The Fraser Institute

The Fraser Institute

March 22, 2006 07:00 ET

The Fraser Institute: Media Release; Mining Executives Rate the Investment Climate of Jurisdictions Around the World

TORONTO, ONTARIO--(CCNMatthews - March 22, 2006) - The ninth annual Survey of Mining Companies, released today by The Fraser Institute, holds good news for Canada's western provinces and bad news for the eastern provinces.

In this year's survey, companies responsible for a combined total of US$1.83 billion in international exploration (in 2005)-a third of the global total-rate the policy attractiveness and mineral potential of mining jurisdictions in North America and internationally.

Companies are asked to provide their opinions about the investment attractiveness of 64 jurisdictions around the world, on every continent except Antarctica, including the Canadian provinces and territories, the Australian states, selected US states, and jurisdictions across Europe, Asia, and Africa.

The Canadian Results

For the first time in the survey's history, British Columbia ranks in the top half of policy attractiveness. Until last year, British Columbia had languished in the bottom 10 spots on the ranking and was typically in the bottom five.

The three Atlantic Provinces in the survey-New Brunswick, Newfoundland, and Nova Scotia-all suffered declines in this year's survey, while Alberta is now seen to have the world's second most attractive policy environment.

Both Nova Scotia and Newfoundland lag British Columbia for the first time in the survey's history. New Brunswick remains ahead, though it has been consistently falling while British Columbia has been consistently rising.

"British Columbia may provide an object lesson for the Atlantic provinces," said survey coordinator Fred McMahon. "British Columbia's policy environment began changing for the better several years ago; however this only gradually resulted in better scores. Perceptions are slow to change in the mining industry-mining companies spend a long time pumping money into the ground before they start making money. If miners are going to invest, they need to know that a good policy today will still be in place when they start making their money back. Damage to a province's reputation can take years to repair."

Manitoba, Quebec, Saskatchewan, and Ontario continue to score highly compared to their global competition, while the Northwest Territories and Nunavut are close to the bottom of the rankings. The Yukon has made steady advances over the last three years and now is in the top third of the survey.

Policy Potential Index

The survey queries miners on 12 separate policy areas affecting mining. The Policy Potential index is a composite measure of these areas.

"The Policy Potential Index serves as a report card to governments on how attractive their policies are from the point of view of an exploration manager," said McMahon. "A jurisdiction's policy climate has taken on increased importance in attracting and winning investment in today's globally competitive economy where mining companies may be examining properties located on different continents."

Nevada obtained the highest score on this index, while Zimbabwe received the lowest.

This is the sixth straight year Nevada is rated as having the best mineral policies. The other top 10 policy jurisdictions are Alberta, Manitoba, Chile, Quebec, Mexico, Saskatchewan, Arizona, Ontario, and Utah. For the most part, last year's top 10 jurisdictions were either in this year's top 10 or nearly so.

Zimbabwe continues to set new records for its poor performance. Its last place score of 7.6 last year was the lowest score recorded in the previous four years. This year Zimbabwe's score fell to 2.4, the lowest in the survey's history. Also at the bottom were Papua New Guinea, DRC Congo, Venezuela, the Philippines, Indonesia, Russia, Zambia, Bolivia, and California.

Current Mineral Potential Index

Current Mineral Potential is based on respondents' answer to the question on whether a jurisdiction's mineral potential under the current policy environment encourages or discourages exploration.

Chile, Nevada, Mongolia, Quebec, Mali, South Australia, Ghana, Mexico, Ontario, and Western Australia hold the top 10 slots. All scored strongly last year and most were in last year's top 10.

Not surprisingly, the jurisdictions at the bottom of the list are also consistent with last year's poor performers-and in most cases with poor performers in the Policy Potential Index.

Colorado comes in last and is joined by California, Zimbabwe, Ireland, Wisconsin, Washington, Minnesota, Ecuador, DRC Congo, and Venezuela. These jurisdictions all scored near the bottom last year, with the partial exception of Ireland (39 out of 64 last year), which has generally fallen in this survey from last year's.

Best Practices Mineral Potential Index

From a purely mineral perspective, the most appealing jurisdictions are Nevada, Nunavut, Canada's Northwest Territories, Indonesia, Papua New Guinea, DRC Congo, Ghana, Mali, Peru, and Russia. All scored highly last year, except for Ghana and Mali, which were in the middle of the pack.

The least appealing jurisdictions are Nova Scotia, Alberta, Finland, Ireland, Wisconsin, New Brunswick, New Zealand, Sweden, Tasmania, and Spain. Not surprisingly, there is a large correspondence between these rankings and rankings in previous years.

Room for improvement

The survey also calculates which jurisdictions have room to improve their regulatory environments. Many of the jurisdictions with the greatest room to improve are developing countries where additional investment, and job, wealth, and capital creation are most needed.

These include the Zimbabwe, DRC Congo, Papua New Guinea, Zambia, China, Venezuela, and Peru. Except for China, miners indicated significant security problems with all of these nations, particularly DRC Congo and Zimbabwe. Nearly three-quarters of the respondents indicated they would not consider investment in these two nations due to security concerns.

However, some of worst performers are from the developed world and include Colorado, California, and Montana.

"Mining executives are becoming increasingly willing to invest their exploration dollars around the globe. Attractive geology is necessary, but not enough. Governments who want to maintain viable mining industries in their jurisdictions must enact favourable policies to encourage investment," said McMahon.

Established in 1974, The Fraser Institute is an independent public policy organization with offices in Vancouver, Calgary, and Toronto. The media release and survey (in PDF) are available at www.fraserinstitute.ca.

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