Overview: Mining in NWT & NunavutGlobal Challenges, Regional Solutions

To: 2015 PNWER Economic Leadership Forum #5: Mining By: Tom Hoefer, Executive Director, NWT & Nunavut Chamber of Mines

November 17, 2015

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Key Messages

• Mining is our economic advantage • Mining has been and is important to our economies• We have more opportunities before us• But, we face challenges • We are not victims – there are actions we can take

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Mining is our economic advantage: GEOGRAPHY

Area of NWT + Nunavut = Norway, Sweden, Finland, Denmark, France, Germany, Poland, Spain, Portugal, Italy combined.

• Huge: 1/3 of Canada • Remote • Challenging Arctic

conditions & climate• Underdeveloped

infrastructure • Small population • Limited options for

farming, forestry, ranching, urban growth, manufacturing, etc.

NWT NUNAVUT

4

Mining is our economic advantage: GEOLOGY

• 8 geological provinces• Diverse mineralogy

– Gold, silver, diamonds, lead, zinc, uranium, tungsten, rare earths, cobalt, bismuth, nickel, copper, iron, etc.

• Under-mapped & remote means under-explored

• This equals tremendous mining opportunity

5

History of mining

• 1930s - Eldorado (uranium), Con, Negus, Rycon (gold)• 1940s - Giant, Thompson-Lundmark (gold) • 1950s - Rankin (nickel), Discovery (gold) • 1960s - Pine Point (zinc-lead), Cantung (tungsten) • 1970s - Nanisivik (zinc)• 1980s - Polaris (zinc-lead), Lupin, Cullaton Lake (gold) • 1990s - Colomac (gold), Ekati (diamonds) • 2000s - Diavik, Snap Lake, Jericho (diamonds)• 2010s - Meadowbank (gold), Mary River (iron)

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Historical mineral production – Over C$60 billion since 1932 –

Silver2%

Gold18%

Diamonds38%

Zinc30%

Tungsten3%

Lead8%

Uranium1%

Current & Past Producing Mines: Ekati • Diavik • Snap Lake • Meadowbank • Con • Giant • Lupin • Polaris • Nanisivik • Pine Point • Cantung • Discovery • Rankin Nickel • Rayrock • Outpost Island • Supercrest • Eldorado • Ruth • Terra • Norex • Silver Bay • Colomac • Tundra • Camlaren • Contact Lake • Ptarmigan • Tom • Mon • Cullaton Lake • Salmita • Hope Bay • Negus • Thompson-Lundmark • Rich • El Bonanza • Rycon • Bullmoose

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Diamonds – we are world leaders today

• The Northwest Territories by itself is the world’s 3rd

most valuable diamond producer

Russia26%

Botswana25%

Canada14%

Angola 9%

South Africa8%

Others 18%

Value of Global Diamond Production 2014

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Mining has contributed legacy infrastructure

• Communities: Yellowknife, Rankin Inlet • Roads to Resources, eg: highways to

Yellowknife, Pine Point & Ft. Resolution• Railway (to Hay River & Pine Point)• All 3 NWT hydro-electric facilities • Marine shipping & ports• Microwave communications

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Today, mineral production is from 6 mines

Ekati (diamonds)

Diavik (diamonds)

Snap Lake (diamonds)

Cantung (tungsten)Meadowbank (gold)

Mary River (iron)

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Our mines create huge value

• NWT: Diamonds are the most significant contributor with lesser tungsten & copper • NU: Gold is the most significant, with some silver (iron will come in 2015)

NWT, Nunavut and Yukon Mining Production

$653 $682$779

$874

$1,667

$2,112

$1,790

$1,638

$1,831

$2,123

$1,507

$2,045$2,140

$1,725$1,659.29

$1,886

$349 $385$321 $272

$35 $35 $4 $32 $35 $13 $0

$317$427

$614 $629.04 $642

$0

$500

$1,000

$1,500

$2,000

$2,500

19992000

20012002

20032004

20052006

20072008

20092010

20112012

2013

2014(p)

$C M

illio

ns

NWTNunavutYukon

Natural Resources Canada – March 2015

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Our mines create people & business success

• 22,000 person years northern mine employment – Today over 1,400 workers, 50% Aboriginal – Mining – largest employer of Aboriginal people

• Over $11 billion in northern business – $5 billion with Aboriginal businesses

• $100 million plus to communities in IBA payments, scholarships, donations

(Note: NWT diamonds example … Nunavut benefits similar)

www.miningnorth.com

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Our mines pay significant taxes

Diamond Mining Taxes

$0

$100

$200

$300

$400

$500

$600

$700

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

$C m

illio

ns

Mining royalties

NWT Corporate Taxes

Federal Corporate Taxes

•Source: GNWT – ITI Economic Model

• AND THAT’S NOT ALL! • ALSO PAYROLL, INCOME, FUEL, & PROPERTY TAXES!

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Aboriginal governments receive royalties, too

• NWT: Over $39 million in diamond resource royalties have been shared with settled Aboriginal claimants. Even more royalties are now being shared under NWT devolution arrangement.

• Nunavut: Inuit are collecting royalties from their own private lands. They are the largest private land holder in the world.

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$C ('

000s

)

Tlicho Government

Sahtu Dene Council

Gwich’in Tribal Council

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Mining – largest private sector contributor

• Mining’s contributions are even larger with spending in other sectors of the economy, eg, construction, transportation, real estate, trade, etc.

Mining18%

Construction12%

Real Estate11%

Public Admin22%

Education 7%

Health5%

Other25%

NUNAVUT GDP (2014)

Mining, Oil & Gas25%

Construction 13%

Transportation 7%Trade

9%

Real Estate 11%

Education4%

Health & Social6%

Public Admin15%

Other 10%

NWT GDP (2014)

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Mine lives are variable

1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030 2033 2036

Ekati

Diavik

Snap Lake

Gahcho Kué

Cantung

Meadowbank

Mary River

NWT & Nunavut Mine Lives

• Mines don’t last forever• To sustain and grow mining benefits, we must protect and attract investment

?

??

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Real NWT opportunity: Gahcho Kué diamond mine

• World’s largest and richest new diamond project– Capital cost $859 million– 700 construction workers – 400 operations workers– Operating costs $218m annually for 12 year mine life

• On plan and budget for first production H2 2016– October 2015, construction over 70% complete– De Beers 51%, Mountain Province 49%

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Real NWT opportunity : more robust Diavik mine

• US$350 million to develop A21 deposit over 4 years• Diamond production planned for late 2018• Does not increase mine life of 2023

– But makes operation stronger to end of mine – Brings construction jobs and business spending

Diavik owners have approved a US$350 million investment to mine its fourth kimberlite pipe, an orebody called A21, shown at far left, using similar dike technology as shown around the A418 and A154 pipes. Courtesy Diavik Diamond Mines Inc.

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Real NU opportunity: Hope Bay gold mine

• Construction underway • Production from first of 3 deposits in H2 2016 • TMAC Resources

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Potential Opportunities – advanced deposits

Hope Bay(gold)

High Lake(base metals)

Meliadine(gold)

Hackett River (base metals)

Kiggavik(uranium)

Ulu(gold)

Selwyn(base metals)

Prairie Creek (base metals, silver)

Gahcho Kue(diamonds)

Nechalacho(rare earths)

YK Gold (gold)

NICO(gold, cobalt, bismuth)

Pine Point (base metals)

Courageous(gold)

Back River(gold)

Izok(base metals)

Lupin(gold) Jericho

(diamonds)

Angilak(uranium)

Chidliak(diamonds)

Indin Lake(gold)

Mactung(tungsten)

Three Bluffs(gold)

Amaruq(gold)

Ekati-Jay(diamonds) Roche Bay

(iron)

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Hope Bay(gold)

High Lake(base metals)

Meliadine(gold)

Hackett River (base metals)

Kiggavik(uranium)

Ulu(gold)

Selwyn(base metals)

Prairie Creek (base metals, silver)

Gahcho Kue(diamonds)

Nechalacho(rare earths)

YK Gold (gold)

NICO(gold, cobalt, bismuth)

Pine Point (base metals)

Courageous(gold)

Back River(gold)

Izok(base metals)

Lupin(gold) Jericho

(diamonds)

Angilak(uranium)

Chidliak(diamonds)

Indin Lake(gold)

Mactung(tungsten)

Three Bluffs(gold)

Amaruq(gold)

Ekati-Jay(diamonds) Roche Bay

(iron)

Potential Opportunities – advanced deposits

THE OPTIMIST’S VIEWNWT:

• 1 diamond mine• 1 rare earth metal mine• 1 poly-metallic mine• 2 base metal mines

Nunavut: • 3 gold mines• 1 uranium mine• 1 base metal mine

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The “Chinese Hangover” – price challenges

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

Apr-00 Apr-02 Apr-04 Apr-06 Apr-08 Apr-10 Apr-12 Apr-14

US$

per

dry

met

ric to

nne

Iron Ore Price, 200-2015 Tungsten Price, 2010-2015

Zinc price

Uranium price

Gold price

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Exploration Financing Challenges – Global

Exploration Financing challenges, Canada too

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

$18,000

$20,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Valu

e of

Fin

anci

ngs (

$mill

ions

)

Year

Value of Junior Company Financings - Exploration StageProposed/Arranged ($millions)

Debt Financing (mil$)

Flow-Thru Financing (mil$)

Equity (non-FT) Financing (mil$)

Source: Gamah International

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All is not lost, though …

“This too shall pass!” History tells us that the markets will improve again.

One reality of the market place that we know

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We can’t change the marketplace, but … we can change ourselves

… take actions now to be ready for the market rise.

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We have some control of our fate

• Yukon and NU exploration investment followed the markets • NWT Exploration spending was out of synch = means self-inflicted

$0

$100

$200

$300

$400

$500

$600

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

$C M

illio

ns

Exploration & Deposit Appraisal Expenditures

NWTNunavutYukon

NRCan – Sept 2015

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We have some control of our fate

• Yukon and NU exploration investment followed the markets • NWT Exploration spending was out of synch = means self-inflicted

$0

$100

$200

$300

$400

$500

$600

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

$C M

illio

ns

Exploration & Deposit Appraisal Expenditures

NWTNunavutYukon

NRCan – Sept 2015

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Strategic action plans for mining

• NWT Mineral Strategy – 2013 – To prepare for devolution

• Strengthen mining, • Rejuvenate exploration• Support northern jobs, business

and taxes

• Some good actions to date, but … – Government needs to do more

• NU Mineral Strategy – 2007 – To create conditions for a strong and

sustainable minerals industry that contributes to quality of life for all

– Economy will depend on development of resources

• Strategy needs rejuvenation• Devolution is coming …

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Taking action to enhance investment

• Invest in infrastructure – “Level the Playing Field”• Increase certainty with regulatory improvement, eg:

– Do not proceed with regulatory cost recovery in the North – Exempt small projects from EA – MVRMA hair trigger

• Address land access uncertainty – Settle remaining Aboriginal Land Claims – Advance land use planning – Reduce growing protected/conservation areas

• Reduce the high northern cost of living • Create economic strategies that all departments support • Educate to increase public support for mining and our economy • Improve education outcomes and provide training• Have Public & Aboriginal gov’ts join in marketing to investors

www.miningnorth.com

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Conclusion

• Mining is proving its ability to create significant benefits for NWT and NU

• Exploration and mining are challenged by global and regional factors

• But there are actions we can take today to help our industry become even more beneficial and successful to our two Territories

Why it matters

Courtesy Diavik Diamond Mines Inc.