May 2013

First place Finnish

Finland has excellent geology and business culture – but do not go in poor

By Eavan Moore

Above left: Geologists for Mawson Resources Ltd. check drill core in the snow | Courtesy of Mawson Resources Ltd.

When Michael Hudson began his Nordic explorations 12 years ago, Finland and neighbouring Scandinavian countries were not widely known for their mining. “I used to spend a lot of time telling people that these were mining countries, that they had been mining countries for hundreds of years, and it was more than just ABBA, IKEA and Nokia,” says Hudson, now president of Mawson Resources Ltd.

The rest of the world appears to have caught on. Finland placed first in the Fraser Institute’s 2012-13 survey of mining companies, as the world’s most investment-friendly mining jurisdiction. Its resource base, infrastructure, and clear-cut policies won praise from the 50 or so companies operating there, even as authorities struggle to accommodate both burgeoning mineral development and a newly heated debate over miners’ social licence to operate.

Ancient history

In a market especially wary of risk, Finland is a calming destination. Its university-educated, English-speaking workforce makes hiring a relatively simple affair. Mining taxes remain low, government officials make themselves accessible, and there is no sovereign risk. Technology firms and equipment suppliers like Outotec, Metso, Sandvik and Atlas Copco are easily accessible. Even high-latitude sites have road access and mobile phone reception. The Geological Survey of Finland provides exceptional maps and data.

This list goes on and on, but what puts Finland over the top is that it possesses a rich geology that invites comparison to Canada and Australia. Gold is today’s top target; in particular, the Proterozoic greenstone of Lapland hosts abundant gold and nickel deposits, according to Krister Sundblad, professor of geology at the University of Turku. On that greenstone belt, Agnico-Eagle’s seven-million-ounce Kittila mine has the largest gold resource in Europe. But the mines operating in the Finnish sections of the Fennoscandian Shield extract numerous minerals, including iron, nickel, copper, chromium, uranium, and platinum group metals. Sundblad’s recent work has explored indium deposits.

Although Finland’s mining history goes back 500 years, it still has some attributes of an emerging jurisdiction. “In Canada and Australia,” says Hudson, “we’re looking under 200 metres of cover these days for the next generation of deposits, whereas projects like ours [in northern Finland] are being found at surface.”

Playing catch up

One reason for this is that, prior to 1994, when an amendment to the mining act lifted a ban on majority foreign ownership, only a few state-owned companies operated in the country. The consequences of legislative changes only became apparent relatively recently, when a spike in exploration projects driven by rising metal prices compelled the government to revisit its mineral policies in 2006. “They weren’t that prepared for foreign investment, particularly in things like mining,” explains David Pym, CEO of nickel and gold miner Belvedere Resources Ltd. “So their mining law was a little bit untested.”

The country’s response to its mining boom has been productive, if rocky. The Ministry of Employment and the Economy introduced a public consultation mandate and began taking a closer, longer look at permit applications. The amended mining act, crafted over several years and put into force in 2011, added numerous safeguards for people and the environment; for example, exploration permitting functions were split off from the pro-mining Ministry of Employment and the Economy, and reassigned to the Finnish Safety and Chemicals Agency.

Unfortunately, the reorganization meant that 15 new employees, as well as mining companies and the public at large, had to be brought up to speed on a brand new permitting process in short order. Meanwhile, a backlog of exploration permit applications had grown since 2006. “It has been a very, very challenging time,” says Riikka Aaltonen, senior adviser of mineral policy at the Ministry of Employment and the Economy.

Corporate social responsibility and environmental issues became hot topics in the country. A public newly aware of mining and dismayed by a 2012 waste water pond leak at the Talvivaara nickel-uranium mine has put pressure on environmental regulators and miners to tread cautiously. Those opposed to mining projects – mainly for tourism, conservation or health reasons – increasingly take the opportunity to appeal development, adding further time to the approval process. Government data show that exploration permits take an average of about three years to make their way through the system.

The government’s goal is to cut down the wait to six months by mid-2014. But for now this pileup of delays has a significant impact on junior explorers, Hudson says. “It’s almost impossible to come in to Finland today and establish yourself if you haven’t already got a foothold or the money to wait.” His company, while it can afford to wait, has been affected. “We’ve had a very exciting gold discovery [at Rompas-Rajapalot],” he says. “It’s been getting a lot of attention, and of course we’ve been wanting to move on this project. It took us three years to get onto the ground to drill, and we’re still not through. A majority of our better target areas are still subject to environmental permitting to allow a drill rig.”

Delays also hit Belvedere’s Hitura nickel mine, which only recently received a mining lease extension to cover a tailings expansion, after applying for it four years ago.

Larger companies have navigated the process more smoothly. Ingmar Haga, vice-president for Europe at Canadian gold miner Agnico-Eagle, reported that the company’s Kittila project waited at most three years for its mining permits, and had secured every permit for which it applied. He notes, however, that mining companies are now more focused on communicating why mining is important. “I think that it’s good because the end result will mean that we will learn from each other,” he adds. While the national government and local communities tend to support mining operations, according to Haga, the people of southern Finland know less about the industry and are more inclined to distrust it.

Pragmatic people

Agnico-Eagle represents one of the larger firms operating in Finland; surprisingly few major mining companies have landed there. Pym of Belvedere Resources thinks the claim system deters majors from operating over the large land tenures they would prefer. A company staking claims must notify and pay a steep fee to every individual out of perhaps hundreds or thousands of landowners. “It’s quite time-consuming and expensive to stake large areas of land in Finland, and that tends to keep the majors out,” he comments. “Anglo-American’s really the only major that’s stuck in Finland and had big, consistent exploration.”

Haga explains that, in the Finnish view, staking off large tracts of land without working them misuses the resource. The Finnish model encourages companies to do their work quickly and move on, making exploration more efficient.

As a national characteristic, that tendency to get on with things is a major source of the optimism felt by foreigners operating there, who expect that Finns, focused on problem-solving, will find ways to untie their administrative knots. “Finland is a country with a very pragmatic approach to things,” explains Casper Herler, an attorney at Finnish firm Borenius Ltd. He points out that the current government is a functioning six-party coalition: “It’s possible to do things in the name of the general interest.” Legislators are, therefore, unlikely to make rapid policy shifts, according to Herler. The new mining law has room for discretion on the details but it remains generally mining-friendly. A proposed mining tax, put aside for at least the next two years, would be passed with caution.

Despite his frustration, Hudson believes Finland is the answer to soaring capital costs and an ever-riskier resource base. “What the world really needs is high-grade, permittable deposits in good jurisdictions,” he says. “I think Finland has almost come into its own.”

For more on the Fraser Institute’s survey of mining companies, see “Is perception reality?

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