Macro themes driving the global mining industry. The Western world has benefited for several decades from the concept of a “peace dividend” but is now subject to intense power competition in a multi-polar world. Significant fragmentation in geopolitics and geoeconomics, along with heightened industrial and technological competition, strategically increases demand for mined materials and critical minerals.
The integral role of extractive industries in Building Canada initiatives. The minerals sector contributes approximately C$120 billion directly to Canada’s gross domestic product, while further supporting an estimated C$47 billion indirectly, which together is 7.2% of the country’s economy. Canada is positioned as a top 15 producer in 21 mined commodities, 16 of which are critical minerals. Mined materials are among the most deeply cyclical commodities in the world, and development has not always been “up and to the right” in Canada for various reasons. We now believe conditions are ripe for secular trend underpinnings that could materially increase Canadian mining output in the years ahead. We also expect potential valuation tailwinds, given the heightened focus on the essential role key mined and processed materials now play in today’s complex world.
Evaluating “Canada has what the world needs.” Canada is the second-largest country in the world geographically, endowed with a multitude of large-scale geological systems. There are approximately 200 producing mines and 6,500 sand, gravel, and stone quarries in the country, along with thousands of exploration leases. Based on our analysis of Natural Resources Canada data, we estimate the mining industry’s quantifiable project inventory pipeline for projects over C$50 million in size to be C$111 billion, split one-third non-critical and two-thirds critical minerals. We see a much more progressive stance from Canada’s federal, provincial, and territorial governments that make it likely projects will advance more rapidly than in the past and new inventory generation is well positioned to increase. Within this report, we provide comprehensive mapping and granular overviews of the pipeline of opportunities.
Thematic investment drivers. We approximate the value of publicly listed Canadian mining assets (i.e., revenue generating assets based in Canada and owned by Canada-domiciled companies) to be ~C$300 billion. While sizable, Canada needs more Canadian-champion businesses of scale to compete globally and, importantly, to be able to capture more of the value chain; we therefore see a consolidation corollary. At the same time, Canada will still require foreign capital to develop its vast resources, and it must be judicious on this front, as it is attractive to various foreign interests. While investors often seek specialization, we sense supportive conditions for greater geological asset mix diversification, given globally competitive and transferable skillsets that can be responsive to geostrategic, industrial, and technological price signals. We also believe Canada is materially underexplored and underdeveloped and that there is a case for increased prospecting activities and strategic infrastructure buildouts.
Case studies drive home that we live in a different world now. Our first case study analyzes the centrality of critical minerals to global power dynamics through U.S.-China trade tensions, the U.S.-Ukraine critical mineral agreement, the United States’ interest in Greenland, and the emergence of G7 and other critical mineral strategies and stockpiling initiatives. Our second case study details the economic realities, strategic benefits, and future potential of Canadian processing interests through the lens of copper. A crucial industrial metal, copper is also an example of a carrier metal that can offer co-product and by-product value-chain benefits, and Canada has many such similar carrier metal opportunities, including nickel, lead, and zinc. Our third case study estimates the amount of iron ore and steel likely required for Canada’s major projects, transformative strategies, and defence initiatives. We expect such demand to be 10% higher on an annual basis over the next decade, foreshadowing how the need for other materials is likely to increase durably.
In search of the right elements. The mining industry and critical minerals comprise a vast landscape, and through our work, we seek to dig into fundamentals to enhance our understanding of the industry’s challenges and opportunities. We have also taken the opportunity to map industrial processes to critical minerals within the periodic table of elements for not only mining operators and developers, but also companies with usage exposures (see Exhibit 1 in full report). We hope such investment research proves helpful to governments, companies, and investors alike as capital from all corners seeks to navigate a complex world.
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