Capital Investment

INFORMATION BULLETIN, DECEMBER 2016

(published in February 2017)

Capital Investment in the Mining Sector Continues Its Downward Trend in 2015—Gold-Silver Mining a Bright Spot

Capital investment in the mining sectorFootnote 1 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 in the industry’s current production capacity and future demand.

Capital investment in the mining sector 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 2015 value of $9.6 billion representing a 43.5% drop since that peak, led by reductions in coal mining (-80.9%) and metal ore mining (-56.9%). Investment intentions are expected to decline modestly (-2.5%) from $9.6 billion in 2015 to $9.3 billion in 2016 due to reductions in nonmetallic mining that were only partly offset by gains in metal ore mining. Downstream mineral-processing industriesFootnote 2 contributed $4.9 billion to capital investment in 2015 and are expected to contribute $4.5 billion in 2016. Nearly 60% of the anticipated 2016 downstream investment ($2.6 billion) is attributable to primary metal manufacturing. More than one-quarter (28.6%) is attributed to nonmetallic mineral manufacturing, which is anticipated to break the $1 billion barrier ($1.3 billion) for the first time on record. Fabricated metal product manufacturing is expected to contribute $0.7 billion. Combined 2016 capital investment intentions for the mining and mineral- processing industries are down 4.0% from the previous year to $13.9 billion, which represents 6.8% of Canada’s total private-sector capital investment intentions.

From 2006 to 2015, the average annual growth rate of capital investment in the mining and mineral-processing industries was 7.6%, which outpaced both energy, which grew at 4.6% per year, and forestry, which experienced a 0.8% average annual growth rate.Footnote 3Footnote 4 Capital investment levels for both mining and mineral processing and energy declined in 2015 and are expected to do so again in 2016. In 2015, mining and mineral processing accounted for 13.4% of the total of the three natural resource sectors (Figure 2). Total capital investment in these three sectors is expected to be $94.5 billion in 2016, accounting for 40.1% of all capital investment intentions in Canada.

Investment in the Mining Industry by Sector

Following the global economic downturn of 2008/09, capital investment in the metal ore sector increased steadily until 2012 when it reached a record high of $11.0 billion. By 2015, expenditures had fallen 56.9% to $4.8 billion, driven by decreased spending for iron ore mining (-73.7%) and copper-zinc mining (-63.1%). In 2016, capital investment in the metal ore sector is expected to break from its downward trend and increase 17.7% to $5.6 billion, led by gains in gold-and-silver mining and nickel-copper mining.

The nonmetallic mineral mining sector 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 fell 15.4% to $4.6 billion. Investment is expected to fall further in 2016 by 23.2% to 3.5 billion, which coincides with the suspension of the Picadilly potash mine in New Brunswick and generally weaker potash prices.

Capital investment in the coal mining sector has plunged since a peak in 2012. Spending levels in 2015 ($206.9 million) were 80.9% lower than in 2012 and are expected to fall further in 2016 to $193.2 million, the lowest level in more than a decade.

Investment in the Mining Industry by RegionFootnote 5Footnote 6

All but four jurisdictions experienced a decline in mining capital investment in 2015. Yukon experienced the largest drop in expenditures (-37.6%) as the result of a mine closure and a major project slowdown that was not offset by expenditure increases at other advancing properties.

Capital investment increased in Nova Scotia (108.5%), the Northwest Territories (29.6%), Ontario (19.2%), and Nunavut (12.0%), all largely due to advanced projects progressing toward production or increased investment at existing operations.

Capital expenditure intentions point to modest increases in Newfoundland and Labrador, Ontario, and Alberta, with more notable increases anticipated in Nova Scotia, Quebec, Manitoba, and British Columbia.

In 2016, over 80% of Canada’s total capital investment in the mining industry was expected to be concentrated in Saskatchewan (26.2%), Ontario (23.1%), Quebec (20.1%), and British Columbia (11.0%), with investments expected to exceed $2 billion in the top three jurisdictions (Figure 3).

Notes: (1) Changes in capital investment spending are based on comparisons between 2016 intentions and 2015 preliminary actual spending. Statistics Canada and NRCan data may differ due to conceptual differences and the timing of the publication of the two data sets. (2) As of 2015, Statistics Canada updated its methodology related to the capital investment account system. As a result, expenditures related to mineral exploration are no longer classified to “capital investment, construction,” but to “intellectual property.” Historical data have been updated to reflect this change. Additional information regarding Statistics Canada’s methodological updates is available on its web site.


Figure 1
Allocation of Capital Investment in Canada’s Mining Industry, 2007-16

Figure 1 - Allocation of Capital Investment in Canada’s Mining Industry, 2006-15

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

 
Text Version - Figure 1
Figure 1. Allocation of Capital Investment in Canada's Mining Industry ($ Billions), 2007-16
Year Coal Mining Metal Ore Mining Nonmetallic Mineral Mining
2007 0.35 3.06 2.35
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 (p) 0.21 4.75 4.60
2016 (i) 0.19 5.60 3.53

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

 

Figure 2
Capital Investment Expenditures, 2015 (p)

Figure 2 - Capital Investment Expenditures, 2015 (p)

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

 
Text Version - Figure 2
Figure 2. Capital Investment Expenditures ($ Billions), 2015 (p)
Sector Value
Canada total 246,633.00
All other sectors 139,213.70
Natural resources 107,419.30
   Energy 90,011.60
   Foresty 2,961.80
   Mining and mineral processing 14,445.90
      Mining 9,557.20
      Mineral processing 4,888.70

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

 

Figure 3
Change in Capital Investment, by Jurisdiction, 2015 (p) to 2016 (i)

Figure 3 - Change in Capital Investment, by Jurisdiction, 2015 (p) to 2016 (i)

Sources: Natural Resources Canada; Statistics Canada.
(p) Preliminary actual investment; (i) Investment intentions.
(1) Includes the Northwest Territories, Nunavut, and Yukon.

 
Text Version - Figure 3
Figure 3. Change in Capital Investment, by Jurisdiction, 2015 (p) to 2016 (i)
Province/Territory 2015 (p) 2016 (i)
Saskatchewan 3,709.11 2,811.80
Ontario 2,382.10 2,477.10
Quebec 1,675.68 2,160.47
Territories (1) 1,674.01 1,231.76
British Columbia 969.29 1,186.61
Newfoundland and Labrador 368.51 371.09
Manitoba 238.78 282.97
Alberta 116.79 122.47
Nova Scotia 52.3 76.99
New Brunswick 92.76 20.14

Sources: Natural Resources Canada; Statistics Canada.
(p) Preliminary actual investment; (i) Investment intentions
(1) Includes the Northwest Territories, Nunavut, and Yukon.

 

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