Government rolls out faster permits, tax incentives to spur growth in critical mining

In recent years, Australian companies have heavily invested in Canadian mineral assets, including by acquiring marquee Canadian mining companies. Take Newmont Mining Corporation’s 2019 acquisition of Goldcorp Inc. and the numerous mineral projects operated by Rio Tinto Group in Canada as examples. Recently, there’s been commentary around the lack of investment in mining by Canadian pension funds, which as of the 1990s are no longer required to invest 90% of their assets in Canada. The result is that, according to mining.com, the eight largest pension funds in Canada having only 3% of their holdings in domestic equities, compared to Australia’s superannuation funds, which hold up 21.9% of their asset base in Australian equities. In effect, this means that the investments from these Canadian pension funds are often going to offshore commitments and are consequentially driving investment and development in those jurisdictions, which means that the Canadians (i.e., the future retirees whose earnings fund these pension funds) only stand to benefit from potential profits associated with these investments, instead of simultaneously benefiting from the positioning of Canada’s mining industry to best compete in the coming energy transition that is intended to secure the future generations of Canadians.

Outside of pension funds, we’re seeing lower levels of investment capital available more generally from the Canadian investor base for mining activities, despite government incentives such as CMETC, and so mining companies are looking beyond our shores for solutions to funding gaps. We see this in strategic investments with offshore funds and other entities, as well as through attempts to lure manufacturers to build their production facilities in Canada and utilize critical minerals produced domestically. There’s been limited success in obtaining this type of funding from foreign sources. The Canadian government has become increasingly concerned with ‘friend-shoring’ and limiting investment from certain jurisdictions, such as China, but replacement funding has not yet materialized.

Ultimately, without buy-in or investments by Canadian investors, Canada’s mining industry will be unable to reach its full potential and this will significantly hamper our ability to be a competitive jurisdiction in the sector globally.

Q: What are your concerns/points that you’re addressing with clients in this area?

A: As noted above, accessing investment capital continues to be one of the main issues that our mining clients are dealing with. These days, we’re advising numerous clients in relation to foreign investments since domestic investment capital just isn’t there. For some clients, raising foreign capital comes with its own set of unique challenges, including undertaking complex tax structuring, compliance with securities laws and exchange policies and – the latest obstacle lurking in the shadows – the potential for triggering a national security review. Over the last few years, the relatively robust inbound flow of Chinese capital into the Canadian critical minerals sector has been a life preserver for many struggling TSX-listed mining issuers, but the Canadian government isn’t so sure this is in the best interests of Canada’s national security. In November of 2022, the Canadian government ordered three Chinese-owned entities to divest themselves of their respective holdings in Canadian mining companies due to national security concerns. As a reaction to this, we’re seeing increased caution from both mining issuers and Chinese investors alike, neither of whom wants to find itself being forced to unwind a transaction, possibly at fire sale prices.