Excessive global expansion by North American mining companies over the past several years has exposed companies to unnecessary risks and large unexpected losses.  In search of more stable political environments, companies are returning home to Ontario and Quebec and also places like Washington, California and Oregon State are attracting new investment for the first time in decades.

Global expansion for larger mining companies was initially driven by a need to diversify into different sales markets and financial regimes, however, for many companies the drive was the lure of mineral wealth in less explored but risky countries. This trend pervaded the sector, and with numerous failures, many companies are now licking their wounds. Prior to writing down billions of dollars in losses, many North American mining companies were actively exploring and acquiring mineral properties in parts of Asia, Eastern Europe, Africa and South America that turned out to be very unfavourable for mining investment.

Canadian miners including Gold Corp., Kinross Gold Corp., and Barrick Gold Corp. are good examples of the North American mining sector’s rapid global expansion. Barrick was drawn to Zambia by expectations of large ore deposits and low operating costs. However, a royalty rate hike by the Zambian Government triggered a monstrous $4.2 Billion write-down on its Lumwana mine.  A few months ago Barrick announced another $2.8 Billion write-down for two mines that will be sold. One of the mines to be sold is the large Porgera Mine in Papua New Guinea. Even though Porgera produced nearly 500,000 ounces for Barrick in 2014, it was plagued with violence and hostility. Barrick has reported that it is refocussing on its Nevada projects, where they expect to get the best return.

Kinross acquired the Fruta de Nortes deposit in Ecuador in 2008. After a long battle with the Ecuadorian government, Kinross divested the project at a loss of nearly a billion dollars.  The losses at Fruta de Nortes are estimated to be equivalent to the profits yielded by their Buckhorn deposit in Washington State over the same period of time. Their Kupol project is a large high-grade low cost producer, a miner’s dream, with the exception that the mine is in Russia.  Until President Putin ceases his imperial aggression, sanctions, political uncertainty, and a volatile Ruble add major risk to this project. Even with recent improvements to the Russian economy, it would be a good bet that Kinross is mining their Russian deposits as fast as possible to get as much ore out while they can.
 Foreign investment is not only affected by political instability; production losses due to events such as power rationing in Ghana and Brazil is also a risk reality for Kinross. As recently as a few months ago, Kinross initiated exploration in Canada around Val d’Or. Their mining operations in Nevada, Alaska and Washington State represent long term profit centers for the company and provide significant growth opportunities as they utilize existing infrastructure and development.

Gold Corp. finished construction of the Cerro Negro project in Argentina and only five months after its first gold pour wrote down $2.3 Billion on the project due to import restrictions and limits on converting the local currency into dollars. Ouch! Gold Corp. recently showed its intentions of refocussing in North America through its acquisition of Probe Metals Inc.

There is no question that there is a renewed interest in mining in North America and unexpectedly, all of this interest is not going into Nevada, one of the world’s most prolific gold producing areas.  The Canadian mid-tier producer Alamos, which is a well-established miner in Mexico, has recently acquired a significant gold project in Oregon.

Areas such as Washington State are becoming more active and have attracted Canadian companies. Washington is historically a mining region known for high-grade gold deposits, but over the past two decades there has been little exploration activity. These areas are therefore under-explored by modern methods.  Junior mining companies like Adamera Minerals Corp. recognize the opportunity and are aggressively targeting these areas with precise low-costs exploration campaigns that take advantage of infrastructure, and in the case of Washington State, an underutilized mill owned by Kinross.

Being a discovery-based industry, mining companies often look for the next frontier for discovery. If reducing risk is a driver, companies will re-focus investment funds in North America, especially the US, making the US the next discovery frontier.

In this risk adverse environment, Canada and the US are attractive for mining investment.  The US has an advantage over Canada in that many parts of the US with well-developed infrastructure are under-explored by modern methods. In the long run, this will outweigh the current Canadian – US dollar exchange rate. The US is emerging as the next discovery frontier.

Companies have started to re-think their global expansion strategies because investors are demanding it. Having secure land title, well-developed infrastructure, dependable mining law and political stability of US standard are corner stones in the mining industry, not a luxury.