BUSINESS

Quebec mining investments to fall 10 per cent in 2013, says report

10/29/2013 04:34 EDT | Updated 01/23/2014 06:58 EST
MONTREAL - Quebec's mining sector is expected to weaken this year with investments falling by at least 10 per cent, marking the first annual drop in a decade, the provincial statistics agency said Tuesday after surveying companies about their spending plans.

"The general situation in the mining sector at this time is a bit depressed so the investment has gone down a lot in different regions of the world, but what's particular in Quebec is that two major commodities are still very strong — gold and iron — so I think that helps us a lot," said Raymond Beullac, an official with the statistics institute.

Investments are expected to decrease to about $4.63 billion, mainly due to weak metal prices and the maturity of several large projects. Despite the decline, it is still expected to be the second-best year for mining investments in Quebec.

However, Beullac said the actual investments could fall below forecasts based on conversations with mining executives.

Last year, mining companies spent a record $5.12 billion in Quebec, including $621 million for exploration. Almost half the exploration activity was focused in northern Quebec.

He said Quebec had the most total investment of any Canadian province and territory last year.

Quebec normally trails Ontario in total mining investment, but could fall behind British Columbia and Saskatchewan, which is benefiting from potash and uranium extraction.

While Natural Resources Canada hasn't yet released its revised forecasts, the department indicated last spring that exploration and deposit appraisal expenditures slowed to $3.9 billion in 2012 and were expected to decline another 14 per cent to $3.3 billion in 2013.

Exploration expenditures in Quebec are forecast to fall 28 per cent this year to $447 million, which could be a sign of future mining investments and the construction of new projects, said Beullac.

Gold was the most sought after metal in Quebec last year, followed by ferrous metals, base metals such as copper, nickel and zinc, rare earth elements, phosphate and graphite.

Despite lower prices, gold and iron accounted for about 75 per cent of all investment and exploration activities.

Gold Corp. (TSX:G) is investing $1.4 billion to develop is Eleanor gold project in James Bay. ArcelorMittal is developing its Mont Wright iron mine.

Nickel mining is also increasing with major projects such as the Raglan mine by Xstrata Nickel and Nunavuk Nickel by Canadian Royalties (TSX:CZZ) in the northern regions of Quebec.

Meanwhile, Beullac said the Quebec government's new royalties proposals aren't responsible for any decreased activity because investment decisions are made several years in advance.

The Parti Quebecois government plans to raise mining royalty rates by only a fraction of the levels set out in last year's election platform.