A few days ago, the Prospectors and Developers Association of Canada (PDAC) organized its annual Convention, Trade Show & Investors Exchange in Toronto. This event, which has become one of the most relevant around the world for the mining industry, attracted thousands of entrepreneurs, investors, corporations, advisors, government officers and international organizations interested in or related to the mining world. As I had the opportunity to attend, I will share some of my impressions for your analysis.
As we all know, mining is booming around the world. Commodities prices are generally raising again, and the present and future need of minerals is clearer than ever. Since it is a matter of survival, the world is going to exploit more minerals to generate clean energy and reduce oil and gas dependence (I say reduce, since oil and gas will be relevant, at least for decades, in the world energy basket). As one World Bank Extractive Industries Unit officer cleverly mentioned: “There is a way to imagine a world when oil is not burned anymore. However, it is just impossible to conceive a world where minerals are not used for human activities”.
Having spent four days attending conferences and panels, checking information stands and talking to a great number of attendants of PDAC Conference, I have a few important takeaways:
1. Sustainable mining is here to stay
My impression is that a concept that might seem evident, but was not always present in the extractive industries history, which is sustainable mining, is now part of the mindset of any formal mining entrepreneur or developer. Sustainability understood as the execution of a project with respect to regulation, community and environment surrounding the site, doing the best effort to achieve the concept of social license, which comes not from the government authorities but from the stakeholders surrounding the development.
I saw several signs of this trend:
The PDAC organization acknowledged, several times during its speeches, the role and importance of the aboriginal people of Canada, and the importance of sustainable mining. This might sound like a rhetoric statement, however I feel that a change of attitude is the first step that communities need in order to reduce the mistrust existent between the parties involved in extractive industry projects.
The conference included a full track of Aboriginal Program, with several conferences and aimed to provide a “platform for discussion on fostering cooperative, respectful and mutually-beneficial relationships between Aboriginal communities and the minerals industry. This program brings Aboriginal communities and Aboriginal-owned companies together with the industry and other interested parties to share experiences, exchange ideas and network” . Without hesitation, discussing social issues in the same forum and with the same importance than technical and economics topics, brings a sense of how seriously the mining industry is approaching to the matter right not.
International organizations were involved in the conference, supporting key areas for sustainable development. I attended one event organized by the InterAmerican Development Bank with the Canadian Council for the Americas, where topics in mining such as rule of law and gender equality were evaluated. The presence as speaker in such panel of the President of IDB says a lot about the importance for this institution of extractive industries sustainable development. Also, I know that several members from other international organizations had meetings with officers of different countries, offering technical support and collaboration in several areas, going from transparency and environment to artisanal and small-scale mining. In short, these approaches will, ideally, result in collaboration for improved governance, public sector capacity building and better control of mining activities.
Improved governance is key to reach, in the long-term, a real social license, because parties will know that, no matter what, government will be there to enforce the law and other contractual obligations. Thus, there would be no need of protests, reinforced security measures, or other actions that are abundant when government is absent.
Several companies offered sustainability services to miners. From consultancy to actual activities on ground, a good number of companies were offering their services for mining projects. As a firm believer in market powers, I can perceive this as a sign of increased interest from clients in this kind of support. There are experts that have successfully executed projects in several countries, and it is undeniable that such experience can be useful in frontier zones or developing areas.
2. Latin America is in all headlines
Several countries of the region had presence in what is called a “Country Day” at PDAC. It means these countries had a specific room to have conferences for explaining how mining is developed in such jurisdictions, and the advantages to make business there. It is known, from the technical and natural perspectives, that opportunities in Latin America are abundant and mining companies are keen to operate in such areas, having done that successfully and making minerals the first export product in several countries in the region.
Perú, Chile and Brazil are mature mining markets, and are well known by investors. However, those countries put together very organized stands and conferences, where their advantages where clearly exposed. It is evident that the regulatory framework is clearly developed and there is consensus in those nations about the importance of minerals development. That does not mean that there are no social or environmental issues to tackle, as anywhere else.
(Ministry of Mines of Chile with the author).
Colombia, Ecuador and Argentina were doing a strong push for keeping up the investment pace of the previously mentioned countries. They had events and stands, where opportunities were also promoted. There is enthusiasm of investors, that in some cases are waiting for the result of ongoing projects, which are moving forward in these countries. The resources that they have are abundant, and it is likely that resources development is going to increase even more in the next few years.
I have to make a specific note for Ecuador, which committed to initiate the process of adoption of the EITI Standard. This is a step that can only bring good things for the country, in a moment when grand-scale mining is starting to develop in the country. National and international actors recognize the advantages of transparency in the sector.
It is a pity that Venezuela is absent of these discussions. I have to confess that, since Venezuela is out of the investment map for so many years now, my knowledge of the mineral geology of that country was fairly limited. However, the comments made in the Conference made me think that there is an incredible potential in the mining sector in that country, that hopefully can be tapped in the near future.
3. Legal regime and stability matter
PDAC includes a section called “Investors Exchange”, where companies that are exploring for minerals around the world explain their projects and aim of capturing investment for such activities.
The vast majority of the projects presented were based in North America. I’m sure there is a tendency to offer projects that might be more relatable to the local market (Canada and USA), but it is undeniable, from the conversations that I had with several investors, that the legal framework in other areas of the world reduces the attractiveness that a project might have.
We have witnessed discussions about the negative effects that international arbitration and stabilization clauses can have in extractive industries development, principally considering that those institutions provide undeserved protection for foreign investors. I disagree with that approach. This is not the post to develop in detail why I believe that strong and clear stabilization and arbitration clauses are important, but it is evident that investors do not trust in national judicial systems and governments, and that is why they demand some level of certainty. I do not blame them for that, based on facts occurred in the last decades.
Nobody demands arbitration or stabilization from, let’s say, Norway, because they know that even if rules change, national courts will act in a reasonable manner, and also will be free from political influence. When other countries earn such reputation (probably through consistent actions from their governments for decades, as Norway has earned), it will be fairly easy to remove international arbitration and stabilization clauses from contracts. That is what is happening with Uruguay, for example. Prior to that, it seems to me a bit premature.
In conclusion, the need for minerals is there, opportunities are abundant, and it seems that development would move forward considering improved (and improving) standards. Lots of reasons to be optimist in the mining sector in the years ahed.