Mining in Alberta The Potential of the Wild Rose TABLE OF CONTENTS Alberta: an Overview.....................................p58 This report was researched and prepared by The Regulatory Framework............................p59 Global Business Reports (www.gbreports.com) for Engineering & Mining Journal. Albertan Oil Sands: Mining for Oil...................p61 Editorial researched and written by Katie Bromley, Coal................................................p63 Lorenzo Piras and Pauline Hovy. Alberta’s Mineral Wealth...............................p65 For more details, please contact [email protected]. The Service Sector........................................p68 Corporate Social Responsibility......................p71 Cover Photo Courtesy of Syncrude. Conclusion....................................p72 A REPORT BY GBR FOR E&MJ APRIL 2012 MINING IN ALBERTA Alberta: an Overview From furs to oil, the development of the New West Between the 18th and the 19th centuries, If one also considers the increasing able than the oil sands, mineral mining in the economy of the region we now know global demand for oil and the royalties the Alberta is driven by the passion of a solid as Alberta depended almost solely on the industry brings to the provincial coffers, it group of people who firmly believe in the tastes in headwear of wealthy European becomes even easier to understand why the province’s mineral potential and seize ev- gentlemen. The region was the theater of mining of oil sands continues to dominate ery opportunity to promote it. The pioneer- a heated commercial rivalry between the the Albertan mining industry. ing projects of companies such as Grizzly Hudson Bay Co., the North West Co., and However mining in Alberta is not limited Discoveries, Channel Resources Ltd, Pacific independent local fur traders. European to oil sands. Coal still plays an important Potash Corp., Lithium Exploration Group headwear fashion of the time required men role, with giants such as Teck Coal Ltd and Inc. and DNI Metals Inc. are opening the to own tall felt hats; Canadian beavers were Sherritt International Corp. actively involved way for Albertan mineral mining to emerge heavily hunted in Alberta, together with in the province, and an increasing number in an otherwise oil-focused jurisdiction. many other species. When the first coal of Asian players are looking at Alberta’s coal deposits were developed commercially, fol- resources. Albertan coal is mainly thermal, The energy divide lowing the expansion of the railway towards but there are nonetheless interesting proj- There is no doubt that the Albertan mining Western Canada, Albertan wildlife must ects based on metallurgical coal. industry contains a divide, with oil sands have felt relieved. The risk in Alberta is that the two estab- (and, to a lesser extent, coal) on one side Coal was the focus of Alberta’s mining lished industries of oil sands and coal might and hard-rock mining on the other. Although operations for more than a century, from overshadow the province’s small but excit- open-pit oil sands operations use a similar the 1860s until 1967, when Great Cana- ing hard-rock mining sector. “Alberta is a extraction process to any other open-pit op- dian Oil Sands Ltd opened the first oil sands great place to be, with huge potential for eration, it is extremely rare for an oil sands- mine. From that moment on, oil sands min- a number of minerals,” said Brian Testo, focused company to branch out into other ing began playing an increasingly pivotal President and CEO of Grizzly Discoveries minerals in the same way that, say, a gold role in Albertan industry. Taxi drivers in Cal- Inc., an Edmonton-based junior focused on producer may pick up a rare earth project. gary and Edmonton claim that Alberta could potash and diamonds. It is similarly unusual for a hard-rock mining be the biggest oil producer in the world; a This perception is shared by Brad Ander- company to delve into oil sands. somewhat more conservative picture sees son, executive director of the Alberta Cham- This divide can be attributed to several Alberta’s deposits as the third largest in the ber of Resources. “Alberta has the resource factors. Most importantly, perhaps, is the world, after Saudi Arabia and Venezuela. A potential for junior companies, the govern- geological make up of the different deposits. substantial part of these resources are in the ment is open to dialogue and juniors know Oil sands occur in sedimentary formations. form of oil sands deposits, 20% of which, they will encounter political stability in the Several such formations exist in Alberta, the according to figures published by the Minis- province when it comes to developing or ex- largest (in terms of deposits) being the Mc- try of Energy of Alberta, are mineable. ploring for resources,” said Anderson. Murray Formation: a Cretaceous-period lay- The fact that oil sands, according to the Potash, iron ore, industrial minerals, dia- er of shale, sandstone and bitumen. Hard- Canadian Association of Petroleum Pro- monds, lithium, and uranium hold particu- rock deposits, in contrast, primarily occur in ducers (CAPP), account for 170 billion of lar potential in Alberta. A number of junior igneous or metamorphic formations. Canada’s 175 billion barrels of oil reserves companies and an expanding service sec- These separate areas of focus provide a could alone explain why Alberta has been tor, primarily clustered around Edmonton, compelling reason for the lack of overlap, so focused on this particular sector over the are working their way towards the develop- yet by no means the only one. Pierre Grat- past decades. ment of these resources. Albeit less profit- ton, President and CEO of the Mining Asso- ciation of Canada, believes that some hard- rock miners may disassociate themselves from oil sands for a far more subjective rea- son. “Oil sands operators are miners. Every- thing about it is mining. Where some might disagree probably lies in mining culture, where hard-rock mining and exploration is seen as riskier and therefore the top of the hierarchy,” said Gratton. With the Albertan oil sands due to attract almost half of the total investment directed at the Canadian mining sector over the next five to 10 years, however, an excess of ro- manticism on the part of certain hard-rock purists will not diminish the undeniable im- Legislature Building, Edmonton, Alberta. (Photo courtesy of the Government of Alberta). portance of oil sands for the industry. 58 E&MJ • APRIL 2012 www.e-mj.com MINING IN ALBERTA The Regulatory Framework Alberta — one of the most favorable mining destinations around the globe In the 2011/2012 Fraser Institute’s Annual While an ad hoc royalty scheme is be- ronment for junior companies: unlike in Survey of Mining Companies Alberta was ing developed to cover those mining proj- other jurisdictions, in this province com- ranked as one of the world’s most attrac- ects that are not yet in the production panies can invest with a certain degree of tive jurisdiction for mineral exploration and stage, the conditions in which junior com- security, because the business processes development. Rather than an acknowledg- panies operate are considered ideal. “An are straightforward and the rules are ment of the province’s developing mineral important advantage for small miners is clear,” said Walsh. industry, the survey indicates praise of Al- the all map-staking systems offered by the Another significant advantage is Alber- berta’s attractive regulatory framework and province; much easier and quicker to use ta’s focus on sustainability and social re- taxation system. than the traditional staking, used in other sponsibility. According to Les Sawatsky, The province offers a 10% personal in- provinces… For instance, Ironstone picked principal director of engineering at the come tax, a 10% corporate tax, no sales tax, up eight townships of land in Alberta, Calgary office of Golder Associates Inc., and no capital tax. Oil sands royalty rates amounting to roughly 75,000 hectares for a global engineering and environmental are linked to the fluctuation of the Western application fees of just C$5,000, whereas consultancy, the strict but straightfor- Texas Intermediate (WTI) price per barrel, in Ontario an investment of C$40,000 is ward environmental regulations imple- ranging from a minimum of 1% to a maxi- needed just to stake our much smaller mented by the provincial government mum of 9% on gross revenue, and from a property,” said Barry Caplan, President represent an important advantage for the minimum of 25% to a maximum of 40% on and CEO of Ironstone Resources Ltd, a ju- sustainable development of the mining net revenue. Coal royalty rates vary accord- nior company working on promising iron industry. In this context, it is also funda- ing to the type of product extracted, with ore and vanadium deposits in north-west- mental to note the government’s role in a fixed C$0.55/mt rate for sub-bituminous ern Alberta. funding bodies such as Alberta Innovates coal, and two rates for bituminous coal: 1% Alex Walsh, CEO of Lithium Exploration – Energy and Environmental Solutions of mine mouth revenue before mine payout, Group, a company focused on lithium-rich (AI-EES), whose mandate is to promote and the same 1%, but with an additional brines, praised the province’s stability. environment-related technological ad- 13% net revenue, after mine payout. “Alberta offers an extremely stable envi- vances in the sector. Minister’s Comments by Hon. Ted Morton, Minister of Energy, Alberta Alberta’s background in oil and gas is what makes it attrac- tive to junior companies; in the first four decades juniors drove the development of the oil sands. Our government has always had a partnership approach towards industries that, despite not playing such a pivotal role for the Albertan econ- omy as the oil sands do, share our goals of wealth creation and job creation.