In recent years, the mining sector has seen an overall decline
in metal prices, an increase in production and processing costs,
and an ever more limited access to financing. Faced with such
complex challenges, mining companies must now innovate, redefine
their approach and adapt to this new reality.
In the years to come, growth, productivity, access to
alternative funding sources and transparency will be the four major
While there continue to be significant drops in the price of raw
materials, operating costs still remain on the rise. Given the
context, more and more mining companies are deciding to simplify
their mining resource or property portfolios, or to form
partnerships with other mining companies in order to reach a
satisfactory productivity level and insure long-term growth.
In order to grow and maintain their appeal, mining companies
need to bank on new technologies and be innovative. Innovation is
proving to be a necessity in dealing with the depletion of mineral
reserves, the increase of regulatory standards and the rise in
production costs. In the current circumstances, operational
efficiency is also essential to ensure and maintain competitive
cost to production ratio.
Alternatives sources of finance
In order to make up for investors becoming more risk averse,
mining companies must consider new funding sources and models.
Alternative funding sources are critical in allowing junior mining
companies to attract investments. For this reason, private
placements, investment funds, foreign direct investments, and
agreements between mining companies are becoming increasingly
popular. Resorting to companies specialized in streaming deals,
i.e. businesses that purchase all or part of the production at a
reduced price in exchange for exploration funds, has also become an
avenue of choice for funding mining projects.
At the same time, mining companies must also expand their
horizons and consider foreign markets, including the Middle-East
and Asia, as potential funding sources. While China remains a key
market, emerging markets such as South Korea are offering new
Transparency and disclosure
Furthermore, the mining sector is now subject to new regulatory
standards for compliance and transparency. In Canada, the
Extractive Sector Transparency Measures
Act1 (the "Act"), effective since
June 1, 2015, now
requires extractive companies to publicly report any payment
exceeding $100,000 made to a provincial, federal or foreign
government, or to a local community.
Under the Act, these annual reporting requirements apply to
companies listed on a Canadian stock exchange or having a place of
business in Canada if they meet at least two of the three following
conditions: (i) own at least $20 million in assets; (ii) generate
at least $40 million in revenue; (iii) employ an average of at
least 250 workers. The Act applies to all companies involved in
exploration, development, extraction activities or in the
acquisition of mining titles.
For mining companies, these transparency and reporting measures
mean they will need to develop a new awareness with regards to the
information they are now required to share with the public.
The time has come for mining companies to focus their know-how
on promising projects in the short and medium term in order to
attract investors and ensure long term growth. Despite the
challenging state of the industry, mining companies that manage to
integrate new practices and find new financial models will be able
to succeed and thrive in tomorrow's industry.
1 S.C. 2014, c. 39, s. 376
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