Toronto’s Global Reach

May 17, 2024

Image courtesy of Torex Gold

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.”

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. 

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. 

Uranium
Ontario Premier Doug Ford’s government has been enthusiastic about nuclear power, announcing its desire to nearly double production at the Bruce Power plant and conducting feasibility studies to refurbish Toronto’s aging Pickering nuclear plant. Canada’s only uranium refinery is located at Blind River, Ontario, where uranium ore concentrates from Canada and abroad are refined to produce uranium trioxide. Ontario’s refineries need not look far to fuel these future reactors, as Canada is endowed with the fourth largest uranium reserves in the world, after those of Australia, Kazakhstan and Russia. Cognizant of this fact, Latitude Uranium, headquartered in Toronto, has had a busy year investing around C$8 million in 18 drill holes, including at its flagship Angilak project in Nunavut. Latitude Uranium’s CEO, John Jentz, explained why he took the approach of exploring in Nunavut, rather than more established uranium mining destinations like Saskatchewan’s Athabasca basin: “While the Athabasca region offers even higher grades, it is a challenging and costly environment for mining. Angilak falls somewhere in between; it is high-grade, but not quite as high as Athabasca.” 

Saskatchewan’s famous Athabasca basin is already home to the big Canadian uranium producers, Cameco and Orano, who rank among the largest producers of uranium globally, with Cameco’s Cigar Lake mine being responsible for 14% of the world’s total uranium production in 2022, making it the largest-producing uranium mine globally. Baselode Energy, another Toronto headquartered junior, has been exploring the Athabasca basin looking for near-surface, basement-hosted, high-grade uranium deposits, avoiding the sandstone that is prevalent in the Athabasca basin. 

Uranium mining is an integral part of northern Saskatchewan, to such an extent that the provincial government established a small town named ‘Uranium City’ to service the mines in the region. “Canadian uranium mining is different from Saskatchewan uranium mining. Uranium is ingrained in Saskatchewan mining, nothing needs to be re-invented here, everything has been in place since the 1950s,” said James Sykes, Baselode Energy’s president and CEO.

The Uranium spot price has more than doubled in the last three years, and Toronto-based Denison Mines has been working hard to take advantage of the bull market, raising US$55 million in October 2023 to fund the development of its flagship Wheeler River project, the largest undeveloped uranium project in the eastern portion of the Athabasca Basin. After a five-year de-risking process, Denison Mines announced the results of its feasibility study of Wheeler River’s Phoenix deposit in June 2023. “We pivoted to engineering design efforts, focusing on readying for project execution and early procurement. It is an exciting time for Denison Mines, as a final investment decision on Phoenix approaches,” shared David Cates, president and CEO, Denison Mines.

Toronto’s juniors are rushing to take advantage of the renewed interest in uranium and ramp up their activities. Latitude Uranium is no different, having recently announced a merger with ATHA Energy Corp and 92 Energy.  However, the record uranium spot prices come with a caveat; most uranium is frequently traded through long-term contracts directly between producers and utilities and lacks a centralized exchange, unlike many other commodities. 

Purepoint Uranium (Purepoint) will spend the 2024 field season drilling at its flagship Hook Lake JV project with Cameco and Orano, following up on promising results from the 2023 season. Purepoint’s president and CEO, Chris Frostad, is optimistic that spot and contract prices will continue their upward trend but cautions that uranium is quite unlike other commodities: “While it is an exciting time to be in uranium, it is crucial to note that, although the spot price has just surpassed US$100/lb, the long-term price remains significantly below the threshold required to activate new mining projects. To trigger mine development or construction, the long-term contract price needs to sustainably reach and stay above the US$80/lb range.”

Geo-political turmoil, while detrimental for some of Ontario’s juniors, creates opportunities for others. The 2023 Niger coup and the ongoing war in Ukraine have forced buyers away from the usual uranium suppliers like Russia. With the USA struggling to incentivize domestic uranium production, the number of stable uranium jurisdictions is narrowed down even further. “As geopolitical instability persists, there is great potential for Canadian supply to be seen as a premium source,” pointed out Cates. 

With geopolitical factors increasingly jeopardizing uranium supply chains around the world, buyers are unlikely to be able to be as cost sensitive as in the past: “The current concern for utility buyers is not price; it is about securing a stable supply. These dynamics collectively maintain upward momentum and support the buoyancy of uranium prices,” explained Frostad.

With the number of viable suppliers dwindling, and the push for green energy growing stronger, the fundamentals for a uranium bull run seem to all be in place – but uranium is not gold, and it presents its unique challenges for juniors seeking investment. “Marketing uranium projects can be challenging due to fears surrounding nuclear power. Effective communication and community education are key to addressing these concerns,” explained Jentz. 

Across most commodities, it is apparent that the fallout of the Covid pandemic and the current volatile geopolitical situation in many regions is pushing buyers to emphasize stability and safety when deciding where to purchase their minerals. For Toronto-headquartered tungsten producer Almonty Industries, which operates mines from Portugal to South Korea, selecting safe jurisdictions is a core component of their strategy: “When it comes to the jurisdiction of our mines, we place high importance on transparent territories with a strong rule of law. We favor democracies, even though they come with regulations and occasional challenges. Our customers value the transparency democracies offer, and it simplifies the supply audit process,” shared Lewis Black, president and CEO, Almonty Industries. 

Toronto’s miners and prospectors seeking to make their fortunes abroad know a stable jurisdiction when they see one, as their home province is renowned worldwide for its stability and equitability. 

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