Battery Age Minerals Falcon Lake Lithium Project, Canada 

Curious case of Canada and its attraction to Australian mining companies

A spate of Australian mining investments in Canada reflects a burgeoning trend of ASX-listed miners finding not just resources but also comfort operating abroad in the wider North American market.

While Australia remains one of the most important countries for the mining industry, data suggests that now more than ever juniors like their predecessors (majors) are increasingly comfortable having a footprint in Canada.

Australia and Canada share similarities across the board. The north of both countries are rich in resources yet have somewhat underdeveloped infrastructure. They are sparsely populated where large proportions of the inhabitants are indigenous. Both are large physical areas with similar geopolitical environments and are well-endowed with minerals and resources.

Executives polled by this news service explain that Canada is attractive for a raft of other reasons.

For one, Canada also offers tax incentives for mining companies. These include concentrating, smelting, and refining, as well as for exploration programs. Such incentives from the federal and provincial/territorial governments reduce the tax burden for resources companies doing business in Canada and other countries.

The country’s Prime Minister Justin Trudeau and his government have proposed a 30% investment tax credit for expenses related to the exploration of critical minerals. This incentive also encompasses investors that are planning to buy shares in certain critical minerals companies.

Same but different 

While the Australian bourse hosts a substantial amount of global metals exploration companies, so too does its North American counterpart. And both countries are still prospective exploration grounds.

According to S&P Global, given its mineral wealth, Australia is the second largest exploration destination in the world only behind Canada. Exploration allocations to Australia increased to $2.3 billion in 2022 from $1.9 billion in 2021. This saw drilling activity increase to 57,341 reported drillholes in 2022 at 661 distinct projects. However, the junior and intermediate sectors raised just $4.2 billion in 2022, down from $8.5 billion in 2021.

Despite this decrease, the ASX remains the second largest exchange for the mining industry just behind the TSX group of exchanges.

Centurion IOCG Project, located in Western Australia's Great Sandy Desert.

Making moves

The emergence of ASX-listed juniors entering Canada in particular has not gone unnoticed.

Examples include Ardiden (ASX:ADV), Balkan Mining and Minerals (ASX:BMM), Cazaly Resources (ASX:CAZ), Cohiba Minerals (ASX:CHK), Forrestania Resources (ASX:FRS), Many Peaks Gold (ASX:MPG), Redstone Resources (ASX:RDS), and Rubix Exploration (ASX:RB6), among a raft of others.

So, why are so many ASX-listed juniors entering Canada?

In late May, Forrestania Resources (ASX:FRS) launched an entitlement offer to raise about $1.94 million to advance its portfolio of projects in Canada and Western Australia. The company will deploy some of the proceeds towards progressing its recently announced joint venture (JV) with ALX Resources (TSX-V:AL) over the Hydra Lithium Project in the James Bay region of Canada.

“I think a lot of the highly prospective ground in Australia is already tied up and spoken for. So, I think coming up the curve ourselves, in recent times, there certainly were plenty of projects available over there”

In terms of the company’s own experience as to why ASX-listed junior explorers heading into Canada, Forrestania Managing Director Michael Anderson tells this news service: “I think the combination of it certainly being a high-profile, highly prospective jurisdiction, perhaps slightly less mature in terms of its land and tenement ownership, so there still is opportunity there.

I think a lot of the highly prospective ground in Australia is already tied up and spoken for. So, I think coming up the curve ourselves, in recent times, there certainly were plenty of projects available over there.”

Cazaly Resources (ASX:CAZ) Managing Director Tara French agrees with Anderson. She tells Mining.com.au that while the country is mineral-rich, it is still very much underexplored.

Cazaly recently stepped into the Canadian market with strategic acquisitions. In late May, the Perth-based explorer entered an exclusive binding agreement to acquire the Sundown Lithium Project for CAD$4 million.

French says: “This provides opportunities for new discoveries, which we have seen recently with Patriot Metals lithium discovery at Corvette.”

The month prior to acquiring the Sundown Project, Cazaly entered into an exclusive agreement to acquire 100% of the Carb Lake Rare Earth Project in Ontario. Commenting on the company’s strategy to expand its footprint in North America, French notes the reasons for entering the region are aplenty.

For one, she says the Canadian government is supportive and sovereign risk is low. There is plenty of undeveloped mineral wealth so the country also offers potentially high rewards – “and there are still good deals to be done”.

We have been working with an in-country team for 2 years looking for new critical mineral projects in Canada”

We have been working with an in-country team for 2 years looking for new critical mineral projects in Canada. The country’s support of the critical minerals space is also ideal with injections from Canada of $2.8 billion and with a $4.5 billion injection from their neighbours in the US to put more of the supply chain back to their home soil, it would seem like a logical place to go.”

The MD adds that the transition into Canada has been “easy so far”, which has been facilitated by Cazaly’s Chairman Clive Jones having experience operating in the country.

French notes: “Government support is positive with plenty of funding and also tax incentives. Their flow-through share scheme allows for individuals to receive investment tax credits – eligible resource and exploration companies are able to issue new equity to Canadian investors at a premium, this allows the company to raise money at a higher share price. This means less dilution for the company, the exploration company has more money to put into the ground, and the investor is then able to claim this as a tax deduction. A great incentive to support exploration.”

Canada offers a variety of tax incentives to the resources industry including enhanced deductions, allowances, and credits that can be claimed against income from mining operations, and special tax incentives for investors in mining companies.

Tax incentives 

For example, flow-through shares are a tax-favourable mechanism to help finance an exploration company that qualifies as a ‘principal business corporation’ (PBC). By issuing flow-through shares, a company can ‘flow through’ certain expenses to the share purchaser. These expenses are then considered to have been incurred by the investor, not the corporation.

These tax rules allow such corporations to ‘renounce’ certain Canadian development and exploration expenses to investors that hold flow-through shares. According to global law firm Gowling WLG, in industries considered high-risk such as mining or oil and gas, early stage companies may not be profitable for some time and therefore are unable to immediately use expenses incurred from various operations. Investors holding flow-through shares can claim the ‘renounced’ expenses as deductions from their own income (subject to certain restrictions), up to the amount the investor paid for the flow-through shares.

“Canada is right up there as one of the most fertile and obvious destinations for wannabe lithium explorers on the global platform”

Forrestania’s Anderson adds that for his company, tax incentives aside, the company’s ALX joint venture is a prime example of the raft of ‘exciting’ projects situated in the region. James Bay is a go-to destination for explorers, as early exploration results look encouraging, especially around that specific region, he adds.

Anderson says: “Canada is right up there as one of the most fertile and obvious destinations for wannabe lithium explorers on the global platform. For us to expand our portfolio, to now have access to both Western Australia and the James Bay region of Quebec, I think it is a great outcome to give us maximum opportunity in 2 greatest jurisdictions to follow the success of many others, in terms of discovery potential for world-class lithium.”

Anderson notes that the potential discovery still remains increasingly prominent within Quebec, and particularly Ontario, thus further accentuating the idea that it is an incredibly mineral-rich region.

Ardiden Canada gold project

For that reason, junior explorer Ardiden (ASX:ADV) is keen to continue working in the region. The company recently reported its first exploration drilling results at its Pickle Lake Gold Project in northwestern Ontario.

Addressing this, CEO and Managing Director Greg Romain says: “This confirms our thesis by demonstrating broad gold mineralisation and is one of the main reasons I joined the company. I believe this to be an exciting opportunity for Ardiden given its large land position in the shadow of historical mines, and the company being well-funded to undertake the necessary work to further unlock the potential at its Pickle Lake Gold Project.”

Perth-based mineral explorer Redstone Resources (ASX:RDS) in mid-May acquired an additional 1,821 hectares over 4 claims at the Attwood Lake Area Lithium Project in Ontario. In an ASX announcement on 10 May, the company says that northwest Ontario has a long mining history with mining suppliers and contractors regionally available. Planning and development of further mining and processing of lithium projects by companies operating in the region demonstrates the significance and prospectivity of this area, Redstone adds.

Earlier this year, Many Peaks Gold (ASX:MPG) was granted additional mineral licences expanding the Aska Lithium Project to 193km-square area in an emerging lithium district in Newfoundland, Canada. At the time, Many Peaks’ Executive Chairman Travis Schwertfeger said the Avalonia Terrane hosting the Aska Project also hosts several high-grade lithium deposits along its extensions into Ireland and North Carolina where the same age of granites and their related pegmatites formed prior to the opening of the Atlantic Ocean.

“MPG believes this corridor in Newfoundland represents an emerging district for highly demanded lithium oxide and lithium carbonate products”

“The Newfoundland segment of this tectonic terrane is an underexplored portion of this well-endowed corridor of intrusions and pegmatites. MPG believes this corridor in Newfoundland represents an emerging district for highly demanded lithium oxide and lithium carbonate products strategically positioned with access to both European and North American markets.”

Prospective provinces

According to the Ontario Mining Association, there are currently 37 active mining operations in the province that cover a diverse set of metals and minerals, including precious and base metals, and non-metallic minerals. About 10 of these mines produce critical minerals, including cobalt, copper, indium, nickel, platinum group elements, selenium, tellurium, and zinc. There are currently 16 significant critical mineral projects in Ontario.

In 2021 alone, Ontario’s mining sector produced CAD$11.1 billion worth of minerals, which accounted for 20% of Canada’s total production value. With 31 critical mineral projects in Ontario currently at advanced stages, the exploration intensity in Ontario is on par with that of Quebec and is significantly higher than that of the US and Australia.

On the other hand, Toronto is touted as one of the mining finance capitals of the world. According to Canadian law firm Gowling WLG, almost 47% of the world’s public mining companies are listed on the Toronto Stock Exchange (TSX) and TSX-Venture (TSX-V) exchanges, and about 37% of the equity capital raised globally for mining companies was raised on these exchanges in the past 5 years.

Gowling WLG is a multinational law firm formed by the combination of Canada-based Gowlings and UK-based Wragge Lawrence Graham & Co in February 2016, in the first multinational law firm combination co-led by a Canadian firm.

Meanwhile, Saskatchewan is touted as Canada’s top-rated jurisdiction for mining investment based on a combination of geologic attractiveness and government policies, according to the Fraser Institute Annual Survey of Mining Companies May 2023.

According to the Fraser Institute, strengths for investment in critical minerals that were highlighted include high-quality and easily accessible geoscience and mineral resource information; attractive exploration incentives and tax credits; highly competitive royalty systems for base, precious, and emerging critical minerals; and competitive utility rates.

Various executives of ASX-listed juniors told this news service that what the Government of Saskatchewan is doing to attract investment and promote their industry is impressive.

Saskatchewan is a Canadian province covering more than 651,000km-square. It’s the world’s largest potash producer, a leader in uranium production, and is also home to the largest ‘high-grade’ uranium deposits globally.

The Government of Saskatchewan released its critical minerals strategy in March 2023 in which it notes that the region has significant untapped potential for a variety of critical minerals, including lithium, copper, zinc, cobalt, nickel, and rare earth elements. By 2030, the Saskatchewan government’s goal is to double the number of critical minerals produced in the region.

The recently released critical minerals strategy outlines the province’s priorities for critical minerals from an economic development standpoint. It lays out 4 main objectives – increase  Saskatchewan’s share of Canadian mineral exploration spending to 15% by 2030; double the number of critical minerals being produced by 2030; grow Saskatchewan production of potash, uranium, and helium; and establish the province as a rare earth element hub.

Hive of activity

ASX-listed resources companies have had exposure to Canada for decades. Australian mining companies have been listing on the TSX since the 1990s. Anglo-Australian mining giant Rio Tinto (ASX:RIO) spends a substantial amount on mineral exploration in North America.

The likes of Rio Tinto and BHP (ASX:BHP) continue to back various junior miners to help expedite exploration projects, particularly those focused on critical and battery metals, which reinforces the notion to the smaller end of town that North America is a friendly investment destination.

Now, it seems junior resources companies have been encouraged by the Canadian government’s plans and tax incentives, the former which was announced in last year’s budget, to allocate CAD$4 billion to the critical minerals sector.

The country is positioned to capitalise on the rising global demand for critical minerals and materials. Additionally, Canada is a key global producer of copper, nickel, and cobalt, which hosts advanced mineral projects for rare earth elements (REEs), lithium, graphite, and vanadium.

According to Canada’s federal government, the nation’s mineral sector is a foundation of the economy that supports jobs and economic activity in every province and territory.

As reported by this news service on 1 May 2023, Australia and Canada continue to be the favoured target locations for M&A transactions in mining.

Multinational professional services firm PwC declared at the time that “transformational deals are back” as data shows both mineral-rich countries continue to be a hive of investment activity.

In its 28 March Commodity Insights report, S&P Global notes that in 2022 there were many M&A deals inked in each region. Canada (13 deals) and Australia (12 transactions) hosted 45% of the companies and projects targeted for dealmaking last year. Both countries accounted for 69% of the total mining deal value last year – Canada at $8.83 billion and Australia at $7.96 billion.

Write to Adam Orlando and Aaliyah Rogan at Mining.com.au

Images: iStock & Supplied
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Written By Adam Orlando
Mining.com.au Editor-in-Chief Adam Orlando has more than 20 years’ experience in the media having held senior roles at various publications, including as Asia-Pacific Sector Head (Mining) at global newswire Acuris (formerly Mergermarket). Orlando has worked in newsrooms around the world including Hong Kong, Singapore, London, and Sydney.