Industry Trend Analysis - Mining Final Frontiers: Arctic Ambitions - NOV 2017

BMI View: Mining in the Arctic will become increasingly attractive over the next decade, driven by junior miners investing in greenfield exploration and larger firms expanding existing operations. R ising mineral prices will allow for riskier projects, declining ore grades at traditional operations will push exploration to more remote locations, and melting ice due to climate change will open up trade routes north of the 60 degree line of latitude , all of which will catalyse this trend .

The Arctic will emerge as a 'final frontier' of mining over the coming years, given the region's significant mineral deposits, improving mineral price outlook, and increasing accessibility from melting sea ice. The area is typically defined as north of the 60 degree line of latitude, which encompasses territory of coastal countries including Canada, Denmark and Greenland, Finland, Iceland, Norway, Russia, Sweden and the US. Whereas Article 7 of the Protocol on Environmental Protection to the Antarctic Treaty prohibits mineral extraction except for scientific purposes, the UN Convention on the Law of the Sea leaves the decision making power regarding the Arctic largely to the aforementioned coastal states. However, the US has not signed the UN Convention. Nonetheless, given the region's small population and established jurisdictions, the risk of geopolitical tension over mining in the Arctic will remain low.

The Arctic subsequently compares favourably as a frontier market compared to countries in West Africa or Southeast Asia, where regulatory uncertainty, political instability and fierce local opposition to mining projects can raise costs, delay projects and in some cases lead to significant financial impairments for miners ( see 'Regulations Shaking Up SSA Mining Landscape', July 24 2017). The mining industries of Russia and Canada, which we expect to total USD195bn and USD22.5bn, respectively, in 2017, will lead the charge to develop projects in the Arctic, supported by significant existing presences in the region and well-established mining industries.

Miners To Head North For New Projects
The Arctic
Arctic Circle line at 66 degrees north of the Equator. Source: Geological Survey of Norway

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