Where is the most attractive for mining investment?
An annual survey reveals Australia has again polled strongly in the global landscape for mining investment, and provides some insights into the opportunities and barriers shaping the global industry’s future.
Each year the Fraser Institute, an independent, non-partisan Canadian policy think-tank, conducts its Annual Survey of Mining Companies. The survey is an attempt to assess how mineral endowments and public policy factors such as taxation and regulatory uncertainty affect exploration investment.
The purpose of the survey is to create a ‘report card’ that governments can use to improve their mining-related public policy in order to attract investment in their mining sector to better their economic productivity and employment. The results also offer a snapshot to all mining stakeholders of the most attractive jurisdictions in the world for mining investment, providing insight into trends shaping the global mining industry. This article is a summary of the full results of the most recent 2020 annual survey.
The survey was circulated electronically to approximately 2,200 individuals between August 6 to November 6, 2020. Survey responses have been tallied to rank provinces, states, and countries according to the extent that public policy factors encourage or discourage mining investment. We received a total of 276 responses for the survey, providing sufficient data to evaluate 77 jurisdictions. By way of comparison, 76 jurisdictions were evaluated in 2019, 83 in 2018, 91 in 2017, and 104 in 2016. The number of jurisdictions that can be included in the study tends to wax and wane as the mining sector grows or shrinks due to commodity prices and sectoral factors.
Jurisdictions are added to the survey based on interest from survey respondents, and their inclusion fluctuates based on a variety of factors such as industry turnover, industry downturns, and the movement of mining investment into jurisdictions seen as more attractive.
Given the survey’s very broad circulation, its extensive press coverage, and the positive feedback we receive from miners, investors, and policymakers about its usefulness, we believe that the survey broadly captures the perceptions of those involved in both mining and the regulation of mining for the jurisdictions included.
The Investment Attractiveness Index
To present the survey results, an overall Investment Attractiveness Index is constructed by combining the ‘Best Practices Mineral Potential Index’, which rates regions based on their geologic attractiveness, and the ‘Policy Perception Index’ (PPI), a composite index that measures the effects of government policy on attitudes toward exploration investment.
While it is useful to measure the attractiveness of a jurisdiction based on policy factors such as onerous regulations, taxation levels, the quality of infrastructure, and the other policy related questions that respondents answered, the Policy Perception Index alone does not recognise the fact that investment decisions are often sizably based on the pure mineral potential of a jurisdiction. Indeed, as discussed below, respondents consistently indicate that approximately 40 per cent of their investment decision is determined by policy factors.
The top jurisdiction in the world for investment based on the Investment Attractiveness Index is Nevada, which moved up from 3rd place in 2019. Arizona, which ranked 9th in 2019, moved into 2nd place this year. Saskatchewan climbed eight spots from 11th in 2019 to 3rd in 2020. Western Australia ranked 4th this year after topping the ranking last year, and Alaska dropped a spot from 4th in 2019 to 5th in 2020. Rounding out the top 10 are Quebec, South Australia, Newfoundland and Labrador, Idaho, and Finland.
When considering both policy and mineral potential in the Investment Attractiveness Index, Venezuela ranks as the least attractive jurisdiction in the world for investment followed by Argentina’s Chubut province, and Tanzania. Also in the bottom 10 according to the survey are Indonesia, Argentina’s La Rioja, Bolivia, Argentina’s Mendoza, Zimbabwe, Spain, and Michigan.
Australia and Oceania
Considering both policy and mineral potential, Australia is the most attractive region in the world for mining investment. Western Australia (4th) and South Australia (7th) appeared in the global top 10 on the Investment Attractiveness Index in this year’s survey.
All Australian jurisdictions saw improvements in their PPI scores this year over 2019. Victoria was the Australian jurisdiction with the highest increase in its PPI score (+10 points) since last year. When evaluating Victoria, miners expressed decreased concern about the uncertainty regarding the administration, interpretation, or enforcement of existing regulations (-33 points), environmental regulations (-27 points), and regulatory duplication and inconsistencies (-27 points).
New South Wales continues to be Australia’s lowest ranked jurisdiction when considering policy factors alone. New South Wales saw its PPI score increase by a little over 5 points this year, but its rank decreased from 46th (of 76) in 2019 to 49th (of 77) in 2020. This year, miners expressed increased concern over protected areas (+14 points) and decreased concern over the administration and enforcement of existing regulations (-10 points). However, regulatory factors continue to hinder New South Wales’s competitiveness as 89 and 81 percent of respondents pointed to environmental regulations and regulatory duplications and inconsistencies, respectively, as factors deterring investment.
This year, only three jurisdictions in Oceania received sufficient responses to be included in this year’s survey: Indonesia, New Zealand, and Papua New Guinea. According to respondents, Oceania is the lowest ranked region in both overall investment attractiveness and policy perception. However, within Oceania, all three ranked jurisdictions saw improvements in their PPI scores this year. In terms of policy, New Zealand is still the best performing jurisdiction in the region ranking 32nd (of 77) with a score of 80.3. This year, miners expressed decreased concerns over New Zealand’s political stability (-42 points), its socioeconomic agreements and community developments (-22 points), and the uncertainty concerning disputed land claims (-18 points).
Despite seeing an almost 7-point increase in its PPI score, Indonesia’s rank dropped from 64th in 2019 to 69th in 2020. Respondents expressed decreased concerns over the uncertainty around disputed land claims (-40 points), protected areas (-35 points), and regulatory duplication and inconsistencies (-19 points). Ninety per cent of respondents cited the country’s legal system as a main deterrent to investment.
Of interest is the difference in results between regional median investment attractiveness and PPI. For example, the United States performs less favourably in terms of its median investment attractiveness score, while performing better as a region on the PPI. This indicates that what is driving the region’s investment attractiveness rank is investors’ views of America’s pure mineral potential and not necessarily policy. In contrast, Australia ranks as the most attractive region for mining investment but ranks 4th when considering policy alone, indicating that what is driving Australia’s investment attractiveness is its mineral potential.
Find out more
The full survey results, available at the Fraser Institute website, go into more detail surrounding the survey including breakdowns of respondents and a subsection on an analysis of permit times.