Canadian Miners Must Adapt to Meet Demand

Source:

"Market forces are 'far from typical.'"

With rapid industrialization in the emerging world driving demand, and countries like Russia, India and China restricting exports of metals and minerals, Canadian miners are scrambling to fill the gaps, the Deloitte consultancy report, Tracking the Trends 2011, said.

But while the normal response to growing demand is to simply ramp up production, new mining taxes and royalty regimes make that less straightforward, while national, political and environmental concerns make it more difficult for mining companies to get permits to expand or build new mines.

Even if a mining company secures permits, lack of infrastructure and a shortage of skilled labor makes projects in far-flung regions such as Mongolia or West Africa risky.

But if Canadian miners can position themselves to capitalize on deposits in these new mining regions, the benefits could be big.

"Market forces today are far from typical," said Deloitte's Philip Hopwood. To win in this new "boom", Canadian miners must adapt: this means looking to alternative funding sources, including direct off-take agreements with China and India, engaging local stakeholders, and building skilled regional labor forces from the ground up.

With China looking to gain control of more resources such as uranium, coal, copper and rare earths, Deloitte expects to see Chinese interests not only funding projects, but also acquiring Canadian mining companies.

China accounted for 33 global mining deals worth a combined $9.2 billion in 2009, said Deloitte.

The report added that 73% of Chinese companies expect the pace of dealmaking to continue at the same level.

This means Canadian miners need to make sure they have diverse projects, secure licenses and funding in place, said South, "so they can be positioned to attract fair value should the Chinese, or other acquirers, come calling."

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