Investment in Canada’s mining sector to grow with global demand, BMO

Canada's mining sector could see an increase in global investment, driven by rising demand for critical minerals, government support and expanding development spending, according to BMO Global Metals & Mining. The outlook was presented ahead of the Canada Investment Summit, which aims to attract $1 trillion in total investment in Canada over the next five years.

Canada is already a major player in the mining industry, ranking as the world's largest potash producer, second-largest uranium producer, and fourth-largest gold producer and aluminum refiner. With its expertise in mining and supportive regulators, the country is well-positioned to expand further. Development spending is expected to rise to C$120 billion by 2025, up from the 2018 outlook of C$70 billion.

However, there is still significant room for growth. BMO Equity Research forecasts that annual Canadian development capital expenditures will increase by more than 11% over the next two years. To capitalize on this opportunity, investors are advised to shift their focus from upstream to downstream investment, focusing on key areas such as copper smelting and refining, battery precursor materials, and rare earth separation.

Infrastructure development is also crucial, with potential opportunities in British Columbia, Ontario's Ring of Fire, and Nunavut. BMO recommends developing niche critical-mineral supply chains, which may require government intervention and targeted price supports to address challenges such as volatile prices and limited domestic processing capacity.

By allocating infrastructure investments separately from mine development, specialized infrastructure funds can be attracted, reducing the cost of capital and increasing the potential for mining capacity and downstream industry growth. Canada's mining sector has the potential to generate competitive risk-adjusted returns and enable funds to invest more domestically, ultimately helping to unlock new mining districts and create a more complete domestic supply chain.