Is Canada Enjoying a Mining Boom?

Canada's mining sector is currently witnessing a major boom, with an array of precious and base metals reaching record-high prices. Investors worldwide are flocking towards this lucrative opportunity in one of the largest mining economies globally.

Canada's rich deposits of minerals, including gold, copper, silver, iron, and nickel, make it an indispensable player in the global mining market. Combined with its stable geopolitical climate, advanced infrastructure, skilled workforce, and strict regulatory environment, investing in Canada's mining sector is a promising opportunity for global investors.

History of Mining in Canada

Indigenous people in Canada have been mining for thousands of years and using various minerals to make tools, weapons and other artefacts. They were trading copper in the Lake Superior area around 6000 years ago and were mining silver in Cobalt approximately 200 years before the arrival of the Europeans. The Beothuks developed chert beds and utilized the chert to make arrowheads, scrapers, and knives, about 700-1000 before present (BP).

The gold rush of the late 1800s saw the population of British Columbia skyrocket, while mining operations in Yukon and Ontario expanded in the early 1800s when the demand for base metals for use in manufacturing, machinery, and transportation grew. In the early 20th century, nickel and copper deposits were discovered in Sudbury, setting off another wave of growth.

The discovery of rich mineral deposits in Quebec in the 1920s led to an expansion of mining. During the post-World War II years, Canadian mining experienced significant growth. Iron ore was discovered in the Labrador Trough. New mines were also opened in Nunavut and the Northwest Territories during this period.

Exploration and development expenditure

In recent years, the mining industry has witnessed a significant surge in exploration and development expenditure because of increased demand for minerals, particularly rare earth metals. So as the demand and price for minerals go up in the world market, it is natural for the mining sector in a country like Canada to go through a boom phase, as shown in the chart below.

Source: Natural-Resources.Canada.ca

The recent commodity supercycle has pushed mineral prices close to historic highs. The last time prices were at a peak was in 2011, they then declined due to outpacing supply. Prices began to recover in 2016 but declined due to the COVID-19 pandemic. However, prices rose in 2020 again with the commodity supercycle. In 2021 and the first half of 2022, price growth intensified due to inflationary pressures and regional conflicts.

Mining Potential of Canada

Canada produces 60 minerals and metals from almost 200 mines, making it one of the largest mining nations in the world. Consequently, the Toronto Stock Exchange (TSX) and TSX-Venture Exchanges list 50% of the world's public mining companies, raising the most equity capital in the world and hosting over 1,100 mining companies. Making Toronto the mining finance capital of the world.

Source: Natural-Resources.Canada.ca

Canada's mining industry plays a critical role in driving economic growth and job creation, with millions of dollars invested each year. The mining sector accounts for around 719,000 direct and indirect jobs, with workers in the industry earning an average annual total wage of $126,000, double the all-industry average of $63,000.

Source: Natural-Resources.Canada.ca

Today, Canada is a major mining country with a well-established mining industry that spans different commodities such as gold, silver, copper, potash, palladium, uranium, zinc, and diamonds.

Additionally, Canada boasts one of the largest reserves and resources of rare earths, with an estimate of over 15.1 million tonnes of rare earth metal reserves in 2022. With the net zero emission target and the growth expected in the alternative energy industry, rare earth metals are going to be in extremely high demand. With China mulling over a rare earth mining technology ban, the importance of countries like Canada that not only have rare earth reserves but also some of top-notch technology, the potential for profits in the mining sector is very high.

Mining in Canada is also paving the way for global sustainability, having launched its Towards Sustainable Mining (TSM) initiative back in 2004. Other countries have followed suit and are now utilizing TSM's standards to create an environmentally friendly approach toward resources within their borders.

Canada's significant reserve and production of rare earth metals, gold, and graphite has positioned the country as a significant contributor to advanced technologies. Canada's diverse mining landscape and focus on responsible and sustainable practices create opportunities for growth in mining industries, with particular emphasis on the recovery and development of rare earths, graphite and gold. These efforts include the use of technology and data-driven exploration methods to make mining processes more efficient and cost-effective.

Gold rush

In recent years, we have seen a surge in demand for gold, mainly driven by the recent economic uncertainties due to the pandemic. This has led many investors to flock towards safe-haven assets like gold, which has resulted in a significant uptick in gold prices.

According to the Metals Economics Group, which monitors exploration spending, Canada's share of global gold exploration spending has doubled over the past decade. In 2001, Canadian gold exploration projects accounted for about 10% of the roughly $900 million spent, while in 2010, they accounted for 20% of the $5.4 billion spent.

Canada is currently the fourth largest producer of gold globally, with a production output of 7,765k ounces in 2022, which marks an 11% increase compared to 2021. Between 2016 and 2021, gold production from Canada grew at a compound annual growth rate (CAGR) of 4% and is expected to rise at a CAGR of 19% between 2022 and 2026.

According to a feature published by Reuters. During the previous gold rush in Canada, gold was not always extracted completely because the mining companies could not afford to dig deeper. Due to the low price of gold for a long time, they left a lot of ore behind while pulling out the high-grade ones. However, with the skyrocketing price of gold now, it is profitable to extract the remaining gold. Additionally, there is a possibility of finding new gold deposits in the area.

Taken together, these factors suggest that Canada is set to become an even larger player in the global gold market in the years to come. As the price of gold increases, it leads to increased revenues and profits for gold mining companies, which can offer a massive boost to the industry.

Investor Takeaway

In conclusion, Canada's well-established and prosperous mining industry is primed to lead the global resource extraction sector. The current surge in demand for gold represents a significant opportunity for the gold mining sector, potentially leading to the creation of new job opportunities and a promising avenue for economic growth. This presents a compelling opportunity for investors looking to capitalize on the current gold rush.

Investing in equities or ETFs that track the performance of gold mining stocks holds the potential to deliver strong returns. With Canada's significant reserves and global leadership in gold mining, investing in this sector is a calculated move for investors seeking a safe and reliable investment strategy. As such, we invite you to consider investing in Canada's thriving gold mining sector and reap the potential rewards of its continued growth and prosperity.