MINING NEWS: Alaska, B.C. get poor scores for investment

Fraser Institute releases annual investment ‘report card’ for 64 mining regions; Alaska’s grade drops, B.C. scores higher than last year but companies still wary of investing in British Columbia because of tough environmental regulations, Native land claims uncertainty

Sarah Hurst

Mining News Editor

For the first time since the Fraser Institute began its investment survey in 1997, British Columbia did not score in the bottom 10 of the “policy potential index,” although it remained in the bottom third. Alaska, although it rated high for potential investment, dropped from 29th place last year to 55th place this year in investment attractiveness.

The Fraser Institute describes the index as a report card to governments on the attractiveness of their mining policies. A total of 259 company exploration managers from around the world responded to the survey, released in March, giving their opinions on the investment attractiveness of 64 regions. Last year 159 executives responded to the survey on 53 regions. Some company presidents and other executives chose to respond to the survey, which is sent to exploration managers.

Nevada was rated as having the best mineral policies for the fifth straight year, Zimbabwe came in last. Russia, fourth from the bottom, sunk from 40th place out of 53 in 2003-2004.

Russia’s lower rating this year was probably due to doubts about the future of market reforms, the report said. British Columbia placed 44th out of 64 this year, with Yukon coming in 34th and Alaska 33rd.

Alaska has room for policy improvement

However, in the best practices mineral index, which looks at a region’s mineral potential if it had policies (taxes, regulations, etc.) that encouraged development, Alaska came in third out of 64, up from 24th place last year. Yukon came in 29th, Russia 15th and British Columbia 12th in that index. Tasmania was the top-rated region.

Russia scored poorly on a question about uncertainty concerning the administration, interpretation and enforcement of existing regulations. Only 3 percent of respondents thought this factor encouraged investment in Russia, while 19 percent considered it a strong deterrent and 30 percent would not pursue investment due to this factor. By contrast, 22 percent of respondents said this factor encourages investment in Alaska, and 41 percent said it was not a deterrent to investment in Alaska.

British Columbia fares poorly on regs

On the other hand, “Yukon regulators forced the repair of a 300 meter-long bulldozer track leading off a highway to a drill site,” the president of an exploration company said in the survey. “Repair consisted of hand-placing peat moss in the bulldozer tread marks. In spite of the fact that the track was being reclaimed naturally and that there was evidence of older bulldozer tracks (related to highway construction) that could never be considered as contributing to any environmental impact problem.”

British Columbia was criticized even more strongly for its environmental regulations than Yukon and Alaska, with 31 percent of respondents saying they were a strong deterrent to investment in the province and another 8 percent saying they would not pursue investment due to this factor.

Taxation, Native claims issues in Russia, Canada

Uncertainty concerning Native land claims is an important issue for miners in Canada.

“Anywhere you work in Canada, Native land claims are possible at any time, and no matter how outlandish the claim, the provincial or federal government will not support a tax-paying company by applying the Mining Act. It will inevitably run and hide,” the president of an exploration company said in the survey. “In Canada, British Columbia (is the worst jurisdiction) because of Native land claims,” another exploration company president said.

British Columbia scored last out of the 64 regions on the question about Native land claims, with 42 percent of respondents saying this factor is a strong deterrent to investment in the province, and 14 percent saying they would not pursue investment due to this factor. Yukon and Alaska had slightly better results and Native land claims were not considered a very serious problem in Russia.

Another question where British Columbia did poorly was about uncertainty concerning which areas will be protected as wilderness or parks. British Columbia came 62nd here, ahead of Wisconsin and California. The issue was not considered quite so important in Yukon, Alaska or Russia.

On a question about infrastructure, British Columbia did extremely well, coming in 14th in the list, while Alaska and Yukon scored much lower and Russia came in at 58.

Russia scores poorly on socioeconomic agreements

“Russia (has) a dysfunctional legal and regulatory system geared to favor the entrenched interests,” an official from an exploration company said in the survey. “You find something of value and someone will find a way to steal or expropriate any economic benefit from you.”

British Columbia was also criticized by the president of one exploration company, who said: “Giving in to special interest groups for reasons of political expediency and a history of having due process set aside or killed by government and/or the courts make British Columbia one of the worst investment climates on earth.” Nevertheless, British Columbia scored well on this question, as did Yukon and Alaska.

British Columbia landed in the bottom half of the table on a question about political stability.

“British Columbia has a history of severe swings in politics and the ideologies of the political party in power. What a mess!!!” the manager of an exploration company said. Russia was much further down the table with Yukon and Alaska scoring near the top.

Chamber: Survey shorts British Columbia

The chamber was pleased that British Columbia climbed in the institute’s rankings, but it said the survey fails to reflect recent positive changes in the province.

“While we were pleased to see (British Columbia’s) improved standing, the survey results do not reflect the many positive changes that have taken place over the last half of the year that have bolstered investor confidence in (British Columbia’s) mineral exploration and mining sector,” said David Caulfield, chamber president.

Investment in mineral exploration in British Columbia more than doubled last year to $130 million, 12 percent of all the exploration money spent in Canada — up from an all-time low of 5.7 percent in 2001, Caulfield said.

In the time since the survey opinions were gathered in June, the British Columbia government has streamlined permitting procedures, introduced an online claim staking system, committed $25 million to geosciences, and unveiled a comprehensive long-range mining plan for the province, Caulfield said.

British Columbia isn’t just tooting its own horn, the chamber said. The province was nominated in June 2004 by the London Mining Journal as one of the most improved regions in the world for mineral exploration and mining.

—Steve Sutherlin

Fraser report generates Alaska dissent

“It’s mystifying to a lot of us; there seems to be a good level of activity up here,” said mining consultant Tom Crafford, of T. Crafford & Associates in Anchorage.

Crafford said the makeup of the group of respondents to the poll may have affected Alaska’s standings this year, and that companies actually familiar with investing in Alaska, or the United States, for that matter, may be underrepresented in the survey.

Companies active in Alaska were not included in the survey, Steve Borell, executive director of the Alaska Miners Association, said in a March letter to the National Mining Association’s Mining Week.

“I have now talked with six companies — three very large companies and three juniors — that each have one or more large exploration and/or mines in Alaska, and none of the six were asked to participate in the Fraser survey,” Borell said.

Fairbanks-based mining consultant Curt Freeman concurred with Borell: “Perception is reality in the mining game: ask anyone working in any jurisdiction worldwide what they think about working there and they are unlikely to say anything horrible about it. Ask them what they think about other parts of the world that compete for the same funds they are competing for and they dump all over that jurisdiction.”

Freeman said he has heard from six of his company’s clients and none of them had filled out the survey: “So the people judging Alaska don't work here and have no idea what it is like to work here. In short, the survey leaves a lot to be desired.”

Colorado treated unfairly

“The study is misleading in that it does not constitute a real study of the laws, geology, and regulatory structure of states like Colorado ... it is a subjective survey of impressions — this report gives the industry in states like Colorado and Alaska a black eye, which is undeserved.”

The mineral potential index is designed to reflect whether a region’s mineral potential under the current policy environment encourages or discourages exploration.

—Steve Sutherlin