report card miningThe Fraser Institute’s Annual Survey of Mining Companies tells the truth nobody wants to hear. If you have to make hard decisions about spending and investing your money, then you will want to read every word they write. 

Typical of the they-got-it-wrong wail from the publicists is this quote from the Association of Mineral Exploration British Columbia: “There’s a huge gap between perception and reality in this year’s Fraser Institute Annual Survey of Mining Companies when it comes to B.C.’s ranking in the report.” True, the Fraser Institute’s rankings are based on the perception of people who have been hit by the reality of what actually happens in a province, state or country when they try to find an ore body or open a mine. But these rankings reflect real wounds inflicted on the bold: the rankings are not the public-relations press releases of the paid apologists. I would recommend thinking hard about what the Fraser Institute writes before investing your cash; therefore, let us take a harder look at their findings.

First, they rank countries by the policy potential index, a big-word way of saying this is a good place to go find an ore body and develop a mine. The top five: Manitoba, Alberta, Nevada, Utah, and South Australia. An interesting change from last year’s top five which were Nevada, Ireland, Manitoba, Utah and Saskatchewan. You hardly need the institute to tell you the worst are Zimbabwe, Venezuela, Bolivia, Mongolia and the Philippines. I see Mongolia has been added to last year’s worst who were Zimbabwe, the Congo, Indonesia, Bolivia and Venezuela. British Columbia ranks way down there, along with notoriously bad-to-mine places like Montana and Zambia—B.C. is not even all that far from California. 

Another way to rank the best places to invest in mines is the composite policy and mineral potential index. The top five are Nevada, Quebec, Western Australia, Alaska and Ontario. Quite a change from last years tops which were Nevada, Western Australia, Quebec, Ontario and Chile. The worst are Ireland, the Philippines, Venezuela, Kazakhstan and Burkino Faso. They all join last year’s bottoms including South Dakota, Bolivia, New Zealand, Wisconsin and (of course) Zimbabwe. 

The list of places with the most “room to improve” their regulations and policies regarding mining goes like this: Montana, California, Alaska, Colorado and then British Columbia. I would have guessed the first three, but Colorado and B.C., shame on them. Obviously their publicity has gotten ahead of their reality. For what is worth, the conclusion is that there is hardly any room to improve in Wyoming and Nevada. 

Because we all like list of the best and the worst, here are some more:

Uncertainty Regarding Native Land Claims - The best are Nevada and New Mexico; worst are the Zimbabwe, South Africa, and Venezuela. British Columbia, which was at the bottom of the pack last year, is now seventh from the bottom—an improvement I suppose, but nothing to brag about. The province is still below the Congo.   

Regulatory Duplication and Inconsistencies - Last year California ranked last, just below Colorado, Montana and Wisconsin, which was pretty much the same rank as for the overall categories for environmental regulations and uncertainty concerning the administration, interpretation and enforcement of existing regulations. This year the bottom rungs are held by—who else?—Zimbabwe, Russia, Mongolia, Venezuela and Bolivia. 

Political Stability - The best are those obvious places in the Untied States where the rule of law and lawyers are supreme. The worst are Venezuela, the Congo and Zimbabwe. With regard to British Columbia, the 2004/5 report noted the manager of an exploration company who is quoted as saying, “British Columbia has a history of severe swings in politics and the ideologies of the political party in power. What a mess!!” This year, it is Mongolia that attacks the most colorful comments, including “Mongolia has a waffling government and theft of mineral tenure and land tenure.” 

Labor Regulations and Employment - This puts South Africa down at the bottom with Russia and our negative friends Zimbabwe and Venezuela. California has moved up—must be the Terminator at work. 

Here is more of the British-Columbia-is-good-to-mining stuff from AME BC:

Over the last five years, the BC government has introduced numerous progressive policies to attract exploration investment and cut red tape all designed to make BC more competitive in the international market. These include: (1) Streamlining regulations while providing a global standard for environmental protection in the minerals sector; (2) Extending the flow-through share tax credit program to 2008, with a commitment to further extend it to 2016; and (3) Introducing a 30 percent mineral exploration tax credit for companies prospecting in forest-dependent communities affected by the Mountain Pine Beetle.

Lest this be too good to be true, the report does admit that that one of the reasons the Fraser Institute researchers may have taken a dim view of B.C.’s investment merits is the length of time required to secure federal approval for new mines, up to 14 separate departments look at each mining project.  Further on BC, let me quote the 2006 report:

Several years ago, the mining policy in British Columbia began to change.  However, this resulted in only slow changes in British Columbia’s position in the survey since it takes time for the mining community to gain trust the improvements will endure.  Two years ago was the first time since the survey’s inception that British Columbia had not scored in the bottom 10 of the PPI, though it remained in the bottom third.  In last year’s survey, British Columbia ranked in the top half and was a couple of positions from the top third.  This year’s report represents the first time since the 2001/2002 survey that British Columbia has not marked an improvement in it score or rank.  Its score at 61 out of 100 is almost identical to last year’s score of 62, though it did decline in the rankings from 23rd to 30th. This makes British Columbia the lowest ranked of the Canadian provinces, though above the Northwest Territories and Nunavut. 

I confess that before reading the Fraser Institute report, I had heard of them only via dinner party discussions in which my Canadian hosts had assured me they are a right-wing think-tank. Maybe, but I liked their self-description from the 2004/5 report:

Where markets work, the Institute’s interest lie in trying to discover prospects for improvement. Where markets do not work, its interests lie in finding the reasons. Where competitive markets have been replaced by government control, the interest of the Institute lies in documenting objectively the nature of the improvement or deterioration resulting from government intervention. 

In the 2006 report they state that their vision is a free and prosperous world where individual benefit from greater choice, competitive markets, and personal responsibility.  They state that their mission is to measure, study, and communicate the impact of competitive markets and government interventions on the welfare of individuals. 

I think they have achieved this in their reports and their surveys prove—to my way of thinking—that the trick lies in the proper balance of government intervention and the responsible exercise of commerce and private enterprise. None of us like government breathing down our necks, but we recognize that freedom entails curtailing lesser instincts, predatory practices and monopolies. In the absence of government control of these all-too-human tendencies, the strong will suppress the weak—and we are all weak in one way or another so we need the strong guiding hand of a mature and responsible democratic government so we can all benefit. Mines, miners, and mining investors are but a subset of the benefactors as this report demonstrates.

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