The Québec Investment Scene
Little investment, big ambitions
The reality check is harsh for Canada. World Bank Data shows that per capita growth GDP and productivity figures have barely risen in the past decade. For context, Canada's per-person GDP, a typical measure of living standards, was C$58,111 in the fourth quarter of 2023. This figure is slightly lower than the C$58,162 recorded at the end of 2014 when adjusted for inflation. Canadians’ living standards have not improved, and experts have pointed toward a particular culprit: A decline in business investment.
This decline is evident in Canada’s resources sector. The second-largest country in the world now ranks 8th in global mineral output. Natural Resources Canada, which maintains an inventory of projects under construction or planned within a decade, revealed alarming figures. Despite the increasing demand for minerals to supply raw materials for electricity, renewables, and electric vehicles, the number of mining projects decreased from 150 in 2014, worth C$166 billion, to 129 projects in 2023, valued at C$93.6 billion (equivalent to C$75.2 billion in 2014 dollars), marking a 55% drop in value. Québec is no stranger to this trend. Several interviewees noted that lithium, cobalt, and copper projects were dropped as they could not get the necessary funding to advance to the later stages of development in the past two years. And on the floors of mining conferences from Toronto to London, executives share a shocking realization that investors are not interested in their stocks as much as they used to be.
After his election in 2015, Prime Minister Trudeau wanted the world to know the country for its resourcefulness rather than its resources. Québec, with its abundant gold production and critical minerals potential, now teeters on the precipice of missed opportunity. Thankfully, the province can rely on its executives’ open-mindedness to attract new capital, and its unique financial ecosystem.
Addressing a new investor base
Buoyed by a historic bull market for precious metals, and a strong bottom-line trend for critical minerals, executives must reinvent the way they address investors.
The difficulty in junior financing despite the high prices of gold, copper, and base metals, is at least partly due to a change in the investor base of exploration companies. Going forward, educating a new generic investor base will be key for juniors to get cash from the remaining sources that have not dried. For instance in Québec, much like any other North American mining jurisdiction, it will take over ten years on average to bring a mine to production. The waiting game is much different to other industries, and for Olivier Grondin, who leads the AEMQ’s efforts in supporting juniors in the province, educating investors will be the industry’s lifeline: “There are fewer exploration-specific funds, so the industry is targeting the generic investor, which is less cognizant of how exploration works and how patient one needs to be. That investor base is less patient, but it is the one holding the capital, so companies will have to shift their approach to address them.”
Attend enough PDACs, and you will soon realize that the median age for retail investors sniffing at explorers’ booths or core shacks is well above 60. Indeed, the shift in investor demographics plays a key role when addressing the slowdown in mining investments. Traditional commodity funds, often managed by baby boomers, are dwindling, while younger generations gravitate towards crypto and other assets. However, faced with the extreme volatility that comes with the latter industries, mining executives have noted a shift in the newer generations’ behavior. As put by former Hecla CEO Phil Baker: “Interestingly, millennials and Gen Z are showing interest in buying precious metals, evident in places like Costco. Unlike crypto, which faces volatility and accessibility issues, gold and silver offer tangible store-of-value appeal.”
“The government is extremely engaged with the mining industry. Québec is also home to a number of investment funds, directly and indirectly backed by the Québec government, with the mandate to advance the mining industry in the province and create jobs.”
Peter van Alphen, CEO, Nuvau Minerals
Beyond shifting demographics, miners have also felt lonely during this rough patch due to the lack of external support. Unlike other mining powerhouses that hold similarities with Canada, the country does not have a large fund whose sole purpose is helping companies get the necessary funding. Having completed nine acquisitions in two years, Champion Electric Metals strategically shifted towards its Québec assets as it was able to raise capital through flow-through and super-flow-through in the province. Despite the unique environment for juniors offered by Québec, Jonathan Buick, president and CEO deplored the lack of support at the national scale: “We do not have a big mining house like we used to, we do not have a dedicated multi-metal fund. We are missing a “big brother”.
For investors and miners alike, the coming months might resemble a waiting game that shows no chance of a win-win scenario. Since May, the VanEck Gold Miners ETF, which comprises the world's largest gold mining firms, has decreased by 17.5%. During this timeframe, shares of Agnico Eagle have fallen by 7.4%, while Barrick Gold and Newmont have seen their shares drop by 23% and 30%, respectively. Paul Carmel, CEO of SIDEX, explained the disconnect between a high gold price and struggling share prices: “Despite soaring commodity prices, rising operational costs, including overruns and permitting delays, have squeezed profit margins for gold producers, prompting investors to await tangible signs of sustained profitability before fully committing to gold stocks.”
On the plus side, current market conditions and societal trends will offer opportunities for the mining industry to shine again in the coming months. It might finally be time for a new wave of large-scale and sustained discoveries in Québec. Exploration will likely remain junior-driven, as over 80% of exploration work was done by juniors in Québec in 2022 (according to AEMQ figures), and investors have a key role to play in bolstering greenfield exploration, which is alive and well in James Bay notably. Generalist investors have shunned mining for years, yet the depths of their pockets are key for more discoveries. The rally in precious and base metals saw gold reach US$2,334/oz and LME copper US$9,706/t, which is making investors rethink mining as a source of returns. For Mathieu Savard, president of Osisko Mining, who was acquired by Gold Fields in the summer, that pool of investment is desperately needed to fuel further discoveries: “We need more generalists and retail investors to support discoveries. Without capital to support finding these new mines, it will only equate to a higher commodity and precious metals environment.”
The Québec touch
Québec’s unique ecosystem is again proving it can make a difference amidst a rather dire investment outlook countrywide. The funding framework includes Investissement Québec, which occasionally collaborates with the province’s C$402 billion (US$300 billion) pension fund, the Caisse de dépôt et placement du Québec (CDQP). Mining investments are managed by Ressources Québec, a division of Investissement Québec, which administers funds from the C$1 billion Natural Resources and Energy Fund and an additional C$600 million allocated to Ressources Québec. Since 2022, Investissement Québec injected C$12,5 million into Nouveau Monde Graphite to unlock the province’s graphite potential; CDQP and FTQ invested over C$50 million in the Bloom Lake iron mine, while SIDEX invested close to a C$ 1 million in three gold, lithium and nickel early-stage projects in James Bay and the Abitibi. These are just recent examples highlighting the participation of financial tools that are unique to the province, and that are key to Québec’s investment attractiveness. As put by Pascal Hamelin, CEO of developer Abcourt Mines, who is closing in on restarting the Sleeping Giant mine: “When capital markets are difficult, the institutional investors you find uniquely in Québec can be helpful, whereas other jurisdictions in Canada do not have this financial support the province offers.”
For juniors navigating the storm, the support of funds in financing, both debt and equity, to de-risk mining projects is a relief. Advancing several projects in gold and lithium, Harfang Exploration offers a glimpse into how those provincial long-term focused shareholders assist juniors. Québec funds and the CDQP together hold over 28% of the firm. President and CEO Rick Breger said: “The general market is not awesome for juniors, but Québec is one of the better jurisdictions to be given these funds and their level of support. The support for juniors in the province is unparalleled, and the whole ecosystem is very supportive.”
Rather than aligning with the global trend of slowdown, Québec ramped up its efforts to support companies exploring for the minerals our society is avid for. The latest newcomer to an already packed provincial financial support scene is NQ Investissement Minier. The fund was announced by Minister of Natural Resources Maïté Blanchette Vézina at the XPLOR conference in November 2023 and will have C$17 million in cash to deploy from the Société de développement de la Baie-James and the Administration Régionale Baie-James to assist projects in Northern Québec. The fund aligns with the province’s philosophy, as only mining companies respecting the principles of sustainable development in the Nord-du-Québec administrative region will have access to financing. On the timing of the creation of the fund and its vision, general manager Sylvain Lépine explained: “The need for a new institution became apparent following the big claim rush in Northern Québec in recent years. The SDBJ realized they did not have enough capital to push projects from exploration to production, so they decided to create a new fund. The lithium and nickel rush, along with major firms coming in historical camps like Chibougamau and Matagami, meant it was the perfect timing to create this fund.”
In a country in dire need of investment, Québec's unique financial ecosystem offers hope for its mining industry. By educating new investors and leveraging unique provincial funds, Québec can overcome current challenges, ensuring sustainable growth and capitalizing on rising demand for critical minerals and precious metals.
Article header image by Saptashaw at Adobe Stock