Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Lately, the media have provided a lot of coverage about Canada’s “Cold War era” uranium policy, limiting foreign ownership rights to 49% of a producing uranium project.
The policy’s loudest critics include Saskatchewan Premier Brad Wall, Newfoundland & Labrador Premier Kathy Dunderdale, Rio Tinto, Areva Resources, Paladin Energy Ltd. and the Australian government.
As it stands, a 1987 letter from the federal minister of natural resources to companies active in Canada’s uranium industry stipulates:
The uranium policy aligns with Ottawa’s push to keep Canadian resources in Canadian hands (despite exceptions made in oil and gas, as seen here). It also makes room for the possibility of a major Canadian mining house — something the country hasn’t had since the 2006 sale of Inco to Brazilian-owned Vale.
Canada’s Cameco single-handedly produces upwards of 14% of the world’s uranium, and with the Cigar Lake mine about to come on stream, this percentage is expected to grow. But Canada’s uranium production as a whole has fallen from 22% of global supply in recent years, in second place behind Kazakhstan, which provides 36% of global supply.
Some say the existing foreign ownership policy is hurting Canada’s uranium production sector. Foreign mining companies may be hesitant to invest in Canadian uranium — they’re bound to lack a majority stake and thus control of their project.
This in turn limits the market for junior explorers looking to raise money and sell their projects, which ultimately means fewer jobs, less development, and reduced growth of the industry.
While there are definitely more sides to the Canadian uranium policy’s coin, Ottawa’s made clear it has no plans to even consider changing these ownership limits.
That said, Rio Tinto’s purchase of Hathor Exploration (the Roughrider deposit) may represent a step in a different direction. Because the Roughrider deposit isn’t in operation, Rio Tinto is not subject to the 49% limit. But once production begins — and the Canadian uranium policy stays the same — they’ll be required to sell a 51% stake or find a local partner.
However, the fact that Rio is willing to take this risk does say something about their views on how regulation may evolve in coming years.
Ultimately, though, with so much money and politics involved, the debate will likely continue for the foreseeable future.
