BCAdvantage 2008; Business and investment across British Columbia

There may be gold in the hills, copper in the valleys and a host of minerals in-between, but for many B.C. businesses the richest discoveries are to be found within an eight-block zone in downtown Vancouver.

The city’s business core has undergone a quiet metamorphosis over the past five years, becoming a magnet for much of the world’s mineral exploration and mining industry.

Once suffering through a combination of an extended commodity price lull and development-unfriendly government policy, the industry has taken off since 2002.

It has spawned a host of secondary, locally based enterprises – everything from geological, engineering, mining technology and consulting firms to analytical laboratories, material suppliers and investor relations firms.

Finance houses, which helped attract junior exploration companies here in the first place, are doing a roaring trade raising capital for projects all over the world.

“I can’t think of any other place in the world where this concentration of professionals actually exists,” said Michael McPhie, the outgoing president and CEO of the Mining Association of B.C., which represents the $10 billion a year industry. “Vancouver is one of the only places I’ve ever been to in the world where you can come up with an idea, get your exploration geologists, organize a field program and, if you discover something, you can find the engineers, the environmental scientists, the consultants – all the people you need to permit it and bring it into production.”

These companies are spending a ton of money on people, supplies and services, said McPhie. And, on trying to unearth the next big discovery.

Mineral exploration activity in B.C. rocketed to an all-time high of nearly $416 million in 2007, an increase of 57% over 2006 and a whopping 1,300% from 2001.

The mining association estimates that every dollar spent directly injects a further $3 into the local economy. The city’s business core is home to more than 735 publicly listed exploration and mining companies, but associated with every one of them are also the accounting and law firms. Sixty per cent of Canadian exploration and mining companies are based in B.C., which has the world’s largest concentration of exploration companies and mining professionals.

“Drilling companies, they’ve grown like mushrooms. Analytical labs are just running flat out and have been for the last several years because they just can’t keep up with the demand for services,” said Jim Mustard, a former vice-president and senior mining analyst at Haywood Securities Inc. who joined city-based zinc-lead-silver explorer Mantle Resources Inc. in 2007. “The whole industry is just going at warp speed,” Mustard said, adding that anybody associated with it is benefiting.

In 2007, B.C.-based companies, most of them headquartered in downtown Vancouver, raised $6 billion in equity capital for projects, or about 37% of the total equity capital raised for Canadian-listed exploration companies, according to latest statistics provided by the B.C. Ministry of Energy, Mines and Petroleum Resources.

“The developing nations’ demand for commodities has set all new records for commodity prices, so it’s created a very buoyant market,” said Peter Brown, chairman of Vancouver-headquartered Canaccord Capital Inc., Canada’s largest independent investment dealer. “They’ve been able to raise record amounts of money.”

The windfall is being shared by 1,689-employee Canaccord and other investment firms, including city-based Haywood Securities. “We do more mining finance than probably anybody in the country,” said Brown, whose company focuses on five sectors, including energy and technology. “To some of us, which I include myself, mining finance is our first love.”

In B.C., tax incentives such as the popular flow-through shares, have been a huge success in being able to finance local projects – and made it a lot easier for investment firms to sell deals.

Unlike most exploration companies that don’t have the benefit of writing off expenditure against revenue, the flow-through scheme enables an individual investor to write off that investment against his or her income.

While it may be heading into a bear market, the industry was still robust, Brown added, with mining still a very profitable business with positive spin-offs for Vancouver businesses.

“The mining community is fully employed in Vancouver,” he said. “It’s a big mining community here. There was a decade in the ’90s when they couldn’t get a job. Now there’s a shortage of people.”

It’s not only companies providing technical services that have sprung up, but those specializing in aboriginal, community and governmental relations, said Rob Pease, immediate past chairman of the Association of Mineral Exploration B.C.

Vancouver’s reputation as a hub for exploration and mining is reinforced by the ability to pull in global industry players to the city like never before, providing brisk business for organizers and ancillary service providers of industry-related conferences.

“We’ve seen our business flourish over the last three, four, five years because of this bull run that we’ve had in commodities,” said Howard Fitch, president of Cambridge House International Inc.

Vancouver-based Cambridge has put on resource investment conferences, mainly mining, for over a decade, and most recently in January with its flagship Vancouver Resource Investment Conference.

In 2000, shortly after the ill-fated junior exploration company Bre-X Minerals Ltd. sank investor confidence in the industry to an all-time low, Cambridge had 65 exhibiting companies at its Vancouver conference. A paltry 40 of them were resource companies. Its 2008 conference had 428 paid booths, with more than 450 exhibiting companies. •

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