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Despite the challenges currently faced by the mining industry, Canadian junior mining executives appear to have a renewed sense of optimism, particularly those in Quebec, where the adoption of Bill 70 to reform the Mining Act in December has at long last provided the industry with a stable and predictable regulatory framework. This framework will help Quebec mining companies prepare for the next mining and metal market upswing that the whole world is counting on. Furthermore, the Quebec government’s recent announcement of support to oil exploration on Anticosti Island is perceived as highly positive by mining companies with respect to the natural resources sector. Nevertheless, financing, access to infrastructures and government aid remain high stakes for mining company executives.
This and more is what Grant Thornton International’s 2014 mining industry study has revealed. The preliminary study findings were released for the first time this morning during the Prospectors & Developers Association of Canada (PDAC) convention in Toronto.
The financing conundrum
Nearly 27% of junior Canadian mining companies state that they will require additional financing over the next six months. “The figure from our investigation last year at the same time was 38% for all companies, which goes to show that the situation has hardly changed and financing still remains a challenge for junior miners. The consolidation of exploratory mining companies, combined with the disappearance of companies that were in an unstable financial situation and the stock market decline in the mining industry, means that there are fewer companies looking for financing. However, the needs remain high,” explains Anand Beejan, Partner and Mining Sector Leader at Raymond Chabot Grant Thornton.
The investigation also reveals that Canadian mining companies consider financing as their main growth factor (at 41%). “The research demonstrates concretely why companies need to find alternative financing methods, such as agreements between juniors and big companies in exchange for stock options in an important project phase, convertible debt, sale of a portion of the company’s shares in exchange for financing secured with future output and even private financing,” relates Beejan.
Government assistance a must
Only 26% of Canadian junior miners state that they have received assistance from the provincial government. This percentage drops to 3% for federal assistance. However, this is a crucial aspect for junior mining companies; 55% of which claim that government regulations are the main obstacle to their growth. “By adopting Bill 70, with opposition party support, the Quebec government has made a solid step to support the development of the mining industry,” Beejan goes on to say. “Such government efforts must continue, especially from Ottawa, whose current level of support is very marginal, as demonstrated by the results of our survey.”
Infrastructure is fundamental for Quebec projects
Improving infrastructures is also essential for Canadian junior miners, as confirmed by 29% of respondents, who state that they will not be able to pursue their project without additional, significant infrastructure development. Approximately half of respondents (47%) state that their project will not reach its full potential within reasonable timeframes without such investment.
As Beejan continues, “There is heavy global competition in the mining sector. These days, mining projects require major capital injections to explore, develop and build mining sites. However, to be productive, this investment hinges on infrastructures, such as roadways, railway lines, port facilities being set up by the government. To ensure that Canada remains attractive, we need to support mining companies and find viable solutions and new infrastructure financing models to advance projects.”
The complete results of Grant Thornton International’s 2014 mining industry study will be released over the coming weeks.
About Raymond Chabot Grant Thornton
Founded in 1948, today Raymond Chabot Grant Thornton (www.rcgt.com) is a leader in the fields of assurance, tax, consulting services, business recovery & reorganization. Its strength is based on a team of more than 2,400 people including some 230 partners in more than 100 offices in Quebec, eastern Ontario and New Brunswick. For the past 30 years, Raymond Chabot Grant Thornton has been a member of Grant Thornton International Ltd providing its clients with the expertise of the member and correspondent firms in more than 100 countries.
Source: Marie-Eve Carignan
Manager, Communications and Public Relations
Raymond Chabot Grant Thornton
Cell: 514-668-9187
Information:Marc Poisson
Consultant
National Public Relations
Cell: 514-616-7691
