration companies headquartered in Vancouver, including major mining players like Newmont and Teck Resources. The mining sector in Vancouver includes support services like geological research, business administration, finance, engineering and environmental consulting. Other cities provide services to the mining sector in their region. Montreal is the Canadian home to Rio Tinto and significant mining research and education facilities, making it an important centre for expertise in aluminum smelting. The total value of mineral production in Canada in 2021 was $55.5 billion as shown in Figure 5. This value has increased 11.6% from 2011. The rank of producing provinces has changed slightly over the decade, but the general division remains the same: the largest five producing provinces make up over 80% of the value of mineral production. Figure 4: Mines in Canada4 4 Mining Association of Canada.
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 9 Province/Territory 2011 2021 (p) ($M current) (%) of all Canadian Value Rank ($M current) (%) of all Canadian Value Rank British Columbia 8,716.1 17.5 3 12,899.1 23.2 1 Quebec 8,095.6 16.3 4 11,911.4 21.5 2 Ontario 10,124.2 20.4 1 11,104.5 20.0 3 Newfoundland and Labrador 5,072.9 10.2 5 6,225.0 11.2 4 Saskatchewan 9,100.8 18.3 2 5,565.1 10.0 5 Nunavut 427.3 0.9 10 2,514.9 4.5 6 Northwest Territories 2,138.3 4.3 7 1,506.4 2.7 7 Alberta 2,347.1 4.7 6 1,482.4 2.7 8 Manitoba 1,793.9 3.6 8 861.7 1.6 9 Yukon 367.4 0.7 11 742.9 1.3 10 Nova Scotia 197.1 0.4 12 415.2 0.7 11 New Brunswick 1,334.9 2.7 9 275.2 0.5 12 Prince Edward Island 2.7 … 13 2.0 … 13 CANADA 49,718.2 100.0 55,505.8 100.0 Province/Territory Exploration Deposit Appraisal Mine Complex Development Total Expenditures ($ millions) Newfoundland and Labrador 134.9 10.7 1,516.8 1,662.4 Nova Scotia 14.9 35.3 106.4 156.6 New Brunswick 20.6 0.5 46.4 67.5 Quebec 521.6 442.9 2,963.6 3,928.1 Ontario 703.8 174.0 2,958.6 3,836.4 Manitoba 74.3 46.0 447.4 567.7 Saskatchewan 1,64.5 104.7 2,337.4 2,606.6 Alberta 6.4 19.4 31.4 57.2 British Columbia 553.2 259.9 1,987.1 2,800.2 Yukon 116.2 18.8 164.6 299.6 Northwest Territories 56.8 11.3 201.7 269.8 Nunavut 88.8 60.4 1,079.5 1,228.7 CANADA 2,456.0 1,184.0 13,840.8 17,480.8 Figure 5: Value Of Mineral Production by Province and Territory, 2011 and 2021. (p) Preliminary 5 Figure 6: Total Mineral Development Expenditures, by Stage and Province and Territory, 20216 5 Natural Resources Canada. Annual Statistics of Mineral Production. 6 Natural Resources Canada, based on the Federal-Provincial/Territorial Survey of Mineral Exploration, Deposit Appraisal and Mine Complex Development Expenditures. Data from the Annual and Revised Spending Intentions of Mineral Exploration. 2021 data is preliminary.
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 10 Spending on exploration, deposit appraisal and mine complex development tends to follow current patterns of mine production. The top five producing provinces are also the top provinces for mineral development expenditure. Of the $17.5 billion invested in mineral development in Canada, combined spending across these five provinces exceeded $14.8 billion, or 85% of the total, as shown in Figure 6. NORTHERN DEVELOPMENT As the largest economic driver in Canada’s North there is no question that the mining sector’s presence in the Territories is significant with mining industry GDP contributions for 2021 for the Northwest Territories, Nunavut and the Yukon at 31% and 38% and 15% respectively, totalling $3 billion. The mines operating in the Northwest Territories and Nunavut are the largest private sector contributors to each territory’s economy. Proportionally, the industry is the largest private sector employer of Indigenous peoples in the country and the territories host the highest per capita demographic of Indigenous peoples of any sub-national jurisdiction in Canada. Mining is also the largest private sector business partner of Indigenous-owned enterprises in the North, responsible for helping to develop and grow many successful Indigenous businesses, some that have grown and now serve customers beyond the mining sector. INDIRECT ECONOMIC EFFECTS OF CANADA’S MINING SECTOR Resource wealth has built communities and infrastructure across the country. Mines create jobs and make direct payments to government through taxes and royalties. But the mining industry’s economic impact far surpasses its direct contribution to the GDP. For example, mining accounts for approximately half of Canada’s rail-freight revenues and tonnage annually, typically exceeding $6 billion in expenditures. Organizations such as CN Rail, CP Rail, and the Ports of Montreal, Quebec and Vancouver rely on a vibrant mining industry. Specialist firms, including those in the legal, environmental, taxation, engineering and other fields, support the industry’s many requirements to locate, develop, construct, operate and reclaim a mine. These supply relationships are mutually beneficial. Clusters of expertise, like those in finance, geology and exploration noted above, create opportunities for other companies outside the mining sector. InfoMine, a mining database, reported in 2019 that more than 3,700 firms provide technical, legal, financial, accounting, environmental and other expertise to the Canadian mining industry. Most of these suppliers are located in Ontario and British Columbia, followed by Alberta, Quebec, Saskatchewan and Manitoba, and generate significant local benefits for Canada. The mines operating in the Northwest Territories and Nunavut are the largest private sector contributors to each territory’s economy.
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 11 POLICY COHERENCE ESSENTIAL TO MINING SECTOR’S COMPETITIVENESS The Canadian mining sector remains strong and has responded well to the challenges of recent years. The Mining Association of Canada’s (MAC) outlook is positive for the sector but believes that certain steps are required for the industry’s continued success. As a leading producer of responsibly sourced mineral and metal products globally, Canada has an opportunity to become the world’s leading supplier of inputs, specifically critical minerals, integral to a lower carbon economy. Towards Sustainable Mining®, a sustainability standard originally created by MAC in 2004 and now used by mining chambers globally, can help demonstrate responsible sourcing as it produces site-level performance data in key environmental and social areas. A growing body of federal policy actions that recognize the criticality of the Canadian mining sector to Canada’s future prosperity – both domestically and internationally – has taken shape. Increasingly, the mining industry’s importance to federal climate, Indigenous reconciliation and clean technology manufacturing policy objectives is crystallizing. Similarly, in relation to security and national defense contexts with Canada’s international partners, the sector is increasingly understood as being of national strategic interest. Relevant policy actions include: • The development, publication and ongoing roll out of the Canadian Minerals and Metals Plan • The publication of the federal government’s Canadian Critical Minerals list and Critical Minerals Strategy • The establishment of ongoing international critical minerals dialogues with the US, the EU, and other allies • The addition of critical minerals and critical minerals supply chains to updated Guidelines on the National Security Review of Investments under Section 38 of the Investment Canada Act With Canada’s North playing a key role in supplying minerals and metals to meet current and future demand, it is essential that a coherent approach to northern development be prioritized. Strategic investments in energy and transportation infrastructure are essential to ensure economic development and to reduce northern reliance on fossil fuels. The production of gold, diamonds and iron ore are key drivers for economic prosperity and Indigenous reconciliation in the North, with companies that mine these products acting as the largest (and in some cases the only) private sector investors, employers, skills-trainers and partners to Indigenous communities proximate to the mine sites. The infrastructure deficit in Canada’s North makes it one of the most expensive places to mine in the world. For example, construction of the Slave Geological Province Corridor would extend all-season road access to a mineral rich area straddling the NunavutNorthwest Territories border. This vast region shares many geological features with the
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 12 Abitibi Geological Province along the Ontario-Quebec border. The Abitibi has supported more than 100 mines since its discovery in the late 1800s, but its potential was only realized with the construction of the Timiskaming and Northern Railway at the turn of the last century. The Slave Geological Province has no railway, no highway, and no power grid. As a result, any development requires costly winter roads and air transportation for access. This means only the rarest and highest quality deposits of precious metals and diamonds are economically feasible to mine. A substantial investment in the region’s infrastructure could improve the prospects of mines in the area. Gold, diamond and iron ore mining are excellent examples of the driving force the mining industry plays in supporting Indigenous reconciliation in remote regions. In Nunavut and the Northwest Territories, the mining sector is the largest employer of Indigenous peoples and the largest business partner to Indigenous firms. Cultivating relationships with local communities, establishing meaningful partnerships, constructing mines and training local workforces has taken decades of work. With few alternative economic development opportunities, climate policy considerations in the North must be weighed against the long-term costs to the industry’s competitiveness. For example, Nunavut’s four operating mines have invested in best-inclass diesel energy infrastructure that still requires more than 100 million litres of diesel each year to power their mine sites. Currently, there are no other energy alternatives for Nunavut communities or industry. Strategic investments in energy infrastructure, including potential off-grid Small Modular Reactors, will reduce northern reliance on fossil fuels. The Kivalliq Hydro-Fibre Link is an Inuit-led project that will deliver renewable energy and broadband service to underserved remote communities while enabling the region’s mining sector to flourish. The Hydro-Fibre Link project is a once-in-a-generation opportunity to decarbonize communities and industry in Nunavut, improve quality of life and connectivity, and create new economic opportunities long into the future. The benefits from this project will be enormous for the environment and for the economies of Nunavut and Canada and would work to solve two persistent problems at once.
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 13 Wind Turbines Low carbon technologies, like wind turbines, rely on metals like iron, lithium, nickel, cobalt, carbon and copper, to come to fruition. PRODUCTS THAT RELY ON MINING
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 14 Canada’s strength in mining rests on its ability to produce and process minerals competitively and to transport products efficiently to and from domestic and international markets. These production, processing and transportation activities form the base that allows the industry to stay globally competitive and expand its Canadian investments. MINERAL PRODUCTION Canada is among the top producers of metals and non-metallic minerals in the world. It is the top producer of potash, second largest producer of gemstones and niobium, and third largest producer of precious diamonds, indium and palladium (by metal content). Canada produces 60 minerals and metals and is among the top ten producers in the world for 26 of them. These materials are mined in either open pit or underground mines. The mined products are often transferred to concentrators, where the mined ore is converted to usable raw material through crushing and concentrating. SECTION 2 The Activities: Production, Processing and Transportation Figure 1: Canada’s High-Ranking Mineral Products7 Mineral 1 2 3 4 5 Potash Canada Russia Belarus China Germany Gemstones Russia Canada Botswana Angola South Africa Niobium Brazil Canada Diamonds (precious) Russia Botswana Canada Congo South Africa Indium China South Korea Canada Japan France Palladium (metal content) South Africa Russia Canada United States Zimbabwe 7 From United States Geological Survey annual Mineral Commodities Summaries for each mineral available at the National Minerals Information Centre using 2021 data.
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 15 After decreases in nonmetals and coal in 2020, all mineral production elements increased in 2021. The total value of Canadian mineral production in 2021 was $55.5 billion, up from $46.3 billion in 2020 and $48.1 billion in 2019. The total value of minerals production has tripled since 2002. Metals are responsible for the majority of this growth. Figure 2: Value of Canadian Mineral Production, 2000-20218 Unit of Measure 2012 2021 (p) Change Quantity $ Value Quantity $ Value Quantity $ Value (millions) (millions) Gold t 106 5,705 215 13,717 103% 140% Coal kt 66,471 5,881 41,809 7,965 -37% 35% Iron ore kt 38,892 4,875 37,772 6,495 -3% 33% Potash (K20) kt 8,976 6,343 13,953 4,820 55% -24% Copper kt 560 4,454 521 4,507 -7% 1% Nickel kt 204 3,546 149 2,597 -27% -27% Sand and gravel kt 239,307 1,823 185,652 1,994 -22% 9% Platinum group t 22 644 22 1,810 0% 181% Diamonds 000 ct 10,529 2,006 17,827 1,677 69% -16% Stone kt 152,977 1,559 97,211 1,057 -36% -32% 0 5 10 15 20 25 30 35 40 Metals: $35.7 Billion 2000 2005 2010 2015 2020 Nonmetals: $11.9 Billion Coal: $8 Billion $ Billion Figure 3: Mineral Production, Selected Minerals, 2012 and 20219 Canada’s top 10 minerals and metals (see Figure 3) each had projected production values of more than $1 billion in 2021. Five (gold, potash, copper, iron ore, and coal) were valued at more than $4 billion. Since 2012, production quantity of six of the top ten minerals and metals has declined. An increase in some commodity prices means that only four of the top ten have seen declines in the value of production. 8 Natural Resources Canada, Minerals and the Economy. 2021 data is preliminary. As of 2017, Statistics Canada is no longer conducting the monthly survey of cement, and values are no longer included in Canada’s mineral production. Cement production has been excluded from previous years for comparability. 9 Natural Resources Canada, Canadian Mineral Production. 2021 data is preliminary. For metals, quantity refers to the recoverable metal in concentrates shipped.
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 16 PROCESSING MINERALS Once materials are mined, they must be processed to obtain a product that is useful to the consumer. This processing may include: • Smelting, which removes metal from ore by heating it, often in the presence of other materials to oxidize or reduce the target metal. • Secondary smelting, which is similar, but uses recycled material as a feedstock rather than mined ore. • Refining, which removes impurities frommetals by chemical or physical processes. Canada has a significant mineral-processing industry, with 29 non-ferrous metal smelters, refineries and conversion facilities in six provinces. Canada’s processing industry is summarized in Figure 4. Canada’s integrated smelters and refineries were originally built near mines, which were mostly inland, without access to affordable marine transport. As local ore reserves become depleted and the production of base metal concentrate declines, these smelters and refineries must move from integrated production to the more expensive custom treatment of concentrates imported from other countries. As another method of addressing declining local ore reserves, Canada’s refineries and smelters are using more secondary raw materials and scrap feed. This re-use of materials helps with sustainability but is more expensive than using raw mined materials. Province Processing Facilities Quebec Ten smelters, two refineries, one secondary smelter, one refinery/ secondary smelter Ontario Four refineries, two secondary smelters, one conversion facility, one smelter/refinery/plant, and one smelter/plant British Columbia One smelter, one secondary smelter, and one smelter/refinery/plant Alberta One refinery Manitoba One refinery Newfoundland and Labrador One refinery Figure 4: Non-Ferrous Smelters and Refineries in Canada by Province10 Figure 5: Canadian Refined Metals Production, Selected Metals, 2005 Production = 10011 2005 2007 2009 2011 2013 2015 2017 2019 2021 160 140 120 100 80 60 40 20 0 Nickel Aluminum Zinc Cobalt Cadmium Copper Lead 10 Natural Resources Canada, Canada’s Minerals and Mining Map. 11 Data since 2020 from Statistics Canada, Production and shipments of metallic minerals, monthly, table 16-10-001901, previous years from Natural Resources Canada. Data for 2021 is preliminary.
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 17 The quantity and value of refined metal production in Canada has become irregular due to the depletion of reserves and greater dependence on imported concentrates. Figure 5 shows the production volumes for refined metals since 2005, setting the baseline production for each metal in 2005 to be 100. Of the seven metals assessed, only cobalt, cadmium and aluminum were produced at levels higher than 2005 in their most recent year. Figure 6 shows the actual difference in production volumes for 2005 and the most recent measurement year. TRANSPORTATION Mines and production facilities are often far from the manufacturers and consumers that will use what they produce. Mining products are bulky, heavy and must travel long distances over inhospitable terrain. Some mines are far outside Canada’s main transportation networks and require transportation of goods by air, water or temporary ice roads. As a result, Canada’s logistics supply chain is critical to the flow of mined and refined products to both domestic and international markets. Canada’s strength in mining rests on its ability to produce and process minerals competitively and to transport products efficiently to and from domestic and international markets. The mining industry is the largest industrial customer group of Canada’s transportation sector and a major user of Canada’s ports. Mining companies require a reliable transportation network to compete internationally. This is especially true for Canada, the world’s second largest country by land mass. Rail, truck and marine shipping are all important means of transportation for the industry. Rail Canada’s mining industry is a heavy user of rail. Freight rail moves heavy, bulk commodities over long distances, which makes it a good match for mines and production Figure 6: Refined Metal Production, Select Metals12 2005 Most Recent Most Recent Measurement Year Tonnes Aluminum 2,894,204 3,157,762 2021 Cadmium 1,727 1,803 2019 Cobalt 4,618 5,965 2020 Copper 515,223 291,250 2018 Lead 230,237 147,358 2019 Nickel 139,683 124,043 2020 Zinc 724,035 640,718 2021 12 Data since 2020 from Statistics Canada, Production and shipments of metallic minerals, monthly, table 16-100019-01, previous years from Natural Resources Canada. Data for 2021 is preliminary.
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 18 facilities. For more than a decade, crude and processed mineral products have made up more than half of the total freight volume transported by rail in Canada. In 2021, the total freight volume was 284.6 million tonnes, of which 126 million tonnes was crude minerals and 28.9 was processed minerals. As a result, crude and processed minerals made up 54.4% of the total freight volume. Costs for shipping by rail have increased substantially since 2021. The Federal Rail Service Price Index tracks price changes for the mainline freight rail industry. Costs are compared to a reference year (2018), which is assigned a value of 100. For all commodities, rail prices have increased by 29.1% since 2018. For metals and minerals, prices have increased even more, by 31.4%. Prices remained relatively stable until the middle of 2021, when they began to increase dramatically. In Canada, freight rail is primarily handled by only two Class I railways: CN and CP. Of the $16.5 billion in total industry revenues in 2020, CN and CP were responsible for more than 93%. Communities and businesses are often captive, served by only one of these companies, which gives rail customers little or no competitive choice, and gives the railways market power over their customers. Road Trucking also plays an important role in moving mining products. Trucks move mining products frommines to production facilities and customers, and deliver mining supply inputs to mine sites, such as fuel for operations. Mining sites that do not have access to rail rely on truck and marine shipping for these essential materials. As with rail transport, trucking prices rose dramatically in 2021 and 2022. The for-hire motor carrier freight services price index is based on a comparison of current trucking Figure 7: Freight Rail Service Price Index13 95 100 105 110 115 120 125 130 135 Freight Rail Services Price Index: 129.1 Apr. 18 Oct. 18 May 19 Dec. 19 Jun. 20 Jan. 21 Jul. 21 Feb. 22 Aug. 22 Mar. 23 Metals and minerals: 131.4 13 Statistics Canada, Freight Rail Services Price Index, monthly table 18-10-0212-01.
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 19 prices to a baseline year (currently 2013) and is maintained by Statistics Canada. The index increased from 111.3 for local trucking and 115 for long-distance in September 2020 to 143.9/153.2 for local/long distance in September 2022. This means that prices have increased by more than 50% for long distance trucking since 2018, and by 38 percentage points since September 2020. These increased costs put pressure on all producers of goods. The mining industry is particularly vulnerable to these increases in costs because of the high volume and long distances required to ship its products, and because of the need for transportation of essential supplies to mines. Marine Mining is a leading customer of Canadian ports. The Port of Montreal handles large volumes of iron ore and salt, as well as other mineral products such as fertilizer, ores, gypsum and scrap metal. Total dry bulk mined products accounted for approximately 3.7 million tonnes in 2021, or 48% of the port’s dry bulk cargo shipments for the year. Generally, these arrive by ship as inbound cargo and are then transported by rail or truck to the region’s smelting and refining facilities. On the container side, the port moves metallurgical steel and mineral products, which together accounted for 2.4 million tonnes of goods moved, or roughly 17% of total container volumes. Steelmaking coal accounts for 22% of the bulk goods handled at the Port of Vancouver annually, which moves shipments to China, Japan and other Asian markets. Fertilizer potash represents another 9% of the bulk volume, and minerals and ores another 10%. All told, mining products account for 60 million tonnes, or roughly 60% of the bulk volume. Figure 8: For-Hire Motor Carrier Freight Services Price Index14 100 110 120 130 140 150 160 General freight trucking, local: 143.9 General freight trucking, long distance: 153.2 Jan. 19 July 19 Feb. 20 Aug. 20 Mar. 21 Sept. 21 Apr. 22 Nov. 22 May 23 2013=100 14 Statistics Canada, Archived - For-hire motor carrier freight services price index, monthly, table 18-10-0212-01.
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 20 Cargo ships are expensive and take a long time to build. Shipowners do not typically maintain substantial excess capacity and plan for demand years in advance. This means that small increases in demand at the margins can cause substantial price increases. Increased demand for goods during the Covid-19 pandemic meant that prices increased across the board for shipping. The Baltic Exchange’s dry bulk sea freight index measures the cost of shipping goods around the world. Throughout 2020 and into 2021, bulk freight prices soared to levels not seen in more than a decade. Prices have declined since their high point in 2021 but remain volatile. This means increased uncertainty for heavy users of marine transportation. LOOKING FORWARD Mineral Production Canada’s mineral production industry faces challenges: Canada is no longer a top producer of minerals critical for a low-carbon economy like zinc and nickel, and many other minerals are not even being produced at the level they were a decade ago. A decrease in mineral investment is responsible for part of this decline in production. Canada should be the top jurisdiction in the world to invest and explore. In order to increase mineral production, Canadian governments should undertake comprehensive mineral resource assessments, based on geoscientific studies, in order to understand and incorporate the value of mineral potential into regional assessments and land management decisions. This is particularly true of northern Canada, where the potential for new discoveries is high. Canada will also need to support mineral production by building infrastructure – transportation, energy and communication. Substantial investment in building the 0 1000 2000 3000 4000 5000 6000 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 POINTS Figure 9: Baltic Dry Index15 15 Trading Economics. Baltic Exchange Dry Index.
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 21 economic backbones of road, rail, power lines and communication lines will ensure that Canadians can benefit from the rich natural resources of our country. Finally, strong fiscal policy is a requirement for competitiveness in the global mineral industry. Incentives, competitive taxation levels, and efficient and reliable securities regulations are critical for positively influencing investment in Canada’s mineral sector. Mineral Processing The competitiveness of Canada’s mineral-processing industry depends on its ability to secure reliable sources of feedstock from domestic mines. Transportation costs have increased dramatically in recent years, making it expensive to import feedstock from abroad. If the processing industry is to remain competitive, enhancing domestic levels of mineral production through investment in exploration and mine development is essential. Canada’s processing facilities operate in a global market, where China and other countries are expanding their capacity with new facilities and competing fiercely for raw materials.
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 22 The cost of electricity is also a factor in some Canadian jurisdictions. Given the energyintensive nature of mineral processing, high-power-cost jurisdictions dampen the competitiveness of existing operations and deter future investment. Finally, the age of some Canadian operations, and their ability to meet potential regulatory requirements, also affects their viability. In the face of these factors, the downstreamCanadianmining industry risks being left behind. Recent smelting facility closures represent lost manufacturing capacity that will be challenging to reclaim. This is particularly relevant given the federal government’s recognition of how critical the stability and security of the mining and primary metal manufacturing ecosystem is to attracting advanced manufacturing investment. The projected need for large volumes of minerals and metals, specifically critical minerals, means that demand both domestically and globally will be high. With among the lowest carbon intensity nickel production in the world, Canada must signal that it no longer takes its smelting and refining industry for granted, nor the extractive supply chain that supports these critical mineral assets. Action to protect its competitiveness is essential to the low-carbon economy both in Canada and abroad. Supply Chain A robust, dependable supply chain with stable prices is a significant determinant for mining industry investment given the volume of mineral and metal products transported in Canada. Natural disasters, labour disputes, and pandemic related disruptions have all had a negative impact on Canada’s logistics network. The global supply chain is also strained from sharp swings in consumer demand during the pandemic and the knock-on impacts to land, air and sea freight. The costs to Canada of uncertain supply chains are high: reputational damage as a reliable trade partner; additional operational costs to businesses; and reduced confidence in Canada as a destination for business investment for supply-chain reliant businesses, such as mining. While the government is seized with economy-wide supply chain challenges, concrete solutions, such as legislative fixes to longstanding mining industry recommendations to address transportation network challenges, (see Rail section below) remain elusive. Rail Canada’s rail freight system is a duopoly, with limited choice for its customers. Communities and businesses are often captive to a single railroad serving their area. The number of rail service-related consultations and federal legislative measures in recent years reflect the persistent challenges faced by rail customers. The Government of Canada has passed the Fair Rail Freight Service Act, the Fair Rail for Grain Farmers Act and the Transportation Modernization Act. These pieces of legislation have made
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 23 incremental improvements but have failed to address systemic challenges, hampering opportunities for Canadian mining companies. A robust transportation data regime would improve the rail freight system for all stakeholders. The system should maximize data disclosure and public access, including railway capacity data. This would improve relations between shippers and transportation service providers, minimize unnecessary and costly disputes, provide government with the tools necessary to identify, assess and resolve existing policy challenges, and provide confidence in future large-scale investments reliant on rail for market access. MAC believes that robust data transparency is the least onerous way to reform Canada’s rail network without resorting to re-regulation. Allowing data to inform the interactions between railways and their customers is the nearest term, most justifiable, and least intrusive choice available to federal decision makers to effect desired and positive change. MAC believes that Canadian railways should provide at minimum, the level of granularity of railway data already provided to US shippers by its railways. Marine Shipping The International Maritime Organization (IMO) is the United Nations’ Special Agency responsible for the safety of life at sea and the protection of the marine environment. As a signatory to the IMO’s conventions, Canada’s domestic maritime shipping policies tend to move in tandem with those of the IMO. MAC has worked with Transport Canada and its IMO regulators in support of reasonable solutions that prioritize environmental protection and safety without compromising economic competitiveness. Recent successes on this front include the cooperative development of a novel corrosivity testing method and properly assessing and identifying the self-heating hazard of coal in IMO codes. As a regular observer on Canadian delegations, MAC appreciates Canada’s reputation for excellence and collaboration at the IMO, and attributes this to the hard work and expertise of our diplomats and technical experts in these areas.
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 24 Currency The Royal Canadian Mint manufactures approximately 1 billion circulation coins per year from its state-of-the-art facility in Winnipeg. PRODUCTS THAT RELY ON MINING
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 25 The financial health of the mineral exploration and mining sector can be measured by exploration and deposit appraisal and by capital spending, both of which are affected by mineral and metal prices. Canada’s ability to capture mineral investment is contingent on mineral prospects and the policy environment, of which tax policy is a key determinant. CANADIAN RESERVES Mineral resources of metals, non-metals and precious stones are present across the country. The process of determining whether it is financially feasible to extract these resources begins with exploration. There are specific names attached to mineral resources, depending on the level of confidence with which they are known. Mineral resources may be inferred, indicated or measured in increasing levels of confidence and measurement. Indicated and measured resources can be converted into probable or proven reserves depending on the confidence that a qualified person has in the estimates, and on the factors that affect the costs of extraction. Mineral reserves decrease through mining activities but can increase through exploration and the development of new technologies. SECTION 3 The Money: Reserves, Prices, Financing, Exploration, Investment and Fiscal Policy
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 26 Figure 1 shows trends in reserves since 1997, with all production values in 1997 set to 100. In the past 25 years, there have been marked declines in Canadian mineral reserves in all major base metals except gold (see Annex 5). The most dramatic declines have been in lead, down by 94% from its 1997 level; and zinc, down by 88% since 1997. Consistent investment over time and access to large tracts of land to explore are needed to reverse the long-term decline in proven and probable reserves. Identifying new reserves so that they may be mined and subsequently used in the economy requires investment in both exploration and mining development. EXPLORATION Exploration makes the mining industry possible. Identifying and quantifying reserves mean that mines can be developed, smelters and refiners can be built and operated, and manufacturing is provided with the inputs it needs. The goal of exploration is to locate mineral resources that may become reserves. Technological advances in surveying, airborne technologies and down-hole seismic imaging have enabled companies to find deposits with less environmental impact and more success than ever before. Increasing reserves over the long term, however, requires ongoing investments in exploration. Figure 1: Mineral Reserves in Canada, 1997=10016 0 50 100 150 200 Gold: 179 1997 2002 2007 2012 2017 2022 Copper: 84 Molybdenum: 54 Nickel: 37 Silver: 25 Zinc: 12 Lead: 6 16 Data from Statistics Canada, Selected natural resource reserves, table 38-10-0007-01. Data for 2021 is preliminary. Mineral reserves set to 100 in 1997.
The Mining Association of Canada | The Canadian Mining Story: Economic Impacts and Drivers for the Global Energy Transition 2023 27 Exploration and Deposit Appraisal in Canada Spending on exploration is a leading indicator for the future success of mineral production in Canada. Natural Resources Canada defines spending on finding and assessing mineral resources as follows: • Exploration expenditures: Spending on activities up to and including the first delineation of a previously unknown mineral deposit. • Deposit appraisal expenditures: Spending on activities that bring a delineated deposit to the stage of detailed knowledge required for a production feasibility study. The two expenditures combined are “exploration spending.” Spending on exploration and deposit appraisal fell in 2020 as a result of low commodity prices and the pandemic. In 2021, after increases in mineral and metal prices and a lessening of pandemic impacts, exploration spending rose 66% to $3.6 billion. Expenditures are expected to continue to rise in 2022 as a result of commodity price increases and shortages due to the ongoing war in Ukraine. Precious metals attracted most of Canadian exploration spending in 2021, accounting for 66% overall (see Figure 2). High gold prices have driven interest in precious metals exploration investment. If inflation continues above historical levels, the “safe-haven” status of gold to hedge inflation risks may mean a continued focus on precious metals. From 2017 through 2021, base metal exploration’s share of total investment increased from 14.7% to 20.5%, and the absolute value of dollars invested doubled to $775 million. Most other targets also saw an increase in the value invested in exploration, although uranium and diamonds saw declines in both expenditure and proportion of total expenditure. Year 2017 2018 2019 2020 2021 $million (percentage of total in parentheses) Base Metals 322.2 (14.7%) 376.6 (15.2%) 425.4 (18.6%) 385.4 (17.6%) 774.5 (20.5%) Precious Metals 1,430.5 (65.5%) 1,522.8 (61.3%) 1,297.9 (56.8%) 1,480.2 (67.5%) 2,497.6 (66.1%) Iron 9.1 (0.4%) 18.4 (0.7%) 17.1 (0.7%) 30.6 (1.4%) 97.9 (2.6%) Uranium 137.4 (6.3%) 169.7 (6.8%) 162.3 (7.1%) 66.8 (3.0%) 122.2 (3.2%) Other Metals 89.0 (4.1%) 140.7 (5.7%) 105.9 (4.6%) 33.1 (1.5%) 115.6 (3.1%) Nonmetals (excluding diamonds) 58.4 (2.7%) 78.6 (3.2%) 58.7 (2.6%) 35.1 (1.6%) 65.3 (1.7%) Diamond 83.2 (3.8%) 108.8 (4.4%) 127.0 (5.6%) 64.0 (2.9%) 51.8 (1.4%) Coal 55.7 (2.5%) 69.5 (2.8%) 92.2 (4.0%) 96.2 (4.4%) 56.1 (1.5%) Total 2,185.5 (100.0%) 2,485.2 (100.0%) 2,286.5 (100.0%) 2,191.4 (100.0%) 3,781.0 (100.0%) Figure 2: Mineral Exploration And Deposit Appraisal Expenditures in Millions of Dollars, By Target, 2017-202117 17 Natural Resources Canada, Exploration Plus Deposit Appraisal Expenditures, by Mineral Commodity Sought, 2017 - 2021 Annual and 2022 Revised Spending Intentions.
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