An industry poised for growth
Around the world, governments and industries are driving a global transition towards environmentally friendlier, low-carbon economies.
For Canada’s mining sector, the accelerated commercialization of green technologies – in a diverse range of areas that include automotive and renewable energy infrastructure – translates into greater demand for metals like copper, lithium, cobalt and nickel, which are critical components in products like electric vehicle batteries and powerlines.
For investors, this means greater opportunities to invest in an industry well positioned to meet the needs of a low-carbon future.
“Mining is a highly collaborative industry, so there’s quite an ability to invest not only in exploration companies or in traditional producing miners but also in companies that provide infrastructure, equipment and technology. ”
“Canada really is well positioned to lead in this area,” says Alex Christopher, president of the Prospectors & Developers Association of Canada, which represents the country’s mineral exploration and development community. “Not just because of the commodities we have on hand but also because our mining industry is a global leader in extraction that’s socially, economically and environmentally sustainable.”
With 200 mines producing more than 60 metals and minerals – to a total value of almost $44-billion in 2020 – Canada is recognized globally as a leading mining nation. It’s the largest potash producer in the world and ranks among the top five for production of gold, aluminum, diamonds, gemstones, indium, niobium, platinum group metals, titanium concentrate and uranium.
Beyond domestic production, Canadian mining companies boast close to $177.8-billion worth of mining assets in more than 100 countries.
Investors considering the implications of a global move towards low-carbon economies should note that Canada has the key minerals needed for electric vehicle batteries. With the strong demand for these and other minerals critical for green technology currently exceeding supply – a trend expected to continue in the near future – it makes sense to include mining as part of a diversified approach to investing.
“There’s a fundamental supply and demand imbalance in these commodities that we see now and in the future with the transition to a low-carbon economy,” says Mr. Christopher. “Looking at energy storage, for example, as electric vehicles take off we’re going to see a surge in demand not just for the minerals used in batteries but also for copper because EVs use more copper for their wiring than traditional vehicles.”
This supply-demand imbalance has pushed up pricing for a number of metals and minerals. In 2020, prices for iron ore – an essential raw material for steelmaking – increased by 70 per cent, while silver went up by almost 50 per cent, and copper and gold by about 25 per cent.
While pricing for lithium and cobalt declined in 2020, by January 2021 these battery metals saw a surge in their prices as various governments put forward ambitious infrastructure and emission reduction plans.
Even as mines ramp up production to meet demand, it will take time for supply to fill the minerals and metals pipelines, says Mr. Christopher. Once these pipelines are at adequate levels, he adds, these largely recyclable minerals and metals will start coming back into the supply system.
In addition to the potentially lucrative returns from investing in mining stocks, Canadians who choose to put their money towards mining companies in the exploration and development stages may be able to claim tax deductions for up to 100 per cent of their original investment, plus 15 per cent in investment tax credits.
To do this, they’ll have to purchase flow-through shares from qualifying corporations.
“Flow-through shares, which are quite unique to Canada, provide opportunities for companies that don’t have revenue to flow their exploration and development expenses directly to investors,” explains Mr. Christopher. “For investors, this makes their investment more cost-effective and can give them a greater return overall.”
Investors who are new to mining should take the time to understand the industry and all of its players, he adds. As a starting point, it’s important to distinguish exploration and development companies from companies already in production, and to understand what these different stages mean in terms of investment risk.
It also helps to be familiar with the mining industry ecosystem, which includes hundreds of companies that provide products and services to mining companies.
“Mining is a highly collaborative industry, so there’s quite an ability to invest not only in exploration companies or in traditional producing miners but also in companies that provide infrastructure, equipment and technology” he says. “Ours is a very dynamic and exciting industry that’s poised for even more growth in the future.”
PDAC 2022: the world’s premier mineral exploration & mining convention
This year marks the 90th anniversary of the iconic Prospectors & Developers Association of Canada (PDAC) Convention. The mineral exploration and mining industry event will be hosted in person in Toronto from June 13 to15 and online from June 28 to 29.
For more information, visit www.pdac.ca/convention.
About PDAC
The Prospectors & Developers Association of Canada (PDAC) is the leading voice of the mineral exploration and development community. With over 4,400 members around the world, PDAC’s work centres on supporting a competitive, responsible mineral sector.
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