Whether it’s the Diavik diamond mine in the Northwest Territories or the Patience Lake potash mine in Saskatchewan; the LaRonde gold mine in Quebec or the Garson nickel mine in Sudbury, the mining industry has a presence in virtually every part of Canada and plays a key role in the country’s economic health. Paul Stothart, vice-president, economic affairs for the Ottawa-based Mining Association of Canada, says this diversity will be a key asset for the Canadian mining industry in coming years – particularly as demand for min- eral-intensive consumer products intensifies in emerging markets like China.

The mining sector contributed an estimated $40 billion – $31 billion in mineral processing and manufacturing and $9 billion in mineral extraction – to Canada’s GDP in 2008, and also accounted for roughly 19% of its goods exports.

Canada attracted nearly 19% of all global exploration spending in 2008, ranking ahead of both Australia (14%) and the United States (7%).

The mining industry’s reach extends into sectors ranging from finance and legal to environmental and technology. According to database analyst Global Infomine, more than 3,100 companies provided services to the mining industry in 2009, including 238 environmental consulting companies, 152 management and financial firms, and 140 exploration consulting firms.

Mining also accounts for roughly 60% of the country’s rail-freight revenues and as much as two-thirds of its port volume.

And while it conjures up visions of operations in remote northern towns, the industry boasts a significant presence in Canada’s largest cities. Toronto is a major hub for mining finance, for example, with the Toronto Stock Exchange handling some 81% of global mining equity transactions over the past five years.

Vancouver, meanwhile, is home to many of the world’s leading exploration companies, while several aluminum and iron ore companies – including Alcan, Iron Ore Company and ArcelorMittal Mines – call Montreal home.

The past decade has produced some significant triumphs for the Canadian mining sector, most notably the emergence of a world-class diamond industry and the continued devel- opment of the Alberta oil sands.

However, the industry must also address some key issues in order to ensure its future success in a highly competi- tive industry. In addition to the ever-present environmental concerns – “Obviously any industry that digs up rock and converts it into 99.99% pure metal will face lots of envi- ronmental challenges” acknowledges Stothart – the mining industry is grappling with a coming labour crunch and the need for continued government investment.

Diamond mining: a cut above

The emergence of the diamond mining industry has been one of the most compelling stories in the Canadian mining sector over the past decade. From zero production in 1995, Canada has grown into the world’s third largest diamond producer – with mines in the Northwest Territories and Ontario now accounting for 13% of all global production.

Canada’s diamond exports totaled $2.8 billion in 2008, with two new mines – Snap Lake in the Northwest Terri- tories and Victor in northern Ontario – opening in 2008 to meet strong demand in the first half of the year.

The diamond industry has also provided considerable benefits for Canada’s northern and Aboriginal communi- ties. It has invested more than $10 billion in capital and operating expenses in the Northwest Territories, and created numerous programs including scholarships for post-second- ary education, apprenticeship trades training and Aboriginal employment partnerships.

These investments have contributed to an 8.3% decline in the region’s unemployment rate – which dropped from 13.7% to 5.4% between 1991 and 2007 – while the region’s GDP has ballooned from $1.6 billion to $4.5 billion during the same period. A study by Impact Economics also found that the region’s high school graduation rate climbed from 33% in 1995 to 56% in 2007, while the percentage of people on income assistance dropped from 11% to 4%.

“The diamond industry is one reason why the mining sector overall is the largest private-sector employer of Aboriginal Canadians,” says MAC’s Stothart, noting that companies such as DeBeers and BHP Billiton have numerous ‘impact benefit agreements’ in place with indi- vidual Aboriginal groups.

There is also significant development potential in the diamond sector, including Peregrine’s Chidliak project on Baffin Island and Stornoway’s Aviat diamond field on Nunavut’s Melville Peninsula and its Renard project in central Quebec.

“Prices tend to be relatively stable in comparison to other minerals, which reflects the emphasis of key industry par- ticipants on supply stability and controlled distribution channels,” says Stothart. “Long-term prospects are strong – as in other minerals, long-term growth will reflect the emergence of a large middle class in China and India over the coming decades.”

A global leader

Canada ranks among the top five countries in the world in the production of 12 major minerals and metals: it is the world’s leading producer of both potash and uranium; the second leading producer of nickel and cobalt, and the third leading producer of titanium, aluminum and platinum group metal.

Canadian potash production reached $8.2 billion in 2008, a remarkable 193% increase over the previous year and a reflection of the fact that prices remain historically high.

Elsewhere, continued concern over air pollution created by fossil-fuel power has led countries around the world to ramp up their nuclear energy programs – leading to heightened demand for Canadian uranium. Saskatchewan’s McArthur River uranium mine is the world’s largest and highest-grade uranium deposit, with reserves of more than 215,000 tonnes of uranium oxide.

Ux Consulting estimates that as many as 100 new nuclear reactors will be built around the world in the next 20-30 years. China alone anticipates a six-fold increase in nuclear energy capacity to 50 gigawatts by 2020, while Russia is expected to add two to three gigawatts of nuclear power each year between now and 2030.

The western oil sands also continue to be one of the world’s biggest economic stories, with 2007 exports totaling more than $40 billion. The oil sands will see an estimated $100 billion in investment over the next 15 years, with production expected to more than triple from its current 1.3 million barrels per day to around 4.7 million barrels by 2025.

The development of the oil sands has had a huge impact on the western Canadian job market, with upwards of 200,000 new jobs created in the past decade. The boom is highlighted by Fort McMurray, Alta., the epicentre of the province’s oil sands activity, which has seen its population explode from 6,000 in 1968 to 80,000 in 2008.

Help wanted: apply below

Mining is a key contributor to the country’s economic strength, employing an estimated 351,000 Canadians as of 2008. It is also a well-paying sector, its average weekly wage of $1,347 exceeding that of the forestry, manufac- turing, finance and construction sectors by 44%, 42%, 35% and 33% respectively.

An urgent need to bolster its workforce will be one of the key issues facing the industry in the next decade however, with the Mining Industry Human Resources Council (MiHR) estimating that between 60,000 and 90,000 new workers will be required to meet anticipated production targets through 2017.

“The mining industry’s human resource challenge is a serious one,” says MAC’s Stothart. “Although not dramati- cally different from the demographic challenge facing other sectors.”

The Mining Association of Canada (MAC) says that training and skills enhancement for Canada’s Aboriginal community may be one way to address the shortfall. The mining industry employed 4,515 Aboriginal people in 2006 – a 43% increase over 1996 – but the Aboriginal population is growing at a rate that’s double that of the non-Aboriginal population, and many of its communities are located near mining operations.

Another pressing issue is the fact that the mining industry’s skilled workforce, including some 65% of geo-scientists, will reach retirement age during the next decade.

According to MAC, the number of Canadians aged 50 or over employed in mining’s skilled categories is five times greater than the number of workers under 30.

With its increased reliance on advanced technology, it is imperative that the industry recruit highly educated workers with skills in computer technology and information manage- ment, among others.

Traditionally, the mining sector has had problems recruiting women, visible minorities and immigrants into its workforce, but MiHR says some of these problems can be ameliorated by increas- ing promotion of the industry to these constituencies, while at the same time bringing back retired workers, retaining older workers and increasing mentoring and enhancing educational programs.

The Future

According to MAC’s Stothart, China will be the primary driver of future prospects for the mining industry. The world’s most populous country currently consumes more than 30% of the world’s base metals – as opposed to just 5% in the 1980s – and demand is only going to increase in the years ahead.

“The fact that there are around two to three cars per 100 people in China, versus 90 in the U.S., gives a rough indication of the market potential that [exists] as the interior of China develops,” says Stothart, noting that similar benchmarks exist in other “mineral-intensive” consumer products.

Stothart also predicts an increase in U.S. market demand over the next year or two, as the world’s biggest consumer market slowly rebounds from an economic downturn that curtailed activity in key categories like housing and automotive.

The diversity of Canada’s mining industry will be a huge boon in the years ahead says Stothart, although the competitiveness of some processing facilities is threatened by investment moving to China.

“Re-investment in some of these Canadian smelters will depend upon tax considerations, proximity to transportation routes at competitive rates, efficiency of government regulatory processes and security of supply of mineral concentrate among other variables,” he says.

These pages will highlight a group of Canadian mining companies that are positioning themselves for the future through a combination of exploration, investment, and even a little faith. While their models are different (one isn’t even a mining company in the traditional sense), all share a belief in the future of this vital sector.