THE MINING AND MINING EQUIPMENT INDUSTRY CANADA Fact Pack

Swedish Trade Council in Canada 2006

1

CONTENT

●

Overview Canadian mining industry

●

Canadian mining industry

●

New projects in the mining industry

●

Mining equipment industry in Canada

●

Recommendations

●

References

2

CANADA’S MINERAL INDUSTRY IS RANKED AMONG THE TOP 5 GLOBAL PRODUCERS FOR MORE THAN 10 MAJOR MINERALS/METALS 5 largest mining companies in Canada Cameco Corp.

●

There are 859 mines in Canada 2005

Barrick Gold Corp

●

In total 58 different minerals are produced

●

The largest contributors to the economy are Nickel, Potash and Copper

Tech Cominco Ltd Inco Ltd Falconbridge Ltd. 0

2

4

Source: Natural Resources Canada, Mining Association of Canada

6

8

10

Turnover Billion USD 2005

3

CONTENT ●

Overview Canadian mining industry

●

Canadian mining industry •

Brief History

•

Structure of the industry and mining laws

•

Overview mining resources and production

•

Mining companies

●

New projects in the mining industry in Canada

●

Mining equipment industry

●

Recommendations

●

References 4

CANADA HAS A LONG MINING TRADITION Canada has been a mining country for more than 150 years • Prior to the 1870's nearly all mineral deposits in Canada were found accidentally by individuals. The discovery of gold in British Columbia in 1859 and gold in Nova Scotia in 1860, led to more systematic gold and base metal prospecting in British Columbia, the Yukon Territory and Nova Scotia. •

New deposits were found as exploration efforts spread across the country: Nickel in Sudbury (1883), lead-zinc at Sullivan, B.C. in 1893, silver at Cobalt (1903), gold in Timmins in 1909 and Kirkland Lake in 1911, and base metals at Noranda in 1920.

•

The Canadian Institute of Mining was founded in 1898 (since 1990 re-named Canadian Institute of Mining, Metallurgy and Petroleum)

Technological developments made it possible to cover large areas quickly • The development of the airborne magnetometer and the invention and refinement of ground and airborne electromagnetic systems for the detection of conductive ore bodies in the 1950s led to the discovery of numerous base metal deposits such as the Thompson nickel deposits and the Kidd Creek copper-zinc-silver deposit near Timmins in 1963. •

Today Canada is the world’s largest exporter of minerals and metals, but it did not become a major producer until more recently (silver 1900s, lead 1920s, gold, nickel and platinum 1930s, uranium 1950s and copper and zinc 1960s).

5 Source: A history of mining and mineral exploration in Canada and Outlook for the future (Natural Resources Canada)

STRUCTURE OF CANADA’S MINING INDUSTRY - Government authority and provincial inspectorates The Minister of Natural Resources Canada (NRCan)

NRCan is a department of the federal government of Canada. It has jurisdiction over offshore resources, trade and commerce in natural resources, over statistics, international relations, and boundaries.

The Minerals and Metals Sector (MMS)

MMS is the federal government's primary source of scientific and technological knowledge and policy advice on Canada's mineral and metal resources and on explosives regulation and technology.

Indian and Northern Affairs Canada In the Northwest Territories, Yukon and Nunavut, the Government of Canada, INAC is responsible (INAC) for the administration of Crown lands, including mineral properties.

Canadian Nuclear Safety Commission (CNSC)

Source: Natural Resources Canada’s website http://www.nrcan.gc.ca

6

CNSC is the regulatory authority of the production, refinement or treatment of uranium and other substances stated in the Atomic Energy Control Act

STRUCTURE OF CANADA’S MINING INDUSTRY - Mining regulations generally falls under Provincial Government •

Under the Canadian constitution, the power to regulate mineral exploration, development, conservation, and management is generally one of exclusive provincial, not federal, jurisdiction.

•

The Provincial/territorial goverments regulating mining activities and collecting Mining Royalties are: 1. Ministry of Energy (Alberta) 2. Ministry of Energy and Mines (British Columbia) 3. Manitoba Industry, Economic Development and Mines (Manitoba) 4. Department of Natural Resources – Minerals (New Brunswick) 5. Mines and Energy (Newfoundland and Labrador) 6. Resources, Wildlife and Economic Development – Minerals and Resources (Northwest Territories) 7. Department of Natural Resources – Mineral Resource Branch (Nova Scotia) 8. Ministry of Northern Development and Mines (Ontario) 9. Ministère des Rerssources naturelles, Faune et Parcs – Mines (Quebec) 10. Key Economic Sectors and Minerals and Saskatchewan's Mineral Resources (Saskatchewan)

Source: Natural Resources Canada’s website http://www.nrcan.gc.ca/

7

STRUCTURE OF CANADA’S MINING INDUSTRY - Influential organisations and industry associations Canadian Institute of Mining, Metallurgy and Petroleum

Prospectors and Developers Association of Canada (PDAC)

The Institute is the leading technical society for professionals in Canada's minerals and materials industries. Some 12,000 members belong to the various societies, divisions and branches that form the CIM.

Exists to protect and promote the interests of the Canadian mineral exploration sector and to ensure a robust mining industry in Canada.

Canadian Association of Mining Equipment and Services for Export (CAMESE)

Mining Association of Canada (MAC)

The national voice for Canada's mining equipment and service exporters.

Source: A Chronology of Minerals Development in Canada

MAC is the national association of the Canadian mining industry representing 24 member companies engaged in mineral exploration, mining, smelting and refining. MAC promotes, through the collective action of members, the growth and development of Canada's mining and mineralprocessing industry. 8

FEDERAL ACTS AND POLICIES

Year

„

The Constitution Act, 1867 As per the Canadian Constitution, the regulation of mining activities on publicly owned mineral leases falls under provincial/territorial government jurisdiction.

„

The Atomic Energy Control Act, 1946, (Act No. 27 of 1956) Section 9 Declares that the production, refinement and treatment of uranium and related substances are subject to the regulatory authority of the federal Canadian Nuclear Safety Commission (CNSC).

„

Fisheries Act ( R.S., 1985, c. F-14 ) and Canada Water Act ( R.S., 1985, c. C-11 ) Where mining impact on fish habitat is unavoidable, a Fisheries Act Authorization will be required.

1985

„

Canadian Environmental Assessment Act (1992, c. 37) Mining projects are screened from an environmental standpoint by the Federal Environmental Assessment Index (in 2003 replaced by Canadian Environmental Assessment Agency) before production begins.

1992

„

The Minerals and Metals Policy of the Government of Canada – Partnership for sustainable development, 1996 Describes, within areas of federal jurisdiction, the Government's role, objectives and strategies for the sustainable development of Canada's mineral and metal resources on core federal responsibilities. The Policy document deals with issues such as international trade and investment, science and technology, environmental protection, and Aboriginal affairs.

Source: Natural Resources Canada’s website www.nrcan.gc.ca and www.infomine.com

9

1867

1946

1996

FEDERAL ACTS AND POLICIES

Year

„

Income Tax Act, Investment Tax Credit for Exploration (ITCE), 20001 2000 Investment Tax Credit for Exploration (ITCE) is an amendment to the Income Tax Act designed by the to assist junior mining companies in raising new equity through the issuance of flow-through shares. This additional financing helps exploration companies to maintain, or increase, their level of exploration activities in Canada. With this measure the federal authorities aims to stimulate investment in mineral exploration throughout Canada.

„

National Instrument 43-101 (NI 43-101) All disclosures on mineral projects must be based on the work of a qualified person (QP). The QP is responsible for scientific and technical matters. This includes exploration, development, definitions of resources and reserves, mining matters, quality-control standards for analytical laboratories, the form of technical reports, professional supervision, corporate governance practices, regulatory oversight of the mining industry, and enforcement of securities laws..

2001

The Instrument was developed by Canadian Securities Administrator and is administered by the provincial securities commissions. „

Amendments to the Canadian Environmental Assessment Act, 2003 The result of one of the amendments is the creation of the Canadian Environmental Assessment Registry (CEAR) a web-based registry showing information about all ongoing environmental assessments, and listing documents relevant to those assessments.

Source: Natural Resources Canada’s website www.nrcan.gc.ca and www.infomine.com

10

1Extended until the end of March 2007

2003

PROVINCIAL ACTS AND POLICIES „

Thirteen different Mining Acts across Canada There is separate mining rights legislation for each of the thirteen Canadian jurisdictions (except for Nunavut). In each province, the legislature may exclusively make laws in relation to: a. exploration for non-renewable natural resources in the province; b. development, conservation and management of non-renewable natural resources in the province, including laws in relation to the rate of primary production there from. c. there is also general provincial legislation for environmental, workplace safety, and labour purposes that has an impact on mining activities.

„

…but to name and content the provincial laws are similar Provincial jurisdiction usually contains a1 : a. Mines Act b. Mineral Tax Act c. Mineral Land Tax Act d. Mineral Tenure e. Workplace Safety and Health Act

Source: Natural Resources Canada’s website www.nrcan.gc.caand, www.infomine.com and “Getting the deal through” by McMillan Binch Mendelsohn

1

11

For more information on provincial legislations please visit www.nrcan.gc.ca/mms/busi-entre/ptar_e.htm

PROVINCIAL ACTS AND POLICIES

1

„

…however, there are some differences between the provincial acts ‰ Red tape In some provinces/territories individuals and companies must obtain a prospector’s license before engaging in exploration. In others this is not needed, instead the company must have a license to actually acquire mineral rights, or ”stake claims” to protect what one has discovered in the provinces/territories. ‰ Tax incentives British Colombia, Saskatchewan, Manitoba and Ontario offers tax incentives for exploration in addition to the federal Investment Tax Credit for Exploration (ITCE).

„

There is an ambition to streamline regulations and mining tax regime across jurisdictions ‰ Mines Ministers' Conference (MMC) – is a yearly conference and a joint initiative between federal-provincial-territorial ministers to review and streamline mining regulations across all jurisdictions. ‰ The overall mining tax regime (both federal and provincial) is undergoing a reform, which will be completed by the end of 2007.

For more information on provincial legislations please visit www.nrcan.gc.ca/mms/busi-entre/ptar_e.htm 12 Source: Natural Resources Canada’s website www.nrcan.gc.caand, www.infomine.com and “Getting the deal through” by McMillan Binch Mendelsohn

CANADA’S ROLE IN WORLD MINERAL RESERVES AND PRODUCTION, 2004 Canada's percentage of Worlds Minerals Reserves and Production

60 50

World Reserves World Production

40 30 20 10 0 Potash

Sulfur

Nickel

Cobalt

Gold

Coppar

Canada is the world’s leading mining country and among the world’s largest producers of minerals and metals. Source: Mining Association Canada

13

MINING AND MINERAL PROCESSING REPRESENTS 4% OF CANADA’S TOTAL GDP

Sector contribution of the Country's total GDP, 2004 Other Agriculture

„

Canada is one of the world’s leading mining countries and one of the largest producers of minerals and metals. The mining industry is an important contributor to Canada’s economy.

„

The industry’s $42 billion contribution to Canada’s GDP includes $10 billion in mining extraction and $32 billion in mineral processing and manufacturing.

Mining and quarrying

Services Manufacturing Construction Finance Transport

Wholesale, retail trade

Mining is an important contributor to the economy Source: Euromonitor, Mining Association of Canada, 2006

14

WHILE TOTAL OUTPUT HAS GROWN EMPLOYMENT IN THE CANADIAN MINING SECTORS HAS DECREASED BY 2% PER YEAR Employment per mining sector Gold and silver ore Other Minerals

14% 31%

12% 10%

Iron ore mining

8%

8%

8%

Nickel and copper ore Coal

45 900 persons are employed in the mining sector. Four provinces, Quebec, Ontario, Saskatchewan and British Columbia employ 74% of the total mining workforce. The number of employees has decreased despite strong demand and new mine openings in every mining sector. This is mostly due to productivity gains.

9%

Sand and gravel Potash Copper and zink ore

In diamonds, the number of employed has more than has doubled from 400 to 1000 between 2000 and 2004.

Gold and silver industry is the largest employer and the nickel and copper is number two. Coal is number three in terms of number of persons employed. Source: General Review of Mineral Industries, 2004

15

43 OF CANADA’S 66 OPERATING METAL/MINERAL MINES ARE UNDERGROUND MINES Percentage of open pit and underground mines, 2006

Combination 3%

•Out of Canadas 859 mines there are about 66 operating mines for metals/minerals that are of major importance.

Open Pit 32%

•The majority of mines in Canada are underground mines. Underground 65%

Source: Raw Materials Group, 2006

16

CANADA`S MAIN MINING SEGMENT (VALUE) IS NON FERROUS MINERALS -Main non ferrous minerals are: Nickel and Copper Total Production Value: 17,1 billion USD Non Ferrous and Ferrous Minerals

Energy Minerals & Diamonds

Production value: 10,91 billion UDS / year

Production value: 6,16 billion USD / year

Diamonds

Nickel

Potash

Copper

Gold

Coal

Prod.Value 2,7 billion USD/year

Prod.Value 2,3 billion USD/year

Prod.Value 2,03 billion USD/year

Prod.Value 2,2 billion USD/year

Prod.Value 4,78 billion USD/year

Prod.Value 1,38 billion USD/year

Capacity

Capacity

Capacity

Capacity

Capacity

174 kton/year

10,5 Mton/year

571 kton/year

119 ton/year

65,3 Mton/year

Capacity 12,3 million carat/year

Coal and Potash have the largest production volume in Canada Source: Raw Materials Group 2005, USGS 2004

17

1 Also including other minerals

CURRENT MAJOR MINING HOT-SPOTS IN CANADA Saskatchewan Quebec

Resources • •

British Colombia

•

Uranium Potash Salt

Resources • •

Resources • • • • • • •

•

Aluminium Copper Molybdenum Gold Lead Zinc Coal

• • • •

Iron Copper Zinc Gold Aluminium Niobium Titanium

Ontario Resources • •

Alberta

•

Resources

•

•

Coal

•

•

Nickel Zinc Copper Gold Lead Chrysotile

Ontario, British Columbia, Saskatchewan and Quebec represent 75% of Canadian mineral production 18 Source: Information bulletin exploration, March 2006 (Natural Resources Canada) and The Canadian Encyclopaedia

MAJOR MINES IN CANADA

Mining project (Company)

5 6 3

4 7

1 2

Minerals

Production capacity

1. Brunswick (Falconbridge /Xstrata)

Zinc, lead and silver

341,600 tons /year

2. Kidd Creek (Falconbridge /Xstrata)

Copper, zinc, silver

163,000 tons / year

3. Highland Valley Copper (Teck Cominco)

Copper

179,000 tons per /year Largest copper miner in Canada.

4. Red Lake (Goldcorp)

Gold

16-20 tons/year Largest goldmine in Canada.

5. McArthur River (Cameco Corp.)

Uranium

8.5 tons/year It is the world's largest highgrade uranium deposit.

6. Fording River Mine (Elk Valley Coal)1

Metallurgical Coal

10.5 million tons/year

7. K1 and K2 mines at Esterhazy (The Mosaic Company and Potash Corporation)

Potash

8.38 million tons/year

Canada is number one in the world of producing potash and uranium Source: Information bulletin exploration, March 2006 (Natural Resources Canada) and The Canadian Encyclopaedia and Elk Valley Coal

19

1 Owned by two of Canada's biggest names in mining: Fording Canadian Coal Trust (60%) and Teck Cominco Limited (40%).

CANADA REMAINS THE CENTRE OF SOME OF THE LARGEST MINING COMPANIES IN THE WORLD A number of major international mining companies originate from Canada: ● Xstrata/Falconbridge is one of the world’s leading producers of copper and nickel, with investments in zinc and aluminum. Falconbridge was acquired by the Swiss mining giant Xstrata in 2006. ● CVRD/Inco Limited is the world's second largest producer of nickel with operations in 40 countries. In October 2006 Brazilian Companhia Vale do Rio Doce (CVRD), a world leader in iron ore, acquired all of the outstanding common shares of Inco. ● Potash Corporation of Saskatchewan is the world's largest fertilizer enterprise, by capacity, producing the three primary plant nutrients potash, phosphate and nitrogen. Potash Corporation has corporate offices in Saskatoon, Saskatchewan, and Northbrook, Illinois. ● Teck Cominco is a diversified mining company with headquarters is in Vancouver, British Columbia. The company is a world leader in the production of zinc and metallurgical coal and is also a significant producer of copper, gold and specialty metals. ● Barrick Gold Corporation is a leading international gold mining company, with a portfolio of 27 operating mines and seven advanced exploration and development projects located across five continents. The two largest Canadian mining companies have been bought by foreign companies in 2006. 20 Source: Annual Reports 2005 for Falconbridge, Inco Ltd, Potash Corp, Teck Cominco and Barrick Gold Corp.

THE TWO LARGEST COMPANIES IN TERMS OF TURNOVER ARE ACTIVE IN NICKEL MINING Major Mines

Minerals

Production capacity tonnes / year

• Brunswick Mine • Kidd Creek • Sudbury Operations

341 163 43

• Sudbury Operations • Birchtree, Thompson • Voisey’s Bay1

• Zink, lead, silver • Copper • Nickel, Copper and cobalt

tonnes / year

• Nickel • Nickel • Nickel

98 49 50 million tonnes / year

• Lanigan • Rocanville • Allan

1.9

3.8 • Potash • Potash 3.0 • Potash

PotashCorp is the world’s largest producer of potash with a production capacity in 2005 of nearly 13 million tons . Source: Annual reports for 2005 and www.infomine.com,

21

1

Estimated capacity in 2006, source www.infomine.com

CONTENT

●

Overview Canadian mining industry

●

Canadian mining industry

●

New projects in the mining industry

●

Mining equipment industry in Canada

●

Recommendations

●

References

22

STEADY INCREASE OF CANADA’S MINERALPRODUCTION AND EXPORT Canada’s production and export of minerals Million USD

„

30,000

25,000

Development the last 5 years

Production Export

20,000

„

„ „

15,000 10,000

„

5,000

„

0

2001 2002 2003 2004 2005 Source: Mining Association of Canada, Comtrade HS 2002,Information Bulletin March 2006 Mineral Production, 23 and The Mineral industry of Canada, by Alfredo C. Gurmendi.

High mineral prices have increased overall mining activity in Canada since 2002. In 2005, Canadian mineral production1 was valued at $26.4 billion, representing a 35 % increase from 2001. 92% of Canada’s mineral production is exported. The federal government has introduced a tax credit for exploration activities to off-set a decline in reserves. In recent years new deposit discoveries have been made e.g. the Voisey’s Bay copper-nickel project, PGM2-rich deposits at Sudbury, and the Diavik, the Jericho, and the Snap Lake diamond projects. A number of foreign mining firms has invested in Canada such as BHP Billiton Group and De Beers Group. 1 i.e. the production of metals, non-metals and coal. 2 i.e. platinum group metals

MINING INDUSTRY TRENDS 2004-2006 AND FORWARD „

In 2005, Canada ranked first in the global production of potash and uranium, second in nickel and magnesium, and third in titanium, aluminium, cobalt and platinum-group metals.

„

In 2005, total expenditures reached $1.3 billion, up 10% from $1.2 billion in 2004. A further increase of 9% to $1.4 billion is expected for 2006. Total expenditure have nearly tripled since 2000.

„

Canada was the leading destination for exploration in 2005, receiving 19% of world spending, followed by Australia at 13% and the United States at 8%.

Source: USGS, Mining Journal 2005

24

FUTURE MAJOR MINING HOT-SPOTS IN CANADA Nunavut and Northwest Territories Resources •

Iron

•

Diamonds

British Columbia

Nova Scotia

Resources

Resources

• • •

Coal Copper Gold

•

Saskatchewan Resources • • •

Uranium Diamond Potash

Coal

Ontario Resources • • •

Copper Gold Platinum

More than 80% of exploration expenditures in 2004 was spent in Ontario, Quebec, Nunavut, Saskatchewan and British Columbia. 25 Source: Overview of trends in Canadian mineral exploration 2005, Globe and Mail Sept 7 2006 and www.nrcan.gc.ca

NEW AND UPCOMING PROJECTS IN 2006-2010 „ „ „ „ „ „ „ „

Nickel Rim South in Sudbury, Ontario. Owned by Falconbridge/ Xstrata, production planned to begin in 2009. Cigar Lake Mine. Owned by AREVA, Cameco Corporation (operator and 50.025% owner), Idemitsu, TEPCO Resources. Mining of uranium is planned to begin in 2007-2008. Fort-a-la Corne. Owned by Shore Gold and De Beers Canada, mining of diamonds is planned to begin 20082010. The Midwest project. Owned by CRI, Denison Mines Ltd and OURD Co. Ltd. Mining of uranium is planned to begin in 2010. Kemess North mine. Owned by Northgate Minerals Corp. Mining of gold is planned to begin in 2007-2008. Red Chris copper-gold mine. Owned by bcMetals Corp of Vancouver. Mining is planned to begin in 20062007. Horizon mine. Owned by Hillsborough Resources Ltd, this new coal mining project has been submitted to the government for environmental assessment. Donkin mine Owned by Xstrata, mining of coal is planned to begin in 2006-2007.

Total investment including capital expenditures have increased from 4.78 billion USD in 2004 to a projected 5.12 billion USD in 2006. 1

2006 is calculated as 4,719,738 CAD Total Mineral Resource Development Investments + the average cost for Repair and maintenance for 2004 and 2005 (1,700,202 CAD +1,258,666 CAD)/2 The recalculated into USD by dividing by 1.21 26 Source: Overview of trends in Canadian mineral exploration 2005 and Canadian Mineral Yearbook 2005

CONTENT ●

Overview Canadian mining industry

●

Canadian mining industry

●

New projects in the mining industry

●

Mining equipment industry in Canadian • • • •

International mining equipment companies Local mining equipment companies Procurement process General country conditions affecting the mining industry

●

Recommendations

●

References 27

THERE ARE MORE THAN 2 400 SUPPLIERS OF MINING EQUIPMENT GOODS AND SERVICES IN CANADA 1

International Equipment suppliers* •

There are approximately 1,800 international equipment suppliers for the mining industry present in Canada.

•

Most of the international companies are present on the market with their own subsidiaries or represented by a local distributor.

•

Strong segments are drilling, bulk, power and environmental equipment.

•

The international suppliers are mostly originated from USA, Sweden, Germany, Australia and UK.

Local mining Equipment suppliers •

Canadian companies are involved in thousands of mineral projects around the globe. This amount of activity is creating opportunities for the sale of a wide range of goods and services of Canadian origin.

•

There are approximately 600 domestic suppliers of mining equipment and services.

•

Canadian suppliers appear to have considerable depth in products related to underground mining, the environment, exploration (e.g. airborne geophysical equipment and related software developers), feasibility studies, mineral processing and mine automation.

•

The majority of the companies are located in Toronto, Montreal, Edmonton and Vancouver.

*The company was founded outside of Canada and the headquarter is located outside of Canada Source: The Mining Association of Canada (www.mining.ca) and “Canadian Suppliers of Mining Goods 1 With more than half of these suppliers depending on the mining industry for at least 28 and Services” report by Natural Resources Canada. 50% of their revenues.

INTERNATIONAL MINING EQUIPMENT SUPPLIERS IN CANADA Strong segments are drilling, bulk, power and environmental equipment.

MINING MINING EQUIPMENT EQUIPMENT SUPPLIERS SUPPLIERS

Exploration Exploration Mapping, Geological and Geotechnical Surveys, Borehole Drilling. ‰ Atlas Copco CMT ‰ Boart Longyear ‰ Micromine ‰ Phonex Geophysics

Bulk Bulk Material Material Handling Handling Conveyors, Crushers, Winches, Vehicles; Weighing and Measuring ‰ Hitachi ‰ Integrated Visual Data Technology ‰ LeTourneau ‰ Mettler Toledo ‰ Pullmaster Winch ‰ Rocklabs ‰ Siemens Milltronics Process Instruments

Surface Surface Mining Mining Drilling, Electrical and Hydraulic equipment, Shovel buckets ‰ 3M Mining ‰ ABB ‰ Atlas Copco Thiessen ‰ S&C Electric ‰ Thyssen Schachtbau

Source: Canadian Association of Mining Equipment and services for Export, www.camese.org

29

Underground Underground Mining Mining Blasting, Drilling, Electrical and Hydraulic equip., Communication ‰ Atlas Copco ‰ Breaker Technology/ Astec Industries ‰ Dyno Nobel ‰ Flexit ‰ ITT Flygt ‰ Mine Site Technologies ‰ Sandvik

Health Health && Safety Safety Ventilation, Dust control, Waste Management, Safety equipment ‰ 3M Mining ‰ GIW Industries ‰ Mine Site Technologies ‰ Schauenburg Industries

LOCAL MINING EQUIPMENT SUPPLIERS IN CANADA - Traditionally strong segments are products related to underground mining, the environment, exploration, feasibility studies, mineral processing and mine automation. MINING MINING EQUIPMENT EQUIPMENT SUPPLIERS SUPPLIERS

Exploration Exploration Mapping, Geological and Geotechnical Surveys, Borehole Drilling. ‰ Borinfo ‰ LiDAR Services ‰ Major Drilling Group ‰ Optech ‰ Quantec Geoscience ‰ Sensors & Software

Bulk Bulk Material Material Handling Handling Conveyors, Crushers, Winches, Vehicles; Weighing and Measuring ‰ Atlantic Industries ‰ Gridcom Enterprises ‰ Lantec ‰ MDA ‰ Mine Hoists ‰ P.R. Engineering ‰ Titan Process Equipment ‰ Triton All-Terrain ‰ Williams Machinery

Surface Surface Mining Mining Drilling, Electrical and Hydraulic equipment, Shovel buckets ‰ Fordia Group ‰ Gridcom Enterprises ‰ Major Drilling Group International

Source: Canadian Association of Mining Equipment and services for Export, www.camese.org

30

Underground Underground Mining Mining Blasting, Drilling, Electrical and Hydraulic equip., Communication ‰ Canun ‰ Cubex National Compressed Air ‰ Diaset Products ‰ Dux Machinery ‰ International Mine Radio Systems ‰ Varis Mine Technology

Health Health && Safety Safety Ventilation, Dust control, Waste Management, Safety equipment ‰ ABC Ventilation Systems ‰ Aspectair ‰ Classifier Milling Systems ‰ Entac Emulsion Products ‰ Rocvent ‰ Zacon

A LARGE NUMBER OF CONTRACTORS ARE ACTIVE IN CANADA Project Design

Construction Phase

Cementation Canada Inc. (CA)

X

X

Dumas Contracting Ltd. (CA)

X

X

Company

Geological Surveys

Golder Associates Inc. (CA)

X

X

Hatch (CA)

X

X

X

X

X

North American Construction Group (CA) Norwest Corporation

X

Other areas of operation / Comments Expertise in shaft sinking Raising and raise boring

X

Surface Construction

X

X

X Pipeline and Piling

X

Ross-Finlay 2000 Inc. (CA) The Redpath Group (CA)

Environmental Assessments

X

Thyssen Mining (GY)

Experts in Coal mining

X

Expertise in shaft sinking Chute installation, Hoist installation

X

Underground mining Leaders in shaft sinking

X

Expertise in shaft sinking

As major miners have reduced their workforce to focus on core production business, contractors have expanded beyond sinking shafts, into a variety of construction and other infrastructure work Source: Canadian Association of Mining Equipment and services for Export, www.camese.org

31

Country of Origin : CA= Canada; GY=Germany

THE CANADA MINING INDUSTRY IS OPEN TO EQUIPMENT AND SERVICE PROVIDERS FROM OUTSIDE NORTH AMERICA Trends within the Mining Equipment Industry in Canada „

Canada is an integrated part and a leading player of the international mining industry ‰ The Canada mining industry is open to mining equipment and services from outside of Canada and are home to approximately 1,800 firms that are represented by either subsidiaries or distributors. ‰ A large number of international mining equipment manufacturers and contractors are present in Canada.

„

Competitive Market ‰ Competition among international suppliers of mining products has increased since the mid1990s. ‰ Mining companies, like firms in other industrial sectors, buy largely on specifications and price.

„

R&D is mainly carried out by the mining companies ‰ Canadian mining companies are active investors in research and development (R&D)— companies invested $54 million in extraction R&D, $274 million in primary metals R&D and $176 million in metal manufacturing R&D in 2005, for a total of $504 million. ‰ The Government of Canada has recently launched a program to Innovate Industry – to double the research contribution of Canada's GNP from 1.5 % to 3.0 % by the year 2010.

Globalisation Globalisation

Competition Competition and and price price sensitivity sensitivity

R&DR&Ddisplacement displacement

Source: “Facts and Figures 2006” by The Mining Association of Canada (www.mining.ca) “Canadian Suppliers of Mining Goods and Services” report by Natural Resources Canada.

32

MOST PURCHASING DECISIONS ARE CENTRALISED - The technical specifications are often made by the engineers at the mine Mining Company

Number of Mines

Minerals

Purchasing decisions

Xstrata (former Falconbridge)

>40

Copper, Coal, Nickel, Zinc & Aluminum

HQ, Zug, Switzerland Nickel head office in Toronto, Canada

Companhia Vale do Rio Doce (former Inco)

11

Nickel

HQ, Toronto, Canada

Potash Corp

14

Potash, Phosphate & Nitrogen

HQ, Saskatoon, Canada

Teck Cominco

91

Zinc, Coal, Copper, Gold

HQ, Vancouver, Canada

Agrium

13

Nitrogen, phosphate & potash

HQ, Calgary, Canada

Barrick Gold Corp

27

Gold, Silver

HQ, Toronto, Canada

Fording Canadian Coal Trust

61

Coal

HQ, Calgary, Canada

Uranium

HQ, Saskatoon, Canada

Cameco

4 Uranium + 2 Gold mines2

1 6 coal mines are part of the Elk Valley Coal Partnership

Source: STC Interviews, market player s

owned by Fording Canadian Coal and Teck Cominco.

33

2

Cameco owns 53% of Centerra Gold Inc.

PROCURMENT PROCESSS - GENERAL GUIDELINES FOCUS AREA: LARGE INTERNATIONAL MINING GOMPANIES • Purchasing decisions centralised • Procurement department often in Canada • Technical specialised staff present in Canada, (located at the mines), but also abroad when mining companies own properties in other countries. FOCUS AREA: SMALL TO MEDUIM SIZE LOCAL MINING COMPANIES • Purchasing decision made by local company in Canada • Decision often relation based FOCUS AREA: MINING CONTRACTORS • Contractors have a long history acting as project managers for new mine projects in Canada • The contractor is often handling the tender process and technical evaluations • Final purchase decision still made by the mining company It is important to identify the main focus area (type of end-customers) when deciding on entry and sales strategies. 34

COMPLIANCE WITH THE CANADIAN STANDARD ASSOCIATION’S RULES AS WELL AS THE BUYER’S PURCHASING POLICIES IS CRUCIAL A first step to enter the Canadian market is to get one’s equipment approved by The Canadian Standard Association and receive a CSA label. When it comes to the next step, finding new customers, new mining projects are often announced on the companies’ websites. For new suppliers entering the Canadian market participation on trade shows and in Buyers Guides are important. It is also important to comply with the customers’ Corporate Purchasing Policy, which can usually be found on the companies’ websites. Mining companies have a long tradition of outsourcing various activities in the mining process to Contractors, therefore it is equally important to stay in contact with them.

Approved by The Canadian Standard Association (CSA)

Receive a CSA label

New mining project announced by mining company/ contractor

Make proposal according to guidelines

Evaluation by the buyer

Announcement is made

A pre-requisite of doing buiness in the Canadian mining industry is a CSA approval. 35 Source: The Canadian Standard Association’s website www.csa.ca and various mining companies’ websites.

HIGHLY DEVELOPED INFRASTRUCTURE WITH EXTENSIVE RAILWAY SYSTEMS AND LARGE SCALE PORTS INFRASTRUCTURE -Extensive network of railways, inland waters and ports • Canada has 75,000 kilometers of rail lines, with significant links into the United States. There is also easy access to Canada’s major ports and to interior communities through truck-rail intermodal service. • Mineral commodities account for 60% of the rail tonnage and for more than half of the marine tonnage handled in Canada. • Canada has the world’s longest inland waterway open to ocean shipping—the Great Lakes/St. Lawrence Seaway System. The Seaway provides a direct route to the industrial heart land of North America. • There are 230 commercial ports and harbors handling many goods shipped in and through Canada. Major ports include Vancouver, Montreal, Halifax, Port Cartier, Sept Iles/Pointe Noire, Saint John and Quebec City. • Modern container facilities at the major ports connect with inland container trains to ensure rapid movement of goods throughout Northern parts of the country. • In remote parts of Canada, poor or non-existing infrastructure offers a challenge to mining companies. 36 Source: www.investincanada.com, KPMG Competitive Alternatives study – 2006 edition, and Natural Resource Canada.

EXCELLENT FINANCIAL AND ELECTRICITY INFRASTRUCTURE SUPPORTING THE MINING INDUSTRY CONT. INFRASTRUCTURE -Mapping • Canada has a vast land mass and there are areas that has never been adequately mapped. Therefore the Cooperative Geological Mapping Strategies (CGMS) has been launched to provide new geological information. -Financial • 60% of the world’s listed mining companies are present on the Toronto Stock Exchange (TSX), making Toronto the world’s leading city for mining finance. • TSX is number one in the world in new mining listing. ELECTRICITY - Increasing power demand in the region might leads to increased electricity prices • Canada offers the low cost for electricity and for total industrial facility investment. • Canada has one of the most diversified electricity generation bases in the world. Sources include hydro-electricity, natural gas, oil, coal, nuclear power, and renewable energy. • The country also has some of the most competitive globally electricity rates.

37 Source: www.investincanada.com, KPMG Competitive Alternatives study – 2006 edition, www.nrcan.gc.ca (Natural Resources Canada) and www.tsx.com.

STRONG INDUSTRY AND GOVERNMENT COMMITMENT TO INCREASE MINING TRAINING AND IMPROVE EDUCATION QUALITY COMMUNICATION - Well established telecommunication • The Canadian telecommunication system is well developed and covers 97% of the population. • Due to poor GSM and 3G coverage in the isolated areas of the North, satellite phones are widely used. • The two official languages of Canada are English and French. When conducting business in the Province of Quebec, French is the preferred language of business. LABOUR - A highly competitive labour force • Canada has the lowest overall labour costs in the G7. • There are nine mining schools based in Canadian universities. • The Canadian Mining Education Council (CMEC) ensures effective networking between the universities, the industry and the professional associations in areas of education, research and technology development. • The Government of Canada has launched a program to increase the quality and quantity of Mining graduates and to help enhance the image of Mining within Canadian society. 38 Source: KPMG Competitive Alternatives study – 2006 edition and The Canadian Mining Education Council’s website www.mining.ubc.ca

CONTENT

●

Overview Canadian mining industry

●

Canadian mining industry

●

New projects in the mining industry

●

Mining equipment industry in Canada

●

Recommendations

●

References

39

THE CANADIAN MINING INDUSTRY OFFERS OPPORTUNITIES FOR HIGH TECHNOLOGY SOLUTIONS WITHIN ALL AREAS OF MINING OPPORTUNITIES „

„ „ „

„

Canada's good geological assets provide plenty of growth opportunities for the mining industry. In recent years rate of investments has increased, especially in exploration activities . The remote location of new mine sites needs investments in improved or new infrastructure. The mining industry needs to improve productivity in all areas of the production cycle which points to a increase demand of high tech equipment, such as automation solutions and tele-mining. There is a growing demand for equipment and technological solutions for underground mines as well as for environmental applications.

THREATS „

„

„

„ „

With almost 2,400 suppliers of goods and services the mining equipment industry is generally very competitive, 6% a General Sales Tax (GST) plus customs on mining equipment/machinery imported to Canada. Human resource constraints: The Canadian mining industry will need up to 81,000 new employees to meet current and future needs and to fill positions vacated by retirees as revealed by a sector study. Infrastructure capacity problems. Mining project approval inefficiencies

40 Source: Natural Resource Canada, The Canadian Mining Education Council (www.mining.ubc.ca.) and “Mining for Talent” by Mining Industry Training and Adjustment Council (www.mitac.ca).

SWEDISH MINING EQUIPMENT COMPANY IN CANADA - Success story for Alimak in Canada In Canada since: the 1960s Represented in Canada by: Distributor

• •

SUCCESS FACTORS Introduced new solutions for construction hoists, industrial lifts, raise climbers and winches that improved the work methods and productivity in the mines.

•

OBSTACLES •

After-sales support In-order to keep the clients satisfied Alimak had to improve after-sales support and often in remote locations.

RECCOMENDATION “In Canada the rules and regulations for mining equipment are sometimes quite complicated. Therefore it is important to establish a partnership with a distributor who knows how to get the products through the approval process.” Mr G. Larsson, Segment Manager at Alimak AB

Source: Interview with Mr G. Larsson, Segment Manager at Alimak AB

41

SWEDISH MINING EQUIPMENT COMPANY IN CANADA - Success story for GIA Industri AB in Canada • • •

In Canada since: the 1970s Represented in Canada by: ABB Canada CEO: Roger Karlsson

SUCCESS FACTORS For example • GIA Industri AB is a world leader with an unique knowledge of building and customizing mining vehicles. • ABB is GIAs partner and is well established in Canada. ABB Canada provides service to GIA Industri’s clients.

OBSTACLES For example • Without an own subsidiary in Canada you depend on the partner to provide your end-customer with good service.

RECCOMENDATION “If you are not yet ready to set up you own subsidiary you must find a partner that is well established in the Canadian mining industry and that has a strong service network”. Mr Roger Karlsson. CEO at GIA

Source: Interview with Mr,. Roger Karlsson, CEO at GIA

42

Industri AB.

RECOMMENDATIONS FOR DOING BUSINESS IN CANADA Country Specific recommendations for making business with the Canadian Mining Industry

1. 1.

2. 2.

3. 3.

Source: STC

• Be aware of regulatory environment The Canadian mining industry, in particular the large mineral producers and processors, operate within a complex regulatory environment. There are 19 federal acts and 14 federal regulations related to the mining industry. • Be sensitive to aboriginal issues When conducting mining business in the northern parts of the country especially when it comes to exploration, aboriginal communities should be consulted. Impact Benefit Agreements (IBAs) are often negotiated between the specific communities and the companies. • Consider language Remember that French is the preferred language of business in the province of Quebec, especially outside Montreal.

43

RECOMMENDATIONS FOR DOING BUSINESS WITH THE CANADIAN MINING INDUSTRY Industry Specific recommendations for making business with the Canadian Mining Industry

1. 1.

2. 2.

3. 3.

Source: STC

• Find the right partner It is important to find a partner that is knowledgeable about the market to e.g. get the products through the approval processes. As mining sites often are located in remote and isolated areas it is important that the partner can providing training, service and spare parts to clients. • Start a subsidiary If company business is good for your products and services, you should consider opening a subsidiary with 1-2 sales engineers, serving your key clients.

• Make yourself known Trade shows: One of the world’s largest trade shows is organized in Canada by Canadian Institute of Mining, Metallurgy and Petroleum. In April of 2007 it will be held in Montreal. Buyers guides: The Canadian Mining Journal’s Buyers Guide is published once a year but is also accessible for members at www.canadianminingjournal.com. 44

CONTENT

●

Overview Canadian mining industry

●

Canadian mining industry

●

New projects in the mining industry

●

Mining equipment industry in Canada

●

Recommendations

●

References

45

IMPORTANT CONTACTS AND ASSOCIATIONS IN THE MINING SECTOR Canadian Institute of Mining, Metallurgy and Petroleum Phone: + 1 514 939-2710 Fax: + 1 514 939-2714 Web: www.cim.org/ E-mail: [email protected]

Mining Association of Canada (MAC) Phone: + 1 613 233 9391 Fax: + 1 613 233 8897 Web: www.mining.ca E-mail: [email protected]

Prospectors and Developers Association of Canada (PDAC) Phone: + 1 416 362 1969 Fax: + 1 416 362 0101 Web: www.pdac.ca E-mail: [email protected]

Canadian Mining Industry Research Organization Phone: +1 705 673 6595 Fax: +1 705 671 6606 Web: www.camiro.org Email: [email protected]

Canadian Association of Mining Equipment and Services for Export (CAMESE) Phone: +1-905-513-0046 Fax: +1-905-513-1834 Web: www.camese.org Email: [email protected]

Coal Association of Canada Phone: +1 403 262 1544 Fax: + 1 403 265 7604 Web: www.coal.ca Email: [email protected] 46

FOR MORE INFORMATION CONTACT STC CANADA „

If you have any questions regarding the information in this report, or if you need assistance in doing business in the Canada mining sector, please contact the Swedish Trade Council in Toronto: Swedish Trade Council, Toronto Phone: +1 416 922 8152 Fax: ++1 416 929 8639 Email: [email protected] Web site: www.swedishtrade.se/kanada/ Address: 2 Bloor Street West, Suite 2120 Postal Code: M4W 3E2 City: Toronto Country: Canada

47

Next steps and joint action plan

HOW CAN STC IN CANADA SUPPORT COMPANIES TO DO BUSINESS IN CANADA Country specific Market Market Check Check Distribution Distribution search search Customer Customer Aquisition Aquisition Pre Pre Aquisition Aquisition analysis analysis Supplier Supplier search search Company Company establishment establishment Legal Legal

To investigate market dynamics, players, potential and competitiveness for Swedish firms To scan the market for potential candidates and to narrow down the search into a few interesting and intereted distributors / partners for a face to face meeting with Swedish firms To assist with business development and sales before, during and after the market entry & establishment To assist with identification of potential companies for acquisition in a confidential manner (without disclosing the identity of the client at initial stage) and to help with background checks and legal matters To assist with identification of potential suppliers based on a profile defined by Swedish clients To assist with incorporation of a company, immigration and management transfer, site selection, staffing, opening bank accounts and to provide referral to business service providers To provide referral to reputable law firms or experienced lawyers with expertise on the subject matter, when needed. Among examples are assistance with contracts/agreements, trademarks, patents, and incorporation. 48

STC CANADA HAS HELPED NUMEROUS SWEDISH COMPANIES TO DO BUSINESS WITH THE CANADA MINING INDUSTRY COMPANY

BRIEF PROFILE A world leader in compressors, generators, construction and mining equipment, industrial tools, assembly systems and equipment rental. Atlas Copco has four divisions; Compressor Technique, Construction and Mining Technique, Industrial Technique and Rental Service. Alimak develop, manufacture and market passenger/materials hoists for the construction industry, permanently installed goods/passenger lifts for industrial environments and a range of equipment for applications in underground mining, civil engineering and hydroelectric power generation ITT Flygt aims at helping governments, municipalities and companies to improve sewage handling, flood control, energy conservation, land reclamation and tunnel construction. Offers cemented-carbide and high-speed steel tools for metalworking applications. Sandvik also offers machinery, equipment and tools for rock-excavation and stainless and high-alloy steels, special metals, resistance materials and process systems. 49

IN GENERAL, CANADA IS AN ATTRACTIVE MARKET WHY CANADA? „

Sound economy and politically stable

„

Excellent infrastructure

„

Among most competitive countries to do business in G7 with 5.5% cost advantage over USA*

„

Talented and skilled workforce with the lowest labor cost among G7 countries*

„

No significant trade or cultural barrier for majority of products/services (compared with many other countries)

„

Still within reach by phone during business hours to communicate with clients/partners

„

The largest U.S. trading partner with more than $1billion trade / day!

„

An excellent stepping stone info USA – the world’s biggest market.

*Competitive Alternatives: KPMG’s Guide to International Business Costs, 2006 edition. 50

CANADIAN MINING INDUSTRY IS OF CONSIDERABLE SIZE AND MAY OFFER OPPORTUNITIES TO SWEDISH FIRMS „

Canada is the world’s leading mining country and among the world’s largest producers of minerals and metals. There are some 388,000 Canadians working in mineral extraction and value added smelting, fabrication and manufacturing.

„

Mining industry contributed $42 billion into Canada’s GDP, of which about $10 billion were in extraction and $32 billion in mineral processing. There are more than 2360 service and equipment firms serving the mining industry Toronto is the world’s leading city for mining finance (41% of equity raised worldwide in 2005 was generated through the Toronto Stock Exchange). Vancouver is home to the world’s leading cluster of exploration companies and expertise

„ „

„

Canada was the leading destination for exploration in 2005, receiving 19% of world spending, followed by Australia at 13% and the United States at 8%.

„

In 2005, Canada ranked: ‰

1st in the global production of potash and uranium

‰

2nd in nickel and magnesium

‰

3rd in titanium concentrate, aluminum, cobalt and platinum-group metals

‰

4th in asbestos, zinc, cadmium and gypsum.

Source: The Canadian Association of Mining Equipment and Services for Export 51

APPENDIX ● ●

APPENDIX 1 APPENDIX 2

Detailed map of current mining hot spots in Canada Detailed map of future mining hot spots in Canada

52

APPENDIX 1: DETAILED MAP OF CURRENT MINING HOT-SPOTS IN CANADA Athabasca Yellowknife

(uranium)

(diamonds)

Kitimat

Flin Flon (gold, copper, zinc)

Thompson (nickel, cobalt)

(aluminum)

Rouyn-Noranda (copper) Val-d’Or (Gold, copper) Labrador City (iron. aluminum)

Kamloops

Saguenay (aluminum, niobium)

(copper, molybdenum, gold)

Bathurt (zinc, lead)

Windsor (gypsum)

Trail (lead, zinc)

Thetford Mines (chrysotile)

Elk Valley (coal)

Fort Saskatchewan Saskatoon/ Esterhazy (nickel)

Red Lake/ Hemlo (gold)

(potash, salt)

Timmins

Becancour (aluminum, magnesium) Sudbury (nickel, copper, cobalt, gold)

(zinc, copper, lead, gold)

Ontario, British Columbia, Saskatchewan and Quebec represent 75% of Canadian mineral production Source: Information bulletin exploration, March 2006 (Natural Resources Canada)

53

APPENDIX 2: DETAILED MAP OF FUTURE MINING HOT-SPOTS IN CANADA Diavik and Ekati has large reserves of diamonds. New mines are about to open: 1) Jericho (2006), 2) Snap Lake (2007), 3) Victor (2008) and 4) Gahcho Kue 2011)

Baffin Island The Mary River deposit has iron ore for at least 34 years of profitable operations. No start date as of today. Donkin mine Large reserves of coal.

Horizon mine Large reserves of coal. Brule mine Large reserves of coal. Red Chris coppergold mine Production will begin Fort-a-la-Corne in 2006-2007. Mine’s The Midwest project has a 25 year life Cigar Lake Mine Mining of uranium could One of the world’s largest expectancy. start in 2010 diamondiferous clusters. Reaching Mining of uranium could a go ahead decision on mid-2008. start in 2007-2008.

Nickel Rim South, Sudbury Large reserves of copper, gold and platinum. Production is planned to begin in 2009. Kidd creek Mine extension during 2006-2009. Copper.

More than 80% of exploration expenditures in 2004 was spent in Ontario, Quebec, Nunavut, Saskatchewan and British Columbia. Many of the future hot-spots are located within these five provinces. 54 Source: Overview of trends in Canadian mineral exploration 2005, Globe and Mail Sept 7 2006 and www.nrcan.gc.ca