Canadian securities regulations, local expertise makes Vancouver a junior mining mecca
Pick any mining jurisdiction in the world—Mexico, Chile, the Democratic Republic of Congo (DRC)—and you are likely to find at least one mining or exploration company there that is headquartered in Vancouver.
As of 2022, there were 944 publicly listed mining and mineral exploration and development companies headquartered in B.C., according to the BC Securities Commission (BCSC).
Most of these companies don’t have mines or exploration projects in B.C. or even Canada, for that matter. Some operate in far-flung frontiers—places such as Guatemala, Mali and the DRC, which can be politically risky and even downright dangerous.
Of the top 10 mining companies by market capitalization that are headquartered in Vancouver, only Teck Resources (TSX:TECK.B,NYSE:TECK) owns and operates mines in the province.
Pan American Silver(TSX, Nasdaq:PAAS)—founded by B.C. mine financier Ross Beaty—operates a mine in Timmins, Ontario, but otherwise, its silver and gold mines are located in Mexico, Guatemala, Chile, Peru, Bolivia and Argentina.
B2Gold (TSX:BTO, NYSE:BTG) is developing the Back River gold district in Nunavut, but otherwise operates mines outside of the Americas—in Mali, the Philippines and Namibia.
Billionaire mining magnate Robert Friedland has based a number of his companies in Vancouver, even though he lives in Singapore. Friedland is founder and co-chair of Ivanhoe Mines (TSX:IVN)—a $17 billion company headquartered in Vancouver, with mine operations in the DRC and South Africa.
Turquoise Hill Resources (formerly Ivanhoe Mines), which developed the Oyo Tolgoi copper mine in Mongolia, was also headquartered in Vancouver before it as acquired by Rio Tinto Group (NYSE:RIO) in 2022.
Lukas Lundin, a Swedish-Canadian mining magnate who died in 2022, founded two Vancouver-headquartered companies: Lundin Mining Corp. (TSX:LUN)—which operates mines in Chile, Argentina, Brazil, U.S., Portugal and Sweden—and Lucara Diamond (TSX:LUC), which operates the Karowe diamond mine in Botswana.
Whereas London, England, is the capital for the world’s biggest mining companies, Vancouver is a global capital for junior mining and mid-tier mining, exploration and development companies. The reason for this is that Vancouver developed an eco-system with mining finance and geotechnical expertise that attracts junior miners.
“Vancouver is a centre of excellence, and it’s a concentration of people and talent in geology, finance, all the different aspects of the industry, and people like living in Vancouver,” said Don McInnes, CEO of Broden Mines and founder or co-founder of multiple companies, including Plutonic Power, True Gold Mining, Sun Metals and True North Nickel.
“Silicon Valley is a well-known and acknowledged cluster for high-tech stuff. Calgary and Houston are clusters for the oil and gas industry. And Vancouver just happens to be a very good place for (junior mining) companies to have been domiciled.”
Randy Smallwood, CEO of Wheaton Precious Metals Corp. (TSX:WPM), which finances mine projects through streaming agreements, adds that securities regulations in Canada give Canadian-listed companies a transparency that investors value because it reduces risk, even if those companies happen to operate in places that are inherently risky.
“One of the reasons Canada, as a whole, is an attractive place to be based as a mining company is that we have, I still think, one of the best regulatory environments for the mining industry,” Smallwood said.
After the Bre-X scandal of the late 1990s—which involved a Canadian company “salting” ore samples for a gold project in Indonesia—Canadian securities regulators adopted the 43-101 Standards of Disclosure for Mineral Projects. This requires Canadian-listed companies to provide highly detailed technical reports that identify all risks and opportunities associated with potential mine projects.
“What that does is it creates an environment where investors can be more confident,” Smallwood said. “Canadian listed companies have way better disclosure than any other company or regulatory regime in the world.”
There are also deep roots in Vancouver when it comes to mine financing. The Vancouver Stock Exchange—founded in 1907—always had a heavy focus on mining and mineral exploration. In 1999, it became part of the Toronto Stock Exchange’s venture exchange, which remains heavily weighted with junior mining companies. Forty per cent of the world’s publicly listed mining companies are listed on the TSX or TSX Venture exchange.
McInnes notes that many of the junior miners based in Vancouver may have focused more on British Columbia and Canada prior to the 1990s.
“Pre-1990s, the industry was very domestic by nature,” he said.
He blames the NDP government of the 1990s for chasing exploration companies out of B.C.
“There was a massive exodus from British Columbia to other parts of Canada and—for the first time—the juniors started being adventuresome in financing ideas in different countries,” McInnes said. “The reward of being in some of these countries has been absolutely breathtaking.”
While the payoffs can be huge for companies that venture to geologically rich places such as Mongolia, Burkino Faso or Bolivia, the risks can also be significant.
One recent cautionary tale is the Cobre Panama mine owned by Vancouver’s First Quantum Minerals (TSX:FM). The massive copper mine—reportedly built at a cost of $8 billion—was recently shut down by the Panamanian government after the country’s Supreme Court ruled the mine concessions to be unconstitutional.
In Guatemala, the Escobal mine owned by Pan American Silver has been suspended since 2017 as the country’s government conducts a court-ordered consultation process with Indigenous Peoples. In Mali, three B2Gold workers were murdered last month while travelling by bus under an armed escort.
These are among the risks of doing business. McInnes was vice-chair of True Gold, which built the Karma gold mine in Burkina Faso. Like its northern neighbour, Mali, Burkina Faso is plagued by Islamic militants, including jihadist groups like the Islamic State in the Greater Sahara.
“You do have Boko Haram, who ended up hijacking our site for seven months,” McInnes said. “This was the same kind of issues that B2 (Gold) has had, and many companies have, so security in these companies becomes a huge issue. And you have to think and plan and execute around having a security force, and things like that, which is obviously something you don’t generally think of in Canada,” McInnes said.
Canada is not entirely risk free, either. Exploration companies can point to a number of projects where the government has pulled the rug out from under them. The Windy Craggy project is one glaring example.
Windy Craggy is a copper-cobalt deposit that Smallwood said was on the scale of Oyu Tolgoi in Mongolia. In the 1990s, the NDP government at the time drew a park around it, and made it off limits to mining.
“You don’t want to go into a place where someone changes the rules partway through, and that’s a challenge we’ve had in B.C.,” Smallwood said.
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