O Canada!

Canada has Resources

When someone considers Canada, the first things that pop up in the mind are- maple leaf, harsh winter, and….natural resources!

Canada has natural resources like Saudi Arabia has oil and South Africa has diamond. Its no surprise that Canadian economy is largely resource based. With 1.7 trillion barrels of oil and plenty of gold and timber, Canada’s resource sector is the backbone of its triple-A rated economy.

Not only extracting and utilizing these resources from Mother Nature, the Canadians have taken this resource expertise to global level. They haven’t been content to stay home and ply their trades domestically. They are more adventurous than that. “Canadian know-how” has left few areas of the earth unexplored. Presently Canadian mining companies operate in 350 off-shore mines in different parts of the globe. They search for silver in Mexico and South America, gold in China, platinum in South Africa, diamonds in Namibia, oil in Indonesia, Iron from Sweden…well you get the picture.

Abundance above and beneath the Earth

Natural Resources- categorized as forests, minerals and metals, energy- form the backbone of the economy. These sectors have been engine of economic growth and job creation for generations. In 2009 alone, the sectors generated 11 percent, or $133 billion, of Canada’s GDP and directly employed 759,000 people.

Canada’s considerable natural resources are spread across its varied regions. In British Columbia the forestry industry is of great importance, while oil and gas industry is important in Alberta and  Northern Ontario is home to a wide array of mines. Canada is a world leader in the production of many natural resources such as gold, nickel, uranium, diamond and lead. It also is endowed with mineral resources of coal, copper and iron ore. Several of Canada’s largest companies are based in natural resource industries, such as EnCana (TSX: ECA), Cameco (TSX:CCO), Goldcorp (TSX: G) and Barrick Gold (TSX: ABX).

Gold

Canada is the 8^th largest gold producer in the world. As per 2011 estimate, 101 MT or 3.6% of global production was made in Canada.

The west of township of Timmins, located in the famous Abitibi Greenstone belt in Ontario-Quebec border is the major center of gold play. So far, 180 million ounce of gold have been found and 70 million ounce have been mined. Another prospecful area is the Yukon Territory. Since the famous Klondike Gold Rush in 1897, a new episode of New Yukon Gold Rush is taking place. It’s mainly happening due to the placer gold, washed by water and gravity, originating from a distant source. It is estimated that the amount of placer gold would be around 160 to 180 million ounce range.

Minerals

Many minerals are found within ancient rocks of the Canadian Shield, which is located in Central and Eastern Canada. Canada leads the world in the production of uranium, which is the fuel for nuclear power stations. Modern energy-hungry world will be hell-bent to get access to this precious radioactive metal. Canada is also the leading producer of potash- used for making fertilizers- with 33 percent of world’s supply (in 2005).

Fossil Fuel Resources

A new source of oil- oil sands- is being exploited in places such as Fort McMurray in northern Alberta. This is a mixture of thick oil and sand that is dug up and heated, releasing the oil which is then piped off. Known as Athabasca oil sands, this vast reservoir in Alberta give Canada the world’s third largest reserves of oil after Saudi Arabia and Venezuela, according to USGS.

Canada currently ranks as the world’s sixth largest producer of crude oil after Saudi Arabia, Russia, U.S., China and Iran, according to U.S. Energy Information Administration. Resurging growth in Western Canadian oil production and new oil sands investments drive the positive outlook. Canadian oil production is poised to more than double to 6.2 million barrels per day by 2030, which will put Canada in the top three to four oil producers in the world.

Global Center for Resource Financing

Toronto, Canada’s largest city and commercial center, is generally viewed as the mining finance capital of the world. Toronto is home to the Toronto Stock Exchange (TSX), to more than 400 mining and exploration company offices, over 30 mining company head offices and several hundred mining suppliers, consulting firms and service providers. The TSX is the global destination for financing international projects. During the last five years, 32 percent of global mining capital and 82 percent of financing transactions were handled through the TSX.

Future of Resource Based Economy

Countries with treasure troves of natural resources ordinarily experience currency appreciation during commodity bull markets. It is evident from the U.S. dollar and the loonie (Canadian currency) being in parity right now. And considering the commodity super cycle we are currently in, we suggest the bull market in Canadian dollars still has many years to run. The stocks in TSX and TSX-Venture also have yielded explosive gains during these times. Especially the junior mining stocks have been showing valuable returns.