Bloomberg.com reports 08 May 08 that Canadian mining companies Suncor, Yamana, and Cameco gained in value as a result of record prices for gold, oil, and uranium. I am surprised that the report does not also list at least one Canadian potash mining company.
The exuberance of the Canadian mining industry was on display this week in Edmonton where the Canadian Institute of Mining, Metallurgy and Petroleum met.
Cameco made a presentation that reinforces why their stock is rising, and in my opinion, likely to rise more and more: Saskatchewan is a mining-friendly province, the only province producing uranium, and they have a lot of it. You can see this presentation in full at http://technology.infomine.com.
Suncor made no presentation at CIM, but other oil sands producers did. Here is what I wrote about them:
Two papers went into great detail about the Kearl Oil Sand Project and the Horizon Oil Sands Project respectively. The shear scale of size, number of people, and dollars invested support the fact that this is the driver of the Canadian economy. The plans for further development and expansion are so vast, that thousands of workers from all part of the world, net alone Canada, will be required to bring them to fruition. And to judge from the presenters this can be done without irreversible environmental impact.
Finally all kudos to N Camarta who spoke about Petro-Canada's development and future under the rubric: Great dirt, great people. He left us with some simple rules: never let miners near anything that can burn; never let process engineers move dirt; faced with a choice between you're damned if you do and you are damned if you don't, always choose the second option; the easy part of oil sands is the environmental part, the hard part is the people part (getting them mainly); use existing technology in preference to new technology–at least you know it works. And so on. On the basis of his energy and enthusiasm this is the company whose stock I would buy first given a choice.
On potash in Saskatchewan a presentation by J. Davidson of Agrium Vascoy Potash Operations, noted that at current and projected potash prices you simply cannot loose money, even if you start up a new operation from scratch.
There are factors that could cloud this rosy picture: economic downturn in those countries that import Canadian products such as the United States could lead to a downturn in demand, hence price of product; environmental concerns and demands could delay start-up of new projects and the expansion of existing projects; and the dire shortage of qualified workers could increase costs and delay start and completion of upgrades and new construction.
Regardless of these potential negatives, it seems to me that overall investment in selected Canadian mining stocks merits attention.
Each year, both the Fraser Institute and Behr Dolbear & Co. independently rank countries where it is good or bad to undertake mining. These are the factors that Behr Dolbear & Co. uses to rank countries regarding mining, and I submit, Canada deserves to rank high in all these regards:
• Economic System
• Political System
• Social issues affecting mining
• Delays in receiving permits due to bureaucratic and other delays
• Stability of country's currency
• Tax regime.
In fact, Australia, Canada, and the United Stated top the list. But keep in mind that countries such as Australia, Canada, and the United States are not homogeneous: overall ratings and ranking tell you nothing about conditions in the many individual states or provinces of the county. For example, in the United States, Nevada has a very different mining investment climate to California. Or compare Montana and New Mexico, Wyoming and Utah. In Canada compare British Columbia to Alberta. They are simply not the same and very different politics and success potentials exist. Accordingly look carefully at oil sands in Alberta, uranium in Saskatchewan, and a lot more carefully at gold in British Columbia.