AHK
COMPETENCE CENTRE FOR MINING & MINERAL RESOURCES
CUSTOMIZED MARKET INFORMATION
The Competence Centre for Mining and Mineral Resources serves the purpose of enhancing mutually beneficial business relationships between Canada and Germany.

Therefore, we welcome the opportunity to support you with preliminary market information at no cost. Do you have a specific question about the German or the Canadian market? Do you require information about important industry events or a general overview of the industry and its latest trends?

We provide companies, associations and governmental institutions with relevant market information to enhance transparency and business activity between Canada and Germany

Please contact us for your question or request using the contact form or by writing directly to one of the team members of the Competence Centre for Mining & Mineral Resources.
CANADA

Geographical Landmarks


Canada is a country in North America consisting of 10 provinces and 3 territories. Canada extends from the Atlantic to the Pacific and northward into the Arctic Ocean (see figure 1). At 9.98 million square kilometres in total, Canada is the world's second-largest country by total area, and its common border with the United States is the world's longest land border shared by two countries (8,891 kilometres). The most easterly point of Canada is Cape Spear in Newfoundland and its most westerly point is Mt. St. Elias in the Yukon Territory. The width of Canada is 9,306 km.

Figure 1: Overview Canada (Source: Natural Resources Canada, 2006)



Resource Supplier of World Rank


Canada is one of the leading mining countries in the world producing more than 60 minerals and metals. Canada ranks among the top five countries in the global production of potash, uranium, niobium, cobalt, aluminum, tungsten, platinum, nickel, salt, sulphur, titanium, diamonds, cadmium, and gold with an overall value of nearly $44,7 billion in 2014.

Figure 2: Mineral Production Canada (The Mining Association of Canada, Facts and Figures 2015)

Seven minerals produced in Canada were in the top 3 of global production in 2014. Richly endowed with natural resources, Canada ranks among the top five countries in the global production of 14 major minerals and metals (see figure 2):
  • First in potash
  • Second in uranium and niobium
  • Third in cobalt, aluminum, tungsten and platinum group metals PMG
  • Fourth in nickel, salt, sulphur, and titanium
  • Fifth in diamonds, cadmium and gold


Supplier for Strategic Metals


As one of the leading mining countries worldwide Canada presents great business opportunities and strategic advantages for Germany. For further information on strategic metals produced and explored in Canada please also have a look at our research study on "Opportunities for German Companies in the Canadian Mining Sector" (German).

According to the German Mineral Resources Agency (DERA), Germany aims to secure future supply at reasonable cost for the following commodities with high criticality (supply risk & vulnerability for the German economy): Antimony, Bismuth, Chromium, Cobalt, Gallium, Germanium, Indium, Heavy and Light Rare Earth Metals, Niobium, Palladium, Platinum Group Metals PGM, Rhenium, Silver, Tin, Tantalum and Tungsten.

Canada ranks in the top five producing countries for strategic metals, including cobalt, PGMs (Platinum group metals) and tungsten and could supply these metals to Germany. Lithium, which has seen a recent surge (together with cobalt) due to rising demand in battery manu­factu­ring for electric vehicles, is also being explored and developed in Canada.


Cobalt

Canada is the third largest Cobalt producer worldwide with 7,000t and a 6.3% market share (2014). As of 2014, there are 8 open pit and underground mines in Canada that produce Cobalt (as a by-product). Three of those are in Ontario (Redstone Project, Sudbury Operations, and Lockerby) and two in Manitoba (Manitoba Division, Manigo). Fortune Minerals is advancing a late-stage development project that will also produce cobalt as a by-product.

The main application of Cobalt is the production of high performance alloys or Super alloys. They are not only corrosion and wear-resistant, they also have extremely high temperature stability. These properties make them an essential ingredient in today’s turbine engines and in batteries for electric vehicles. A recent surge in the cobalt market has been attributed to the growing demand for batteries by companies such as Tesla. Certain Cobalt based alloys, like Vitallium (65% Cobalt), are also used in dentistry, prosthetics and joint replacement.


Tungsten (Wolfram)

Canada is the third largest Tungsten producer worldwide with 2,200t and a 2.7% market share (2014). There are currently three mines in Canada that mine Tungsten as their main commodity (Cantung, BC; Mactung, NWT; Sisson, BC). Additionally, Max Moly (Molybdenum Mine, BC) and Yellowknife (Gold mine, BC) mines produce tungsten as a by-product.

Nearly 50% of all produced Tungsten is used in the production of hardmetals. The main constituent is tungsten monocarbide (WC), which has hardness close to diamond.  Tungsten has the highest melting point of all metals and is therefore alloyed with other metals to strengthen them. Hardmetal tools are the workhorses for the shaping of metals, alloys, wood, composites, plastics and ceramics, as well as for the mining and construction industries. Other applications include a widespread variety of chemical uses.


Platinum Group Metals (PGM)

With 24,200Kg production volume and a 6.9% market share (2014), Canada is the third largest producer worldwide. Two of the most common Platinum Group Metals (PGM), Palladium and Platinum, are currently being mined in Canada. PGM’s include Ruthium, Rhodium, Palladium, Osmium, Iridium and Platinum.

Palladium is currently mined at three Canadian locations: Lac des Iles mine, Ontario (primary commodity) and Moshkinabi Mine, Ontario and Shakespeare Mine, Ontario (by-product). Platinum is a by-product of Nickel and Copper mining and is currently produced in Lac Des Iles (ON), MacWatters (ON), Moshkinabi (ON), Dumont (ON) and Sudbury Operations (BC).

The main application (45%) of Platinum and Palladium today is Vehicle emission Control (Catalysts) because it allows the complete combustion of low concentrations of unburned hydrocarbons from the exhaust into carbon dioxide and water vapor. The second Largest (30%) is Jewelry since it is rarer than both gold and silver (only around 10,000t exist in total).


Lithium

Canada is in the top 5 of the world’s Lithium producers and currently has two open pit Lithium mines in Quebec (James Bay and Whabouchi). Additionally, there are several advanced Lithium projects in Quebec (Canada Lithium Corp., Nemaska Lithium, Lithium One / Galaxy Resources, Critical Elements Corp.) and Ontario (Avalon Advanced Materials) being developed as demand is rising mostly due to increased battery production for electric vehicles, one important use of Lithium.

Other important applications of lithium are in the glass and ceramics field and in the production of aluminum. Lithium carbonate is added to glass to make it stronger. Producers of aluminum use lithium carbonate in preparing aluminum metal from aluminum oxide. Another important compound of lithium is lithium stearate. Lithium stearate is added to petroleum to make thick lubricating grease. Lithium greases are used in military, industrial, automotive, aircraft, and marine applications. Lithium stearate is also used as an additive in cosmetics and plastics.


Rare Earth Elements (REE)

Furthermore, Canada has several advanced Rare Earth projects. 11 Canadian REE projects are in an advanced exploration stage, all of which are Canadian owned. Frontrunners among Canadian juniors despite current market conditions and difficulties in obtaining financing are
  • Avalon Rare Metals Inc. (Nechalacho Project)
  • Pele Mountain Resources Inc. (Eco Ridge Project)
  • Quest Rare Minerals Ltd. (Strange Lake Project)
  • Geomega Resources Inc. (Montviel Project)
  • Matamec Explorations Inc. (Zeus-Kipawa Project)
Rare earth metals and alloys that contain them are used in many devices that people use every day such as computer memory, DVDs, rechargeable batteries, cell phones, catalytic converters, magnets, fluorescent lighting and much more.

Several pounds of rare earth compounds are in batteries that power every electric vehicle and hybrid-electric vehicle. As concerns for energy independence, climate change and other issues drive the sale of electric and hybrid vehicles, the demand for batteries made with rare earth compounds will climb even faster.

Rare earths are used as catalysts, phosphors, and polishing compounds. These are used for air pollution control, illuminated screens on electronic devices, and the polishing of optical-quality glass. All of these products are expected to experience rising demand.



Important Mining Clusters


The Canadian Mining Industry forms several clusters around Canada’s major cities depending on the resource concentration within the different Canadian provinces.

With about 1,200 exploration companies, Vancouver is a global centre of expertise in mineral exploration. Companies based in British Columbia conduct exploration work all over the world.

Saskatoon is the focal point for companies in the uranium, salt and potash production. Edmonton gathers the oil and gas industry due to the proximity to the Athabasca oil sands, whereas most iron ore and aluminum firms are located in Montreal. Iron ore production concentrates in the area due to the richness of iron ore in the Labrador belt and major aluminum production facilities are located in Quebec due to low electricity prices. Sudbury is known for its mining supply cluster while Toronto is a global hub for mine financing due to the Toronto Stock Exchange.

Figure 4: Canada's Mining Cities

Other clusters exist based on the geological preconditions and the concentration of certain minerals and metals (see figure 5).

To point out a few, the Northwest Territories is the country’s dominant source of diamonds and also home to Canada’s Cantung tungsten mine. Ontario and Quebec are leading in the country’s production of gold. British Columbia dominates in the production of metallurgical coal and also hosts Canada’s molybdenum deposits. Newfoundland and Labrador and Quebec produce virtually all of Canada’s iron ore. Several provinces have strong copper and nickel production, the Sudbury Basin in Ontario is world famous of its nickel deposits. Important mining locations such as Red Lake (Ontario), Timmins (Ontario) and Val d’Or (Quebec) are considered world class gold camps. Figure 3 below provides a detailed overview of Canadian mining clusters and mineral concentrations. Saskatchewan has one of the world’s largest uranium and potash deposits and hosts all of Canada’s uranium and potash mines.

Figure 5: Mining clusters in Canada detailed (Source: Natural Resources Canada; Compiled by The Mining Association of Canada)



Facts & Figures - Canadian Mining Industry


The Canadian mining industry is a major employer:
  • In 2014, Canada had 1,268 mining establishments consisting of 76 metal mines and 1,188 non-metal mines. Provinces with the most metal mines are Quebec (26), Ontario (19) and British Columbia (9).
  • Canada has one of the largest mining supply sectors globally with more than 3,200 companies supplying engineering, geotechnical, environmental, financial and other services to mining operations.
  • More than 418,000 people across Canada work in the mining and mineral processing industries.
  • Those who work in mining enjoy the highest wages and salaries of all industrial sectors in Canada with an average annual pay of $102,000, surpassing the earnings of workers in finance, manufacturing, construction and forestry.
  • Mining is the largest private sector employer of Aboriginal peoples in Canada on a proportional basis, and employment is poised to increase.
The Canadian mining industry contributes to economic growth:
  • The extractive industry as a whole, including mineral extraction and oil and gas extraction, contributed $115.3 billion, or nearly 7.3%, to Canada’s GDP in 2014.
  • The extractive industry is the fourth largest of Canada’s 18 industries, surpassed only by the services, real estate and manufacturing sectors
  • Mining alone contributed $57 billion to Canada’s Gross Domestic Product (GDP) in 2014.
  • The industry accounted for 18.2% of the value of Canadian goods exports in 2014.
  • Canada’s value of mineral production was nearly $45 billion in 2014.
  • The mining industry’s payments to Canadian federal and provincial governments total $71 billion in taxes and royalties over the last decade (2003-2012).

Figure 6: Facts Canadian resource market (Source: Referring to The Mining Association of Canada - Facts and Figures 2015)



Trends in Mining Development & Exploration Spending


Globally, Canada has been the top destination for mineral exploration investment for 20 of the past 34 years. SNL Metals Economic Group’s Exploration Analysis shows that Canada reaffirmed its leading role in global exploration investment with $1.5 billion in 2014, equalling 14% of the expenditures worldwide (see figure 7).


Figure 7: Worldwide Exploration Spending 2014 (Source: Mining Association of Canada, Facts and Figures 2015)

Furthermore, Canadian companies also have a strong global presence in exploration. More than 800 Canadian companies are actively exploring outside of Canada in over 100 countries. Hence, Canadian firms also account for the largest share of exploration spending not only in Canada, but also in the United States, Central and South America, Europe and, most recently, Africa (SNL Metals Economic Group, Natural Resources Canada).

Looking at more trends in exploration spending within Canada, it stands out that precious metals continue to attract the lion’s share of Canadian exploration spending in 2014, accounting for 42% overall spending. Base metal exploration’s share of total investment remained relatively stable, with a 20% share in 2014. Figure 8 provides an overview of the share of exploration budgets of the most important minerals and metals explored and mined in Canada.

Exploration Spending Trends in Canada 2006-2016

Figure 8: Canadian Exploration Trends, Source: Natural Resources Canada

However, figure 8 also indicates that when looking at mid-term exploration spending trends, across the board expenditures are on a sharp decline. Following the current downturn in commodity markets, overall exploration investment has seen a sharp decrease globally since 2011 (see figure 9). This continued downward trend coincides with a period of declining prices across a broad range of mineral commodities, a persisting dim market outlook, an unfavourable capital market for financing mineral exploration, and, as a result of these circumstances, the adoption of measures by companies to trim costs and focus efforts on core assets.




Exploration Spending Trends in Canada 2011-2015

Figure 9: Exploration Trends, Source: Mining Association of Canada, Facts & Figures 2015

In 2014 alone, Canada experienced a 22% decrease in exploration spending compared to 2013, marking the third year in a row in sharply decreased exploration spending. Figure 8 visualizes this overall trend, indicating that Canadas total exploration spending dropped by nearly 56% between 2011 (CAD $4,227.4 Billion) and 2015 (CAD$1,867.3 Billion). Although the total amounts differ slightly between data sources, looking at exploration expenditures by province over the past two years, the downward trend is also clearly visible.


Canadian Exploration Expenditures by Province 2014-2016


Figure 10: Exploration Expenditure Trends 2014-2016, Source: Natural Resources Canada

Consequently, while precious metals (mainly gold) remains the leading commodity group with shares of total spending of 45% and 46%, respectively, in 2015 and 2016, decreases in dollar terms are notable. Precious-metals expenditures have dropped from a peak of $2.3B in 2011 to $776M in 2015, and are expected to fall to $643M in 2016. As the second-ranked commodity group, the base-metals category fell 21% in 2015 to $330M, with a further drop of 38% to $206M anticipated for 2016. At its 10-year peak in 2012, iron ore accounted for nearly 10% of total expenditures; however, due to oversupply, reduced Chinese demand, and subsequent price retreats, iron ore’s share of total expenditures in 2015 was less than 2% (Natural Resources Canada, March 2016).

Looking at iron ore exploration in Canada over the last decade (2004 to 20014), the sharp decrease in the past year, from CAD$ 111.3M in 2013 to CAD$ 67.2M in 2014, due to tumbling iron ore price, becomes visible. Even though iron ore exploration had seen a dramatic increase between 2004 and 2011 and still, compared to 2004, has increased fivefold from 12.4M to 67.2M $CAD in 2014, compared to a decade ago, the outlook for iron ore is currently more doom than gloom.


Canadian Exploration Expenditures by Province 2014-2016


Figure 11: Trends in Iron Ore Exploration in Canada, Source Facts & Figures 2015, Statistics Canada

Base Metals followed a similar trend. The overall value in exploration spending doubled from CAD$ 241.3M in 2004 to CAD$ 416.8M in 2014. However, the most recent developments show a drastic decrease since 2011 (CAD$ 734.1M) down to CAD$ 206M in 2016.

Canadian Exploration Spending in Base Metals 2009-2016



Figure 12: Trends in Iron Base Metal Exploration in Canada, Source Facts & Figures 2015, Statistics Canada

The impacts on the sector include a significant reduction in the number of active mineral projects (down one-third from the 2011 peak) and a number of projects reporting only minimal expenses related to maintaining mineral claims and leases in good standing and head-office expenditures aimed at keeping the corporate entity alive. This and other statistics from the latest survey underscore the ongoing struggle to conduct work programs that advance projects into later stages of development (Natural Resources Canada, March 2016).

Furthermore, many companies are not able to remain on the market. Whereas the number of companies acting as project operators was 713 in 2014 and 598 in 2015, it is expected to further decrease to 480 in 2016. Since the record high of 911 in 2012, it is projected that 431 project operators will have become dormant, merged, or ceased to exist by 2016. Of this total, junior mining companies are anticipated to account for the vast majority (412) of lost project operators, highlighting the impact of current operating challenges on their ability to remain viable (Natural Resources Canada, March 2016).

This trend is not limited to Canada alone, of course, but reflects a global economic trend or bear market. In a recent global study, SNL Mining & Minerals determined that, based on data from nearly 3,500 companies, worldwide exploration investment in 2014 fell to US$10.74 billion for non-ferrous metals (and US$ 12 billion if iron ore is included). This is a 26% decrease from 2013, and a near 50% drop from the all-time record high of US$20.53 billion in 2012 (MAC, Facts & Figures 2016, SNL Financial).

However, on a more positive note, SNL Metals & Mining published an industry update on April 7, 2016, indicating that some degree of confidence is returning to the sector and the outlook has improved compared to end-2015 reports. The first Quarter of 2016 showed an increase of $ 50B in capital planned for investment into new mines, sustaining capital, and extension projects in just five months (to $ 108B globally). Even more encouraging, initial capital spending on Greenfield projects rose 216% in the first quarter compared to end-2015. The bulk of announced capital spending (60%) shifted to Latin America and copper. During the previous period SNL data showed most money were going to Canada and the US, and towards gold projects which are still a close close second globally with $32.12 billion of announced spending, a 113% jump since November (SNL Mining & Metals, Mining.com).



Trends in Total Capital Expenditures


Another indicator that shows that junior mining companies and Greenfield exploration have taken the hardest hit, whereas money is still spent on mine complex developments and expan­sion projects, is the total capital expenditures. Total Capital expenditure is the total amount of spen­ding for Exploration, Deposit Appraisal and Mine Complex Development. Compared to exploration spending (down 60%), and deposit appraisal (down 47%) mine complex develop­ment is still doing comparatively well (down 34%).

Total Capital Expenditures in Canadian Mining Projects 2012-2014


Figure 13: Total Capital Expenditures in Canada, Facts & Figures 2015

When looking at capital expenditures by Canadian province (see Figure 14) Saskatchewan stands out as the province with the highest capex in 2014. While roughly $ 172M was spent on exploration, Mine Complex Development accounted for the remaining whopping $ 4.19B. Saskatchewan is home to all of the four Canadian uranium mines (producing 22% of global market share) and has recently seen extensive investments into two new potash projects, BHP Billiton’s Janson Mine project ($ 3.7B) and German based K+S’ Legacy Project solution mine ($ 4.1B). Both are still in development, the Legacy mine is currently being commissioned and is expected to start production by the end of 2016. Ontario and Quebec have historically been strong mining provinces in Canada with a large number of existing gold and metal mines. Gold has been doing comparatively well and accounts for a substantial amount of the capex in these provinces.


Figure 14: Total Capital Expenditures for Mineral Resource Development within Canada (Source: The Mining Association of Canada - Facts and Figures 2015)



Canada - Mining with good Governance


Canada is also one of the most attractive mining countries with regards to its governance rating. Governance consists of the traditions and institutions by which authority in a country is exercised and it is rated with the Worldwide Governance Indicators (WGI), which aggregates six governance indicators for 215 economies over the period 1996-2014. The most important mining countries are shown in Figure 15, rated with the WGI. The figure shows that Canada has one of the best overall ratings and stands out especially with regards to political stability (nearly 20 point increase since 2005). Here, Canada ranks first, before Australia, Germany and the USA.


Figure 15: Mining countries with World Bank Group Governance Indicators (WGI) (Data source: World Bank Group, 2015. Worldwide Governance Indicators (WGI))




Canada’s Investment Attractiveness


Aside from the Worldwide Governance Indicators (WGI), the annual ranking of overall investment attractiveness by the Fraser Institute also shows that Canada and Canadian juris­dic­tions are attractive for investment. The Fraser Institute Survey of Mining Companies, 2015 rates 109 jurisdictions around the world based on their attractiveness for minerals and metals and their policy attractiveness. Canadian provinces have historically scored compara­tively high in the global ranking. For example, for the second consecutive year, Saskatchewan ranks as the top jurisdiction in Canada and second worldwide. Quebec ranks second in Canada and 8th world­wide, and is the only other Canadian jurisdiction in the top 10 for overall investment attractive­ness. Yukon ranks 12th in the global ranking, British Columbia and Ontario improved in this year's rankings to 15th (rising eight spots from last year) and 18th (rising 10 spots). Hence, five Canadian provinces are included in the top 20 most attractive jurisdictions worldwide.

The ranking for Canadian jurisdictions according to the Fraser survey is:

  1. Saskatchewan
  2. Quebec
  3. Yukon
  4. Ontario
  5. British Columbia
  6. Manitoba
  7. Nunavut
  8. Newfoundland and Labrador
  9. Alberta
  10. Northwest Territories
  11. New Brunswick
  12. Nova Scotia


Key Issues and Challenges for the Canadian Mining Industry


Recent MAC studies show that there is over $140 billion in potential mining project Investments over the next decade depending on market conditions. This could mean several billions worth of investments in most of Canada’s provinces and territories. While these figures suggest the scale of mining-related employment, supply contracts and tax income, the future of these projects is influenced by the following key issues:

1. State of global mining economy: Like Canada’s economy as a whole, the Canadian mining industry is affected by worldwide economic trends. The profitability of mining companies, for example, correlates with commodity prices, which are cyclical and volatile, driven strongly by supply and demand. They are also affected by overall global economic growth and performance as well as technological developments. Recent concerns with respect to the short-term global economic outlook include the Eurozone contagion, the slowing of Chinese development, and uncertainty over the strength and durability of the US economic recovery. As for commodities, increased supply of certain commodities caused downward pressure on commodity prices resulting in job losses and temporary mine shutdowns. However, despite the challenges, the prevailing view is that the Canadian mining sector remains strong over the medium to longer term. Given the long-term growth projections for China, India and other rising nations, and assuming a positive investment environment, demand for minerals and metals is likely to increase again.

2. Canadian Investment competitiveness: While parts of Canada’s mining tax administration are attractive, recent changes from the 2012 and 2013 government spending plans will make it more costly for organizations to develop projects and expand existing mines. This is especially true for remote and northern regions. Innovation and productivity also affect Canadian competitiveness as the industry is confronted with several challenges in these areas as well. Challenges in finding new deposits, operating deeper mines, increasing energy costs and navigating complex regulatory requirements are all potential obstacles to competitiveness and productivity that need to be addressed in order for Canada to keep its competitive advantages.

3. Canadian regulatory framework: New mines and major expansions must undergo federal reviews and approvals in addition to the review and permitting requirements of their provincial or territorial jurisdiction. Most major mining projects in provinces are subject to the Canadian Environmental Assessment Act (CEAA 2012) as well as parallel provincial assessments. Based on experience to date, there has been a slight increase in the number of federal approvals required for mining projects and a significant change in the processes to obtain those approvals. A recent review of the CEAA registry indicates the number of mining projects requiring review is significantly higher than other industrial sectors. In addition to the uncertainty created by legislative changes, the new government has promised in its platform to review CEAA 2012, the Fisheries Act, and the Navigation Protection Act. The uncertainty and difficult transition that was created by the 2012 legislative changes points to the importance of consultation with affected stakeholders, transition planning, adequate capacity within departments to manage implementation, and consideration of interaction among various federal regulatory requirements and between federal and provincial processes (Facts & Figures 2015).

4. Strategic infrastructure investment: The mining industry is the biggest client of Canada’s transportation sector. The sector is dependent on moving products to market efficiently, at competitive costs and on up-to-date infrastructure like ports, highways and railways. Capital Investment opens up new regions for development by improving the economic viability of a host of ventures. On the other hand, Canada’s ample geography and the considerable cost required to overcome it, can be a hindrance to creating remote and northern mining ventures. A recent study by the Mining Association of Canada (MAC) verified that for base and precious metals, the premium with creating and working a remote and northern mine extents from 2 to 2.5 times the cost contrasted with that of a comparative mine in a southern district. MAC also found that 70% of this cost increase is directly related to infrastructure investment. Mineral investment can help governments and communities accomplish public social and financial goals for these districts and enable the Canadian mining sector to remain competitive.

5. The human resource challenge: As indicated by the Mining Industry Human Resources Council (MiHR), the Canadian mining industry will require 106,000 new workers throughout until 2025. This deficiency is aggravated by the approaching retirement of the business skilled core workforce. In the next decade, MiHR conjectures that more than 51,000 workers will resign from the industry. As Canada’s biggest private sector employer of Aboriginal people on a proportional premise, the industry is in a good position to expand Aboriginal employment if the right training and skills programs are developed and maintained. Most Aboriginal communities are situated inside 200 kilometers of a delivering mine or a development property. Addressing the human resources challenge will take an expansive and facilitated exertion by the industry, educational institutions and all levels of government in the coming years.

6. Sustainability and Social Licence: Obtaining a social license to operate is crucial for the success of a mining project. Internationally, a broad range of sustainability and social licence initiatives affect the Canadian mining industry. For example, companies seeking project financing are required to apply rigorous environmental and social standards set by organizations such as the International Finance Corporation, Export Development Canada (EDC), the World Bank and commercial banks that have adopted the Equator Principles. Firms dealing in dangerous substances abide by the Basel Convention and the International Cyanide Management Code (as well as Canada’s own Transportation of Dangerous Goods Act). Furthermore, practices of many companies are guided by the United Nations Global Compact, the Extractive Industries Transparency Initiative (EITI), the Kimberley Process, ISO 14001 certification and other sustainability programs. Domestically, companies are engaged in a variety of stewardship programs, including the Towards Sustainable Mining (TSM) Initiative, the Mine Environment Neutral Drainage Program (MEND) and the National Orphaned/Abandoned Mines Initiative (NOAMI).



Canada’s Towards Sustainable Mining (TSM) Initiative


In 2004 the Mining Association of Canada (MAC) established their Corporate Social Responsibility (CSR) standard: TSM (Towards Sustainable Mining). Today, TSM has developed into an award-winning performance system that helps mining companies evaluate and manage their environmental and social responsibilities. The adoption of the TSM principles is mandatory for MAC members for all operations inside Canada and can be voluntarily applied to international operations as well. TSM includes a set of tools and indicators that drive performance and ensure key risks are managed responsibly. The program aims to enable mining companies to develop their leadership capabilities to effectively engage with and support local communities, drive world-leading environmental practices and promote safety and health of their employees. The objective then is to meet society’s needs for minerals, metals and energy products in the most socially, economically and ecologically responsible way.



TSM outside of Canada


In November 2015 the Finnish Mining Association (FinnMin) announced, as the first association outside of Canada, that it will adopt the TSM program. The agreement was signed at the Fennoscandian Exploration and Mining Conference (FEM). “TSM has proven its effectiveness in Canada, and we at FinnMin believe it will be a useful tool for Finnish mining companies when the companies develop their sustainability reporting in the future,” comments Markus Ekberg, Chairman of FinnMin. (MAC Press release Nov. 2015)



GERMANY
Main advantages of Germany as a mining location are the reliability and stability of mining regulation, a qualified workforce and skilled engineers, application reliable and innovative technology, excellent infrastructure, stable political conditions, proximity to customers, as well as reliable business relations.


Domestic Raw Materials Production & Raw Materials Imports


A total of about 800 M tons of products are mined in Germany annually. The majority of these materials by volume are sand and gravel, crushed rock and lignite (see figure 1).

Figure 1: Annual Production of Raw Materials in 2014 (Source: VRB)

With 178M tons, lignite mining is predominant in the mining of fuels. The production of hard coal has been declining for several years and is set to end by the year 2018. Germany is therefore focusing on the development of and the investment in renewable energy. Natural gas contributes about 21% (of which 7% are produced in Germany) to national gas consumption and is an important factor in national energy security.
Potash and salt production are significant contributors to German industry in terms of value and represent important export commodities for the international chemical and fertilizer industries (M. Wedig, Mining Report 150, 2014, p. 90-93).

However, figure 1 also indicates that Germany has no domestic metal production. Therefore, Germany is highly dependent on the import of all metals and a range of minerals used by Germany’s large manufacturing sector. Figure 2 shows Germany’s dependence on imports of metals in 2012.

Figure 2: Germany's Dependence on Imports in 2012 (Source BGR 2012)

It is the German manufacturing industry that is so highly dependent on the import of metals and minerals. Critical metals such as Rare Earth, Tungsten, Tantalum, Indium, Germanium, are crucial ingredients in many of today’s high-tech manufacturing processes. The sustained and secure availability of these metals is important to maintain Germany’s technological edge in manufacturing and the need to keep costs from escalating is crucial for the competitiveness of Germany’s industry.

Canada supplies a broad range of metals German industry needs. Hence, Canada offers great potential for increasing the long term resource supply security for Germany’s manufacturing sector.

So far, main imports from Canada by value included Iron ore, Nickel, Copper, Aluminum, Silicon, Coal, Cobalt, Molybdenum, Ferro-Niobium. Canada also accounted for more than 20 % of German imports in Tellurium metal, Selenium metal, Titanium ore and concentrate, as well as Tungsten powder. Figure 3 shows an overview of the German raw materials imports by bulk and value in 2012.

Figure 3: German Raw Materials Imports in 2014 (Source: BGR 2014)



Main commodities mined in Germany


Hard Coal production has a very long tradition in Germany.  Hard coal deposits are predominantly located in the Ruhr area where coal outcrops. The coal-bearing strata descend very quickly and reach a depth of 2,000 m in the area of the city of Münster. Under the North Sea, the coal seams are already 5,000 m deep. The average depth of German mines today is 1,250 m, with the deepest going down to 1,600 m. Exploitation of hard coal is exclusively done through long wall mining. Typical long wall dimensions are more than 300 m in long wall width, and the individual panels achieve lengths of up to 3,000 m. Panel length is often limited by ventilation and air conditioning issues. The seam thickness varies between 1 and 3.5 m and determines the extraction equipment to be used. In thin seams, ploughs are applied whereas in thicker seams shearer loader operation is the rule. Plough operation in particular is fully automated (M. Wedig, Mining Report 150, 2014, p. 90-93).

Lignite mining takes place in four locations within Germany. The largest is the Rhenish mining area where just under 100Mt lignite is mined each year. In the eastern part of Germany is the Lusatian area where about 63.6Mt of lignite is mined annually. In addition, some smaller operations are located in central Germany. In the Lusatian lignite mining area, the deposit is much shallower at only 80 to 100 m and this allows the application of a totally different technology. The rule is to use a bucket-conveyor excavator in combination with the so called overburden conveyor bridge, which is possible only because the distance between the mining and the filling bench is within the range of 60 to 80 m.

Potash is used as fertilizer by the agricultural industry. K+S is the only German producer mining and producing potash products at seven different locations. Production has been stable for a decade and lies at around 3Mt per year. In international comparison, the German producer K+S ranks fifth after the predominant Russian and Canadian producers. K+S is currently developing a Greenfield potash solution mine in Canada called “Legacy Project”.

By numbers, the aggregates, sand and gravel industry is the biggest section of the mining industry in Germany. In contrast to other mining activities a lot of small and medium sized companies are active in this industry section. Hence, the number of gravel and sand mining sites amount to more than 2,200 quarries with a total annually production of nearly 500Mt. The industry has a turnover of 3.2 billion € and employs about 27,000 people. The variety of minerals produced in Germany is tremendous and it covers hard rock like granite, basalt, quartzite, diabase, limestone and dolomite, sandstone, tuff, clay, bentonite, kaolin, feldspar, quartz sand, gypsum, gravel and sand. The following figure 4 gives a summary of the construction minerals sector in Germany.

Figure 4: Summary construction minerals sector - aggregates, sands and gravels (Source: VRB)

Main advantages in the German mining industry are the reliability of mining procedures, the secureness of mineral supplies, the qualified workforce and skilled engineers, the excellent infrastructure, stabile political conditions, the proximity to the customers, sound and inspiring business relations.



German Mining Industry in International Comparison


According to the Austrian world mining data, Germany ranks first worldwide in lignite mining. Germany also ranks fourth in the production of salt and fertilizer products and is one of the leading world exporters in this segment. The international ranking of important minerals produced in German is shown in figure 5.

Figure 5: International Ranking of Germanys Mineral Production (Source: World Mining Data 2015)

However, with a total of 15 billion € per year the value of overall production appears comparatively low. This is due to the fact that the majority of production (by volume) stems from inexpensive gravel and sand production while the more expensive metal products have to be imported.

In 2014, minerals with a total value of 123 billion €, equaling 63% of all minerals consumed by the German manufacturing sector, were imported. Consequently, Germany has an overall negative import-export balance for resources. Figure 6 shows that Germany can only supply limited resources domestically and indicates its strong dependency on imports of metal ores and concentrates.

Figure 6: Germany's Exports and Imports of Raw Materials (Source: BGR 2012)



German Mining Equipment and Technology


Germany is the third largest exporter of mining equipment worldwide after the Unites States of America and China (see figure 7). Through innovation and continued investment in research and development, German equipment and service providers are able to cater to the needs of today’s miners worldwide by providing client- and deposit-specific equipment that is high quality, safe, reliable, and cost-effective.

German expertise in engineering is based on a historical dedication to innovation and an outstanding commitment to research and development. Many German mining supply and engineering companies have histories that date back to the 19th century and are still family-owned, which explains the long tradition of innovation and the deep understanding of the cyclical nature of the industry. A strong focus and a long tradition of R & D resulted in high-precision equipment known around the globe for its endurance and reliability.

R & D expenditures still make up 6.3% of the revenue of manufacturing companies. To ensure future competitiveness and improve mining safety, R& D needs to focus on the following key areas:
  • Improve energy efficiency
  • Improve understanding of rock mechanics
  • Develop automated transport systems (OP and UG)
  • Improve data transmission and control systems

The branch - The biggest exporters worldwide

Mining Equipment Export to VDMA partner Countries in millions of euros €
Figure 7: The biggest exporters of mining equipment worldwide (Source: VDMA)

German mining equipment manufacturers cover all fields of mining technology: open pit, underground, processing, and conveying - at all stages of project development, from exploration to mining and mineral processing.

The mining equipment portfolio of German companies includes: underground mining equipment, crushing, pulverizing and screening machinery, portable drilling rigs and parts, portable crushing, screening, washing, and combination plants, drills, and other machinery and the same for all kind of surface mining equipment.

German mining technology is leading in low total life-cycle costs providing big advantages for the mining industry. German technology is known to increase efficiency, optimize operating costs, and improve safety in underground and surface operations as well as at the mill.

German mining equipment and technology is exported all over the world, with an export quota of over 90%. Over the last decade, the German mining equipment industry tripled its revenues from worldwide sales to 3.57 B€ in 2015.

Figure 8: Export of German Mining Equipment 2015 (Source: VDMA)

Key export markets for German mining equipment are the Mediterranean and Middle East (17% market share), Latin America (11% market share), Saudi Arabia (8% market share), China (8% market share) and USA (7% market share) (see figure 8). At the moment, Latin America is the fastest growing market for German suppliers.



Mining Equipment Export to Canada


Due to current market conditions, the inflow of new orders from Canada is still decreasing. However, exports to Canada have been rising the first Quarter of 2016, albeit from a low base level, totaling CAD$ 7.88Mio. For comparison, during the same period the total exports decreased by 20% to a total of CAD$ 736.68Mio.


Figure 9: German exports to Canada 2007 to 2016

The following graphic shows the most important mining equipment types exported to Canada, comparing 2015 and 2016. It is worth pointing out that exports to Canada are on a positive trend even though exports in general and order inflows are continuing to experience a low, leading to an expected 15% less in total turnover for 2016 for German mining equipment manufacturers.

The outlook is only moderately positive, mostly lead by the slow recovery of some metals and metal prices, such as gold, and the surge of prices in specialty metals such as lithium and cobalt due to increased demand from battery manufacturers. The mid and long term view is, however, positive, according to the German Engineering Federation (VDMA).


Figure 10: German Exports to Canada by type of equipment

The German mining equipment manufacturers are represented by the VDMA. VDMA is the German Engineering Federation, Europe’s largest industry federation with a sole focus on mechanical engineering and with 40 sub-associations for machinery. VDMA represents more than 3,100 European member companies and est. 1,003,000 employees (in Germany). The VDMA sub-association for Mining Equipment has 135 member companies with more than 12,400 employees. The overall production value of these member companies was 3.57 B EUR in 2015 with an export quota of 94%. Please download the Mining Equipment Supplement “Best of Germany” to learn more about German mining equipment suppliers.

Germany also hosts the world's largest and probably most important trade fair for the building & mining industry - bauma. The trade fair bauma, which was established in 1954, presents a comprehensive international product range in the area of construction machinery, construction equipment, vehicles and mining machines. bauma is a hub for international business and an important venue for gathering information and establishing contacts. In 2016 more than 580.000 visitors came to Munich to see the 3423 exhibitors. For more information please visit the bauma website.


BILATERAL TRADE

Trends in Bilateral Trade Relations


Germany is the largest economy in the European Union and the fourth largest in the world. Germany has a strong export orientation. Hence, exports to Canada have seen an increase over the past five years (~50%) while imports from Canada have been rather steady (see figure 1). In 2015, Germany was Canada's eighth-largest export market whereas Germany ranked sixth among Canada's suppliers.

Figure 1: Bilateral Trade Canada - Germany (Source: Statistics Canada 2015)

Looking at the past 15 years, bilateral trade shows an overall growing trend: Canadian imports from Germany have more than tripled, from $3.8 billion in 1990 to $14.97 billion in 2015, while Canadian exports to Germany grew moderately from $2.2 billion in 1990 to $3.9 billion in 2015.

Popular goods imported from Germany included machinery (33%), vehicles, aircraft and transport equipment (28%), chemical products (16%), pharmaceutical products (8%) and data processing technology (6%). Most popular imports from Canada included machines (18%), mineral products (15%), vehicles (7%) and metals (2%) (see figure 2).

Figure 2: Foreign Trade between Canada and Germany in 2015 and basic trade information (Sources: Statistics Canada 2016 (http://www.statcan.gc.ca); World Economic Outlook Database - April 2015, Institutional Investor Credit Country Rating 2016 (100 high, 0 low); Corruption Perceptions Index 2016 - Transparency International (100 high, 0 low); The Mining Association of Canada - Facts & Figures 2015)



Foreign Direct Investment


With estimated assets of $13.5 billion in 2015, Germany ranks 8th in foreign direct investment (FDI) in Canada. Canadian firms, on the other hand, hold $6.6 billion in assets in Germany.

Many multinational German companies are represented in Canada, including Bayer, BASF, Siemens, Daimler, Mannesmann and Thyssen-Krupp. Overall, a total of 1,500 German business representations - or respectively 800 German companies - are spread throughout the country, the majority of which, however, are SME’s (small-medium-sized enterprises). Mississauga in Ontario holds more than 300 German business locations and is therefore called the “German business centre” by locals in Canada.

By the same token, more than 120 Canadian owned companies have holdings in Germany. Notable investors include Rio Tinto Alcan, Research in Motion, CAE Electronics, Bombardier, Pratt and Whitney, Trizec Hahn and Magna.

For further information on investments into Germany, please feel free to contact us or the Germany Trade & Invest (GTAI) agent in Toronto.



Canada - Resources Supplier for Germany


Germany’s resource imports from Canada are shown in figure 3. The figure shows that resource imports from Canada have overall increased in value, especially between 2010 and 2011. This increase, however, reflects mostly raising commodity prices. The volume of resource imports has remained rather steady for more than a decade at around 9 M t.

In 2013, natural resources such as Iron ore, Nickel, Copper, Aluminum, Silicon, Coal, Cobalt, Molybdenum, Ferro-Niobium accounted for 26.3% of all exports from Canada to Germany. Furthermore, Canada accounted for more than 20% of German imports in strategic metals such as Tellurium metal, Selenium metal, Titanium ore and concentrate, as well as Tungsten powder.

This underlines that Canada already represents an important strategic partner for Germany with regards to the supply of natural resources and strategic metals and minerals. The Competence Centre for Mining and Mineral Resources aims to foster this strategic relationship and intensify the trade relations especially in the field of strategic resources.

Figure 3: Germany's Iimports of mineral & energy raw materials from Canada (Source: Statistics Canada, BGR 2014, DERA 2013)



TORONTO STOCK EXCHANGE

Leading Stock Exchange for Mining Finance

The Toronto Stock Exchange (TSX, formerly the TSE) is the largest stock exchange in Canada, the third largest in North America, and the seventh largest in the world by market capitalization. Based in Toronto, it is owned by and operated as a subsidiary of the TMX Group for the trading of senior equities. Toronto is a global hub for mining finance as more mining and oil & gas companies are listed on the Toronto Stock Exchange than on any other stock exchange.

More than 60% of the world’s public mining companies are listed on the Toronto Stock Exchanges TSX and TSX-Venture. The TSX and TSXV handled 53% of the world’s mining equity transactions in 2015, and together raised 47% of the world’s mining equity capital that year (see figure 1). The Toronto Stock Exchange traded almost $148 billion of mining stock in 2015 (TSX.com).

Figure 1: Canada center of mining (source: TMX Group - A Capital Opportunity, 2016, Presentation)


In April 2016, 1,318 mining companies were listed on the TSX and TSX-V with a total estimated value of over $280 billion. 236 mining companies are listed on the TSX (not TSX-V). These companies, together valued at $266.1 billion, raised $3.6 billion in equity capital in 2016.

The remaining 1,082 mining companies listed on the TSX-V. In 2016, they were valued at $13.9 billion, raising $460.7 million in equity capital - just above ten percent of the overall total of equity raised.

TSX-listed mining companies mainly deal in gold, potash, uranium, copper, silver, nickel, iron ore, coal and diamonds. Most of the projects involve exploration, and very few will turn into operating mines. However, the projects listed at the Toronto Stock Exchange cover all project stages in the mineral resources industry (see figure 2).


Figure 2: Overview (Source: TMX Group - A Capital Opportunity, 2015, Presentation)



Figure 3: Overview (Source: TMX Group - A Capital Opportunity, 2016, Presentation)



Global Impact of TSX listed Mining Companies


TSX-listed mining companies have a strong global focus and impact. As of January  2016, the 1,318 TSX mining companies (see figure 1) were involved in 6307 mineral projects worldwide and the equity raised on the TSX financed mining projects on all continents (see figure 4).

Figure 4: Mining Projects (Source: TMX Group - A Capital Opportunity, 2016, Presentation)


To break it down by continent, for example, in 2015, 315 Latin American mining companies listed on the TSX/TSX-V raised $2.2 B for 1169 mining projects in Latin America alone.

Figure  5: Mining in Latin America (Source - A Capital Opportunity, 2016, Presentation)


Furthermore, Canadian-headquartered mining companies accounted for nearly 30% of budgeted worldwide non-ferrous exploration expenditures in 2014, which were spent on projects within Canada and in over 100 countries worldwide (Source: Facts & Figures 2015 Mining Association of Canada).

However, mining exploration companies are currently facing challenges in raising capital. The global mining industry raised only $14.4 billion in 2014 (15bn in 2013, 14.8bn in 2012) in comparison to $65.9 billion in equity in 2009 (together with the other important mining exchanges like the London Stock Exchange LSE, Alternative Australian Securities Exchange AIM, Johannesburg Stock Exchange JSE, Hong Kong Exchange HKEx and the New York Stock Exchange NYSE/NYSE MKT). This decline reflects the challenges of raising capital in the current global economic environment (Source: Facts & Figures 2015 - Mining Association of Canada). Although global economic prospects have improved over the past five years, the road to full recovery in advanced economies is still bumpy. This uncertainty is reflected in the hesitation of banks to finance (often risky) mining exploration projects. Combined with reduced mineral demand and lower commodity prices, this uncertainty affects the availability of capital for the development of mining projects.