Canada Opens Arms to Uranium Investment

In last week’s Throne Speech, the Harper government laid out plans to liberalize foreign investment in the Canadian uranium industry in an effort to fire up mining activity. The move comes at a critical time as Canada, the long-time leader in global uranium production, will be outdone by Kazakhstan this year and risks falling behind Australia in the near future.

Although Canada has “the most favorable geological environment” and “the highest grade deposits . . . these projects cost billions of dollars to build and by having foreign investment they are going to create further jobs and keep Canada on top of the pedestal,” points out Simon Tonkin, analyst at Thomas Weisel Partners.

Present legislation restricts foreign ownership in Canadian uranium mining projects to 49 per cent. The Harper government views the cap as too restrictive in that it “inhibit[s] the growth of Canada’s uranium mining industry by unduly restricting foreign investment.”

The hope is that a more open investment climate will lead to a more robust Canadian uranium mining industry and help keep it on par with its global competition. The move is a part of Ottawa’s wider plans to promote economic growth and create employment in Canada that includes opening up the satellite and telecommunications industries as well.

The announcement was welcome news to one of the world’s largest uranium mining companies, France’s Areva, which holds several minority positions in exploration and producing projects in Canada.

“It’s something we’ve been lobbying and promoting with the government for some time,” said the head of Areva’s Canadian unit, Roger Alexander. “We’re pleased to see they recognize it is an issue they need to address. It will certainly help us with upcoming projects that we anticipate for the future.”

Despite applauding the positive implications for Canada’s uranium sector, world leader Cameco hopes the government’s more relaxed policy includes some tit for tat.

Cameco’s CEO Jerry Grandey said a more liberalized policy that doesn’t include other countries opening up their markets as well would be a mistake.

There are indications such prerequisites would be a part of any new policy. The policy review panel that first recommended such changes back in 2008 also stipulated that reciprocity should be central to any new legislation.

Canadian Uranium and the Nuclear Power Industry

The Canadian Nuclear Association is also smiling after the Throne Speech as it sees a more liberal investment policy as a huge step toward improving competition in the industry.

Part of the government’s plan would include simplifying the regulatory and project approval process in Canada’s resource sector, which nuclear energy companies view as key to providing certainty in a very cost intensive industry.

“Nuclear projects have high capital expenditure,” said Laurent Furedi, nuclear communications services centre manager at French energy group GDF Suez. “Nuclear companies need stability with regard to the approvals and regulatory processes, and so on.”

Uranium demand from nuclear power programs in both China and India are expected to eat a big chunk out of global supplies in the coming years, leading to a rebound in recently depressed uranium prices. India and Canada have already inked an agreement over nuclear technology trade. China would savour the opportunity to more aggressively secure fuel supply from Canada.

Exploration Tax Credit Extension

Canadian junior miners have something to smile about, too. It looks like the government will extend the 15 per cent mineral exploration tax credit yet another year until March 31, 2011.

The “flow-through system,” as it’s called, helps create interest in junior miners who need help funding exploration projects. It lets juniors mining in Canada “flow through” their exploration costs to Canadian investors, who can then use them as a write-off on their taxes.