* Emerging nations fueling demand for metals, commodities
* Miners face challenges to meet that demand
* China in 33 mining deals worth $9.2 billion in 2009
* China seen continuing to pursue mining deals (In U.S. dollars unless noted)
By Julie Gordon
TORONTO, Dec 1 (Reuters) - Surging demand for resources is forcing Canadian miners to look at projects in riskier regions where they will need to change how they do business in order to succeed, according to a report released on Wednesday.
With rapid industrialization in the emerging world driving demand, and countries like Russia, India and China restricting exports of metals and minerals, Canadian miners are scrambling to fill the gaps, the Deloitte consultancy report, entitled Tracking the Trends 2011, said.
But while the normal response to growing demand is to simply ramp up production, new mining taxes and royalty regimes make that less straightforward, while national, political and environmental concerns make it more difficult for mining companies to get permits to expand or build new mines.
“Market forces today are far from typical,” said Deloitte’s Philip Hopwood. “These trends are creating a supply shortage that challenges mining companies to rethink their operational strategies.”
Even if a mining company secures permits, lack of infrastructure and a shortage of skilled labor makes projects in far-flung regions such as Mongolia or West Africa risky.
But the world needs commodities, and if Canadian miners can position themselves to capitalize on deposits in these new mining regions, the benefits could be big.
“With the combination of surging commodity prices, labor shortages, and more demand than supply, one can almost imagine that we are back in the heyday of the mining boom,” said Deloitte’s Glenn Ives.
To win in this new “boom”, Canadian miners must adapt, according to the report.
This means looking to alternative funding sources, including direct off-take agreements with China and India, engaging local stakeholders, and building skilled regional labor forces from the ground up.
This will also ensure Canadian miners are attractive targets should deal-hungry China come knocking, the report said.
“China is the 800-pound gorilla in the room,” said Deloitte’s Mining M&A leader Jeremy South. “Thanks to its ability to influence demand and control the market, the country is beginning to influence global commodity prices.”
With China looking to gain control of more resources such as uranium, coal, copper and rare earths, Deloitte expects to see Chinese interests not only funding projects, but also acquiring Canadian mining companies.
China accounted for 33 global mining deals worth a combined $9.2 billion in 2009, said Deloitte.
The report added that 73 percent of Chinese companies expect the pace of dealmaking to continue at the same level.
This means Canadian miners need to make sure they have diverse projects, secure licenses and funding in place, said South, “so they can be positioned to attract fair value should the Chinese, or other acquirers, come calling.” (Reporting by Julie Gordon; editing by Peter Galloway)