CANADIAN GOVERNMENT'S SUPPORT & PENSION FUND INVESTMENTS/ MINING INDUSTRY

Despite Ottawa’s push to strengthen the domestic mining industry, major pension funds continue to invest heavily abroad — fueling concerns about missed opportunities in Canada’s critical minerals strategy.

CANADIAN GOVERNMENT'S SUPPORT & PENSION FUND INVESTMENTS/ MINING INDUSTRY

Simon Poirier

Simon Poirier 

Principal Simerall Consultants/Author/ Minestockers.com ShareHolder

The Canadian government recognizes the importance of the mining industry, particularly for precious metals and minerals. Through various initiatives and support measures, the government has demonstrated a significant commitment to promoting growth and development in this sector.

One of the government's key initiatives has been funding for innovative mining solutions through the Mineral Innovation Challenges to Advance Clean Technologies (MICA) program. This initiative focuses on projects that aim to commercialize mining technologies and create a more economically robust and sustainable mining sector.

The government also provides favourable tax policies and fiscal measures to investors in the Mining industry, encouraging exploration, development, processing, and advanced materials manufacturing. This support has attracted over $100 million in private investments, with the MICA program alone creating and retaining over 400 highly skilled jobs for Canadians.

In 2021-2023, exploration expenditures increased to $3.6 billion, compared to $2.2 billion in 2020. The latest data shows a slight decline in 2024 but an anticipated rebound in 2025. The overall investment landscape in Canadian mining, particularly in critical minerals, is a significant focus, with calls for substantial new investments in the coming years.

Additionally, it's crucial to highlight another cornerstone of investment concerns i.e. Pension funds in Canada. Recent data indicates that there hasn't been a significant investment in the industry by Canada's primary Pension funds.

A worrying trend forecasts that unless the industry benefits from increased investments, those still in the development stage could potentially be hindered.. Canada's P.M. mark Carneys pledge to invest in infrastructure could now create opportunities for the CPP and other pension funds to invest in the Mining sector in Canada. Let’s hope they get more involved.

Looking at a global perspective, Pension fund investments in other countries like the UK, the US, and Japan show a significantly higher degree of investment in their domestic mining industries than Canada's. Research from Letko Brosseau in 2023 indicated that Canada's eight largest pension funds (the Maple Eight), holding around C$2.1 trillion, invested only a quarter (25%) within the country. ( 75 cents of every dollar invested outside of Canada)

More specifically, when looking at domestic equities, the Maple Eight devoted just 3% to domestic equities as of early 2024, compared to 28% in 2000. This is considered among the lowest compared to other developed pension systems. Estimates suggest Canada needs between $30 billion and $65 billion in new upstream mining investments by 2040 to meet domestic and global demand for Critical Minerals. Current investment levels are insufficient, averaging around $2 billion per year from 2018-2023.

Governments and Pension funds need to share financial risks with investors through mechanisms like equity investments, contracts for difference, or offtake agreements to attract the additional necessary capital. Also, the permit-to-mine timeline is a major deterrent for investors. Although the Canadian government's dedication to the mining sector is noteworthy, the sheer scale of Canada's critical mineral and metal resources, coupled with global demand, increasingly substantiates the argument for enhanced pension fund participation in mining investments.

Canada needs to create a more attractive investment environment by reducing financial and regulatory risks, having more direct investments by Major Pension funds, building essential infrastructure, and fostering strong, equitable partnerships with Indigenous communities. This comprehensive approach is indispensable for Canada to transform its abundant critical mineral resources into a formidable advantage for global leadership in the clean energy transition.

With heightened investment and strong government backing, the Canadian mining industry is primed for substantial breakthroughs, generating considerable economic prosperity while championing sustainable practices and fostering technological innovation.

SP

“For information purposes only and not a recommendation to buy or sell share”

Mining news and Stock charts: www.minestockers.com (disclosure: the writer is a shareholder in minestockers.com)

 

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