Why Mining Companies Should Export
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Exporting is absolutely vital to the long-term success of most companies in Canada. The importance of exporting to our economy has grown rapidly over the years, and is expected to continue.
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Why Mining Companies Should Export
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Editor's Notes
- Exporting is absolutely vital to the long-term success of most companies in Canada. The importance of exporting to our economy has grown rapidly over the years, and is expected to continue.
- About 80 percent of Canadian mining companies are already exporting internationally. It’s the nature of the business: mining sector companies must go where the mines are, and that often means to countries with emerging markets. If you’re not exporting, you’re missing out on a lot of growth potential, and increasing the long-term risk to your business. Why? Because we’re in a global marketplace. Canadian businesses – including those in the mining industry – are competing with sophisticated international companies not only around the globe, but also in Canada. Whether you want to start exporting or you already are, now is a great time to diversify into more markets. Current trends in the mining industry, from innovation and cost reduction to the new field of deep-sea mining, are generating opportunities around the globe that could position your business for future growth.
- Many studies have confirmed that businesses that export do better than businesses that don’t. They experience 20% greater sales growth, are 30% more productive, and 25% more innovative. Exporting makes you better, stronger and bigger.
- Here’s another reason to believe exporting helps build business. Consider that the average 3-year cumulative returns following an initial public offering are just 15% for non-exporters, compared to 45% for exporters. That’s a big gap, and further evidence that exporting is good for business.
- And because exporters have less concentration risk - they’re not dependent on one market or one business cycle – they also have 20% lower volatility, or ups and downs in their business. Studies from numerous countries have clearly shown that exporting increases both business survival and longevity. In an increasingly connected global marketplace, exporting is vital to long-term growth and success. Mining industry exporters like Energold Drilling Inc., Cypher Environmental, VibroSystM, KatchKan and many others have told us how important exporting is to their growth.
- As Marius points out, exporting is essential for his company, as it is the entire Canadian mining sector. It’s a fact, Canadian companies that export do better on several fronts. And, export markets are growing faster.
- Exporting for Canada’s mining industry is valued at $87 billion a year. That accounts for 20 percent of Canadian exports. As the industry has faced several challenges in recent years, including fluctuating commodity prices, exporting and diversifying markets is more important than ever. As Pierre Gratton, the Mining Association of Canada’s President and CEO, explains: “The cyclical nature of our industry means that mining companies are no strangers to ups and downs in the global market. In the current economic environment, the industry is focused on reducing costs, improving productivity and preparing for the next upswing. We are confident about the future demand for our products and the Canadian mining industry is focusing on getting in shape now to seize the growth opportunities ahead of it.” Let’s take a look at Canada’s top mining exports.
- Canada is a global leader in the mining sector. Thanks to our rich geology, we are one of the largest mining nations in the world, producing more than 60 minerals and metals. Canada ranks in the top five countries in the global production of 14 major minerals and metals. We are the world’s number one producer of potash, second for uranium and nickel, third for diamonds, and fourth for palladium and gold.
- And while there might seem to be plenty of opportunities in Canada’s domestic market, global investment in the Canadian mining market is increasing the competition. Canada is a top destination worldwide for foreign direct investments, with some 460 international mining projects in Canada at the advanced exploration stage or beyond. Canada is also ranked #1 on the Investment Attractiveness Score for the 2014 Fraser Institute Annual Survey of Mining Companies, which is a survey that assesses how mineral endowments and public policy factors such as taxation and regulatory uncertainty affect exploration investment.
- Canada’s mining industry demonstrates a wealth of capabilities and competitive advantages. With 3,700 mining companies, and just under 3,500 suppliers, Canadian mining is important to the health of the Canadian economy. 800 of those companies are exporting in 100 countries around the globe. Mining is the highest paying sector, with an average salary of $100K, and employs more than 380,000 people. The production value of the industry was valued in 2014 as $44.7 billion dollars, and 65% of Canadian mining assets are abroad, representing $144 billion dollars.
- In addition to minerals and metals, suppliers to the industry play an important role in mining exports. Working alongside Canada’s 3,700 mining companies are 3,460 suppliers in Canada, providing equipment and expertise in a wide range of services to support the industry.
- Moreover, Canada is world-renowned for its expertise in the mining industry. Vancouver is the global centre of expertise in exploration. Toronto is the global centre of mining finance, with 57 percent of the world’s public mining companies on the TSX and raising 62 percent of global mining capital. Canada also has global expertise in various minerals and metals, specifically in Saskatoon and Quebec.
- Despite the downward trend of commodity prices, the mining sector in Canada is one of the few sectors that consistently makes a positive contribution to Canada’s balance of trade. These are the top five markets for Canada’s mining industry exports, with about half headed to the U.S. alone. However, there are many other promising markets for Canada’s mining industry, including South Africa, Ghana, Chile, the UK, Germany and Peru, just to name a few. Canadian trade has expanded aggressively in recent years, giving Canadian mining companies greater flexibility to expand into new and emerging markets, or export their products more freely to an increasing number of destinations. In addition, although China’s softening growth has affected commodity prices, the growing middle class both in China and India is expected to eventually increase demand.
- As the Mining Association of Canada suggests, now is the time to think about continuing to find new customers, diversifying markets, and overcoming export challenges.
- The pace of change is expected to continue to increase, aided by major international trade agreements. These agreements will further enhance Canada's exporting industry, both for large corporations and the increasingly important SME sector. To find out what specific tariffs apply to your industry, use the tariff finder tool at tariffinder.ca and infotarif.ca
- When we ask businesses why they don’t export, or why they don’t export more, the reasons they give us are generally concerned with the need for making connections, understanding compliance and regulations, mitigating risks and financing. The good news is that EDC is here to help overcome these hurdles with products and services designed to help businesses reduce risk and expand their global business.
- Exporting has a very positive impact on Canadian companies and the Canadian economy – exports amount to more than 30 percent of Canadian GDP. In 2015, EDC supported business in 170 countries, facilitating $104 billion in global business transactions, contributing $66.8 million to the GDP and supporting 530,839 jobs across Canada. We have helped businesses all across Canada grow all over the world – and we can help you.
- EDC has been the catalyst for Canada’s exporting for many years. We have offices and representatives across Canada and around the world, and operate within a trade ecosystem: We work in partnership with the TCS, the Business Development Bank of Canada (BDC – where we have different but complementary roles), the Canadian Commercial Corporation (CCC) and other public- and private-sector institutions. The point of our collaboration is to make it easier for companies like yours to grow internationally and succeed.
- EDC is actively supporting Canadian mining companies in markets around the globe—and many of these markets have a growing demand for the products and services your business provides.
- EDC has helped many businesses in the mining industry. One of the ways we have increased mining exports is by providing loans to foreign companies in exchange for an increased commitment to support mines by buying Canadian.
- In addition, EDC protected mining companies overseas by providing financing, Political Risk Insurance, Accounts Receivable Insurance and Contract Insurance and Bonding valued at over $12 billion.
- Our work with mining industry companies has provided a first-hand demonstration of some of the challenges to exporting that you face, and we can help you overcome them. Now let’s take a look at a few examples of how EDC has helped Canadian mining companies grow their business.
- Guyana Goldfields is a gold mining company based in Toronto that has been successful in raising awareness of Canadian expertise in corporate social responsibility, with the help of EDC.
- Guyana Goldfields required financing to develop an environmentally friendly mining site in Northern Guyana. They asked EDC for help. EDC provided $30 million in financing, plus help in guiding environmental practices and assessment. Today, the mine is producing 188,000 ounces of gold a year, and is designed to produce 2.86 million ounces.
- As a supplier to the mining industry, VibroSystM innovates and manufactures technologies to optimize performance of large rotating machines.
- VibroSystM has a long sales cycle, and dealing in emerging markets means a higher risk of non-payment. By using Accounts Receivable Insurance, their receivables are guaranteed. This gives their bank the confidence to provide more financing, providing VibroSysM the cash flow and confidence to enter new international markets and pursue new business.
- Another innovator, Energold, who focuses on base and precious metals exploration, turned a barrier into an opportunity.
- Mines may often be located in remote places without roads or infrastructure, but Energold’s modular drilling rigs can be carried into a site. Entering new markets can take a significant investment, but Energold has received financial support from EDC, helping them to expand. Today there are more than 240 Energold rigs active in 25 countries around the world.
- One of the biggest hurdles exporters face is finding prospects and partners around the globe. EDC can help find those connections both in the United States and abroad. We have networking opportunities and matchmaking events, plus you can reach out to our on-the-ground connections—and those of our partners such as the Trade Commissioner Service—located around the world. We work with many industry partners such as CAMESE, and actively participate in key mining initiatives, including INDABA, PDAC, Expomin, Mine Expo, Arabal and others.
- There are a lot of questions exporters need answered in order to successfully enter into new markets. What are the local laws and regulations concerning compliance? What about taxes? Which markets are the most competitive, and how can you differentiate yourself? At EDC, we have experts on and in markets all over the world to help you answer these questions, or refer you to the proper sources when more information is necessary. We can provide extensive understanding of global economic conditions, risks and opportunities. The more you know about these issues, the more you can grow – and realize your potential. Maintaining cash flow can also be a barrier to exporting. EDC provides solutions such as Foreign Buyer Financing and Direct Lending to maintain cash flow while you grow. Let’s hear one small business owner’s exporting experience and thoughts about understanding regulations:
- Innovation plus increased productivity ultimately equals growth. Energold Drilling Corp. knows what it takes to be competitive across the globe. Now is the time for your company to start thinking about how your business can fit within the global market and figuring our what your global strategy is in order to grow your business. Keep in mind that, whether you need help making connections or with financing or mitigating risks, EDC can help.
- EDC is here to help companies in all sectors, all across Canada, grow their exporting business. That includes yours. Please get in touch with us and find out how we can help expand your business all over the world. Thank you.