Capital Investment

Information Bulletin, 2016

(published in August 2017)

Capital Investment in the Mining Industry Declined in 2016

Capital investmentFootnote 1 in the mining industryFootnote 2 is characterized by sizable up-front expenditures, protracted periods of sustained expenditures before revenues are generated, and elevated technical, economic, and financial risks. Firms tend to curtail expenditures when market conditions are unfavourable and accelerate investment plans when the outlook improves. As a result, capital investment is a barometer of the confidence of managers and investors regarding the industry’s current production capacity and future demand.

Capital investment in the mining industry weakened during the 2008/09 global recession, but rebounded in successive years, reaching a record high of $16.9 billion in 2012 (Figure 1). Investment has declined in each year since, with the 2016 value of $8.8 billion representing a 48.2% drop since that peak, led by reductions in iron ore mining (-$2.2 billion) and potash mining (-$1.6 billion). In 2017, investment intentions are expected to continue to decline from 2016 (-15.7%) to a near-recession value of $7.4 billion due to reductions in gold and silver ore and potash mining that may only be partly offset by gains in nickel-copper ore and iron ore mining.

Downstream mineral-processing industriesFootnote 3 contributed $4.2 billion to capital investment in 2016 and are expected to contribute $3.6 billion in 2017. Nearly 60% of the anticipated 2016 downstream investment ($2.3 billion) is attributable to primary metal manufacturing. Nonmetallic mineral manufacturing is expected to experience a sharp decline in 2017, dropping 46.6% from 2016 to $0.6 billion. Fabricated metal product manufacturing is expected to contribute $0.8 billion. Combined 2017 capital investment intentions for the minerals sectorFootnote 4 are expected to be down 14.5% from the previous year to $11.2 billion, which represents 7.5% of Canada’s total private-sector capital investment intentions, the smallest proportion since 2009.

From 2007 to 2016, the average annual growth rate of capital investment in the minerals sector was 7.0%, which outpaced both energy, growing at 3.7% per year, and forestry, growing at 3.4% per year, as well as Canada’s total private-sector investment, growing at 0.5% per year.Footnote 5Footnote 6 Capital investment levels for the minerals, energy, and forestry sectors declined in 2016. Forestry and energy are expected to see a slight increase in 2017 while the minerals sector is expected to again decline. In 2016, the minerals sector accounted for 14.5% of the total of the three natural resource sectors (Figure 2). Total capital investment in these three sectors is expected to be $88.4 billion in 2017, accounting for 36.7% of all capital investment intentions in Canada.

Investment in the Mining Industry by Subsector

Following the global economic downturn of 2008/09, capital investment in the metal ore subsector increased steadily until 2012 when it reached a record high of $11.0 billion (Figure 1). By 2016, expenditures had fallen 55.2% to $4.9 billion. Decreased spending for iron ore mining (-88.2%) and gold and silver ore mining (-26.4%) drove this downward trend, which, after a short reprieve in 2016, is expected to resume in 2017 when capital investment is forecasted to decrease 9.9% to $4.4 billion overall. While large gains are anticipated in iron ore (52.5%) and nickel-copper ore mining (50.5%), further loss is expected by the subsector’s largest contributor, gold and silver mining, which is anticipated to decrease by 26.3%.

The nonmetallic mining subsector experienced increases in capital investment in successive years between 2009 and 2014, reaching a high of $5.4 billion in 2014, led by potash mining. However, this upward trend halted in 2015 as investment started to decrease. By 2016, expenditures had fallen 33.5% to $3.6 billion. Investment in this subsector is expected to fall further in 2017 by 28.4% to $2.6 billion, mostly resulting from weaker investment in potash mining as a result of lower prices for that commodity.

Capital investment in the coal mining subsector has plunged since a peak of $1.1 billion in 2012. Spending levels in 2016 ($205.1 million) were 81.1% lower than in 2012; however, they are expected to rebound by 68.3% in 2017 to $345.1 million.

Investment in the Mining Industry by Region

All jurisdictions except Ontario and British Columbia experienced a decline in mining capital investment in 2016Footnote 7 (Figure 3). Saskatchewan experienced the largest drop (-36.4%) in expenditures as a result of declining potash prices.

Capital investment increased in British Columbia (30.8%) and Ontario (3.5%), largely due to advanced projects progressing toward production or increased investments at existing operations.

Capital expenditure intentions for 2017 suggest notable increases in Newfoundland and Labrador and Alberta with a slight increase anticipated in Manitoba. The remaining jurisdictions are expected to experience decreases, the most significant being Saskatchewan (-27.2%), British Columbia (-17.3%), and Ontario (-14.0%).

In 2017, almost 80% of Canada’s total capital investment in the mining industry is expected to be concentrated in Saskatchewan (23.3%), Ontario (24.8%), Quebec (20.2%), and British Columbia (9.9%), with investments expected to exceed $1 billion in the top three jurisdictions.

Notes: As of 2015, Statistics Canada updated its capital investment account system methodology. As a result, expenditures related to mineral exploration are no longer classified as “capital investment, construction,” but as “intellectual property.” Historical data have been updated to reflect this change. Additional information regarding Statistics Canada’s methodological updates is available on-line.


Figure 1
Mining Industry Capital Investment, by Subsector, 2008-17

Mining Industry Capital Investment, by Subsector, 2008-17
 

Sources: Natural Resources Canada; Statistics Canada.
(p) Preliminary actual investment; (i) Investment intentions.

Text Version - Figure 1
Figure 1. Mining Sector Capital Investment, by Subsector ($ billions), 2008-17
Year Coal Mining Metal Ore Mining Nonmetallic Mineral Mining
2008 0.73 4.37 2.25
2009 0.36 3.54 2.30
2010 0.70 5.50 2.85
2011 0.97 8.11 3.08
2012 1.09 11.02 4.81
2013 0.67 9.17 5.24
2014 0.38 5.30 5.43
2015 0.23 4.88 5.08
2016 (p) 0.21 4.94 3.61
2017 (i) 0.35 4.45 2.59

Sources: Natural Resources Canada; Statistics Canada.
(p) Preliminary actual investment; (i) Investment intentions.


Figure 2
Capital Investment by Sector, 2016 (p)

Capital Investment by Sector, 2016 (p)
 

Sources: Natural Resources Canada; Statistics Canada.
B = billion; (p) Preliminary actual investment.

Text Version - Figure 2
Figure 2. Capital Investment by Sector ($ billions), 2016 (p)
Sector Value
Canada total 238,715.7
All other sectors 148,815.4
Natural resources 89,903.3
Energy
74,391.8
Forestry
2,351.0
Mining and mineral processing
13,157.5
Mining
8,990.6
Mineral processing
4,166.9

Sources: Natural Resources Canada; Statistics Canada.
(p) Preliminary actual investment


Figure 3
Mining Industry Capital Investment, by Jurisdiction, 2015-17

Mining Industry Capital Investment, by Jurisdiction, 2015 to 2017
 

Sources: Natural Resources Canada; Statistics Canada.
Note: Prince Edward Island, New Brunswick, the Northwest Territories (2015/16) and Yukon data are suppressed to meet the confidentiality requirements of the Statistics Act.

Text Version - Figure 3
Figure 3. Mining Industry Capital Investment ($ Millions), by Jurisdiction, 2015 to 2017
Province/Territory 2015 2016 (p) 2017 (i)
Saskatchewan 3,722.5 2,366.8 1,722.5
Ontario 2,056.7 2,128.0 1,830.8
Quebec 1,642.9 1,578.6 1,490.7
British Columbia 675.7 883.7 730.7
Newfoundland and Labrador 257.5 226.6 341.8
Northwest Territories x x 490.4
Nunavut 355.7 334.0 259.1
Manitoba 220.4 200.6 211.3
Alberta 134.0 130.6 174.2
Nova Scotia x 150.7 104.9
New Brunswick x x x
Yukon x x x
Prince Edward Island x x x

Sources: Natural Resources Canada; Statistics Canada.
(p) Preliminary actual investment; (i) Investment intentions;
Note: Prince Edward Island, New Brunswick, the Northwest Territories (2015/16), and Yukon data are suppressed to meet the confidentiality requirements of the Statistics Act.

© Her Majesty the Queen in Right of Canada, as represented by the Minister of Natural Resources, 2017