How has the mining industry recovered from the pandemic and what impact will the renegotiated NAFTA have on the sector?
My sense is that the mining and mineral exploration sectors have recovered, but will face important challenges and changes in the coming years. After the initial shock of the pandemic subsided, the commodities market recovered strongly and rapidly. In this new cycle, industrial metals and minerals - those used in the production of goods and equipment – seem to be leading (although precious metals remain important). With inflation becoming an important risk, perhaps precious metals will take the lead again. Nonetheless, a more broad-based increase in the price of all commodities is positive for mineral exploration and mining, even if challenges remain due to labor shortages, cost increases, climate change, etc.
The increasing electrification of the transportation system, particularly through the electric vehicles revolution, has boosted the prospects for most of the minerals used in new types of vehicles and changes to the power grid. The renegotiated NAFTA (or USMCA) appears to have fostered a healthy exploration environment in Canada for a number of industrial minerals. The changes in country of origin rules, coupled with the move of the auto sector towards electric vehicles, seem to be pushing EV companies to source a greater percentage of their components from North America. Also, the disruption of the global supply chain and the increasingly high cost of shipping during the pandemic may lead businesses to source their inputs in ways that reduce shipping costs and risks. Overall, these factors are converging to foster healthy conditions for exploration in North America.
How challenging is it to move from the TSX Venture Exchange to the TSX, and what support do you provide?
It is not terribly challenging from a regulatory perspective. As compared to the TSX, there are more granular rules to be complied with on the TSX-V. For example, most property acquisitions will trigger TSX Venture Exchange filing or approval requirements, which would not always be the case on the TSX. On the TSX, the rules are more conceptual and the thresholds triggering TSX interactions or filings are higher. Conversely, internal control and corporate governance requirements are more exacting for TSX listed companies, and reporting deadlines are tighter. This can mean that a graduating company needs a bigger board and more staff. For a TSX-V company, moving to the TSX can feel as though external operational constraints are reduced, but that internal governance and reporting structures are thickened.
We can certainly assist with preparing for that transition, from considering whether the conditions for graduating are met, to educating a client on the difference in compliance requirements, to building out appropriate internal controls and governance structures.
Have we reached a point of saturation of regulation as we move towards the fourth industrial revolution?
In recent years, securities regulators have shown a real desire to streamline rules and reduce regulatory burden, especially for juniors, which is a positive development. It is critical to regularly review regulations and their structures to ensure that the rules are right-sized while addressing risks. However, I think the biggest regulatory risk faced by juniors does not stem from securities laws. It takes too long to move a project from exploration to production; that process requires streamlining. We have to find more efficient and timely processes that still protect the environment and address the needs of affected communities and stakeholders. Not every project will satisfy all the criteria for moving to production, but efficiently identifying those that do and positioning them to advance is crucial.
Do you have any final messages to share with our readers in the mining sector?
For projects in Canada, it is fundamental that our First Nations are engaged as partners. Historically, this has not happened. Models have emerged that allow First Nations to share in the opportunity and wealth created by resource projects through ownership stakes, by leveraging projects to improve infrastructure and economic capacity, etc. That must continue, and hopefully more models will emerge. The greening of the economy is going to reach deeply through supply chains, and that will open opportunities for projects with lower environmental impacts and stronger community support.