Toronto's Global Reach
Mine the mines afar, mine the markets in Toronto
The latest data available from Natural Resources Canada shows a total of 1,412 Canadian mining and exploration companies possessed Canadian Mining Assets (CMAs) valued at C$285.8 billion in 2021. Of these companies, 748 had CMAs located abroad worth C$195.9 billion. Canadian companies were present in 96 foreign countries in 2021, and foreign assets abroad accounted for about two-thirds of the total value of CMAs. Additionally, around 40% of the world’s public mining companies are listed on the TSX and TSXV. For years, foreign mining companies and international investors worldwide have been drawn to Ontario, thanks in part to the numerous Foreign Investment Promotion and Protection Agreements and Free Trade Agreements Canada has in place with other nations.
Gold
The spot price of gold rose from lows of around US$1,100/oz in the summer of 2018, to record highs above US$2,000/oz in May 2023. Sanctions on Russia, de-dollarization, and talk of a potential recession in the USA may all have contributed to gold’s meteoric rise over the past few years.
Ontario’s juniors have been venturing south in search of the next big gold deposit. Guyana is one of the fastest growing economies in the world due to the ongoing development of its oil and gas sector with the International Monetary Fund (IMF) stating it grew by 62% in 2022, and that it was projected to add another 38% in 2023. Due to the Commonwealth Caribbean Countries Tariff (CARIBCAN) – an economic and trade development assistance program for Commonwealth Caribbean countries established by Canada – 94% of all Caribbean exports to Canada enter duty-free. Cognizant of this, Toronto-based junior G2 Goldfields has been exploring for gold in the mineral-rich Guyana shield. G2 Goldfields released a maiden resource estimation in April 2022, indicating a combined resource of 1.2 million oz at just above 9 g/t at its flagship Oko project. The Guyanese government has been supportive of extractive industries, with giants like ExxonMobil investing billions of dollars in offshore oil projects. Although mining companies are unlikely to match the oil majors in spending, they do bring other benefits to the region, as Dan Noone, CEO of G2 Goldfields explained: “The oil sector tends to be less labor-intensive, primarily relying on skilled imported labor, unlike mining, which has the potential to generate numerous jobs for the local population. The Guyanese government reports that over 40,000 people are employed in mid-scale mining in Guyana.”
Further west, another Toronto-headquartered junior, Quimbaya Gold (Quimbaya), is exploring in the Segovia region of Colombia. Colombia, being a relatively underexplored and less mature mining jurisdiction compared to some of its South American neighbors, is already home to many Canadian producers. This is likely thanks to the Canada-Colombia Free Trade Agreement, ratified in 2011, and the Framework for Cooperation in Natural Resources, signed by Natural Resources Canada and Colombia’s Ministry of Mines and Energy in 2016 at the PDAC convention in Toronto. Quimbaya has now amassed over 40,000 ha of property, including Quimbaya’s flagship Tahami project, adjacent to Canadian producer Aris Mining’s operating gold mine. Quimbaya’s CEO, Alexandre P. Boivin, is confident Quimabaya can replicate the success of its Canadian neighbors in Segovia: “I have noticed that the people who have success in Colombia always have certain traits in common. Take the teams behind Aris Mining and Collective Mining; they both have very similar backgrounds and seem to have a recipe for success; we are the next one.”
Further to the north, in Mexico’s Sonora state, Alamos Gold’s Mulatos District produced 53,900 oz of gold in Q3 2023 and 164,700 oz year-to-date, nearly double the prior year period. Alamos president and CEO John McCluskey shared the company’s plans for the Mulatos District: “Unlike the oxide heap leach resources originally developed at Mulatos, we now have higher-grade sulfides that will require milling. We are preparing for a new phase of development for the Mulatos project, which will take some investment from the company to bring to fruition.”
In recent years, Mexico’s president López Obrador has been pushing through policies to reassert state control over natural resources. In May, Mexico reformed its mining regulations which included changes such as requiring all mining concessions to be awarded under a public bidding process, and a reduction in the term and scope of mining concessions, among others. The reform drew criticism from various industry leaders, and Canadian Trade Minister Mary Ng expressed her concern about the changes. Although the reforms have not impacted Alamos’ Mulatos District, they are likely to impact Canadian players embarking on new mining projects. McCluskey shared his thoughts on the reforms: “In terms of new projects, I do not see us doing much outside the Mulatos area until there is clarity as to the associated risks of doing business there going forward. If you raise taxes and the treatment of certain costs, you are sending a signal to the market you do not want further investment in the sector. The market will respond to those signals, which is what we are seeing right now.”
The reforms may help solve certain problems in Mexico’s mining sector, such as claimed mining concessions sitting idle for many years without being developed. However, big legislative changes like this usually come with a lot of uncertainty for stakeholders, as they wait to see how the regulation is implemented in practice and if there are unforeseen knock-on effects. “In Mexico, mining is a profitable, responsible contributor to GDP, but it requires certainty. Uncertainty is the enemy of investment; investors need certainty that the governmental backdrop will create the conditions to generate returns,” shared Jody Kuzenko, president and CEO, Torex Gold Resources.
Toronto’s reach extends to far-flung corners of the world, but sometimes, there are riches to be found much closer to home. For almost 25 years, Seabridge Gold (Seabridge) has been working on the giant KSM project in British Columbia. KSM is claimed to be the world’s largest undeveloped gold project by resources. Having secured its environmental approvals and spent over C$400 million on construction and infrastructure, Seabridge is now searching for a partner to help bring this behemoth project to production: “The biggest challenge in developing KSM is its immense scale. With over 11 billion t of economic mineral resources, coupled with a projected construction cost of US$6.4 billion, there is a limited number of potential partners capable of building and operating the mine,” shared Rudi Fronk, chairman and CEO, Seabridge Gold.
“The value of sourcing materials from trusted, regulated, and transparent locations cannot be understated.”
Lewis Black, President and CEO, Almonty Industries
Silver
The silver spot has also significantly increased over the past five years, reaching highs of around US$25/oz in mid-2023. In light of this, Silver Storm Mining, previously Golden Tag Resources, has been working on bringing its past-producing La Parilla silver project in Durango State, Mexico, back into production. In choosing to re-start a past-producing mine, companies like Silver Storm are often able to re-use existing permits and licensing, potentially allowing them to bypass some of the hurdles introduced by the reforms that Canadian mining companies are likely to face going forward. Mexico is the largest producer of silver – an increasingly important metal for its use in solar panels, electric vehicles and 5G telecoms networks. Historically, La Parrilla produced over 3 million oz/y, until its previous owners, First Majestic Silver, put the mine on care and maintenance due to low commodity prices and its desire to focus on its larger mine, San Dimas. With silver prices significantly higher, Silver Storm saw an opportunity and acquired La Parilla in August 2023, aiming to put the mine back into production in 2025. A 7,000 m drill program is underway to expand the inferred resource base in proximity to existing underground development and infrastructure. “Although La Parilla was last operated in Q4 2019, the care and maintenance program was executed very well. As such, the mine will be a relatively low capital restart for us and there is even a partial underground mining fleet that remains onsite,” shared Greg McKenzie, president and CEO, Silver Storm Mining.
Article header image courtesy of Torex Gold