Editorial: Race to the Finnish (June 06, 2006)

The geopolitical whirlwinds now buffeting North American miners in the Third World are only underscoring the hard truth that oftentimes it’s best for us to stick to First World countries where there is substantial mineral potential and a long history of prosperity, freedom and private wealth creation through mining. Regrettably, the list of countries that actually fit the bill isn’t very long: Canada, the U.S., Australia, Ireland, Norway, Sweden and Finland.

Relatively tiny Finland holds a unique place on that list, being especially inviting these days for foreign capital directed at mineral exploration and new mine development.

Like the people of South Korea, Poland and the Baltic states, the Finns have managed to emerge triumphant over a particularly tortured 20th century, much of which was spent being viciously trampled upon by their much-larger neighbours.In the tough decades after the Second World War, with Finland limping along in survival mode, mining within the Finnish territory was a strategically important industrial activity off limits to most foreign companies.

Instead, the Finnish government worked through the then-state-owned base metals giant Outokumpu and the iron-ore miner Rautaruuki, and used the Ministry of Trade and Industry’s geological survey (called the GTK, or Geologian Tutkimuskeskuksen) to carry out most prospecting in the country.

While Outokumpu substantially expanded its mining activities in Finland and around the world in the 1980s, its managers had reversed course by the mid-1990s, deciding to get out of the mining business and sharpen their focus on smelting, refining and metals technologies.

During the past 10 years, Outokumpu management has gone even further, shedding the company’s copper, zinc and nickel businesses to focus strictly on steel manufacturing and related technology. (Today’s Outokumpu has global sales of 5.6 billion euros annually.)

At the same time, Outokumpu was beginning to exit the mining business in the mid-1990s, the Finnish government was abandoning its long-held — and somewhat coerced — posture of neutrality and joining the European Union. As a requirement for EU entry, Finland had to open up its economy to foreign investment, including its minerals sector.

However, by the late 1990s, mineral commodity prices were tanking and few foreign mining companies were all that interested in what Finland had to offer.But still, the Finnish government kept up its strong support of its highly competent geological survey, allowing it to develop cutting-edge information technology, maintain its labs and carry out fieldwork.

Meanwhile, three more elements of a healthy mining industry also remained in Finland: a world-class mining-equipment manufacturing industry; excellent infrastructure throughout the country; and a highly educated and productive workforce.

And so, with metals prices beginning to rise in late 2001, it didn’t take long for a few Canadian, Australian, British and Swedish mining and exploration companies to realize they might make some money filling the huge vacancy left by Outokumpu in Finnish mining.

Of note, Inmet Mining jumped in with its purchase of the Pyhasalmi underground copper-zinc mine, and Sweden’s ScanMining reopened the bankrupted Pahtavaara gold mine.

There are only two other metals mines in operation in Finland today, but a fifth is on its way: Canada’s Agnico-Eagle Mines (AEM-T, AEM-N) has just committed to spend US$135 million building the Kittila gold mine on the Suurikuusikko deposit in northern Finland. It’s expected to produce around 150,000 ounces of gold annually, beginning in mid-2008 and lasting at least 13 years.

Agnico personnel shouldn’t suffer too much culture shock as they build their first mine overseas: the northern Finnish landscape is not unlike their usual stomping grounds in the Abitibi and miners are already using plenty of Finnish equipment at Agnico’s flagship LaRonde mine in Quebec.

Other foreign explorers now active in Finland include Scandinavian Minerals, North American Palladium, Gold Fields, Inco, BHP Billiton, Anglo American, Vulcan Resources, Taranis Resources, Dragon Mining, Karelian Diamond Resources, Areva, Northern Lion Gold, Belvedere Resources, Nordic Diamonds and Tertiary Minerals.

True, it’s a bit more expensive to hold claims in Finland than in Sweden and many other jurisdictions, but the upside of that is that companies tend not to lock up large tracts of unworked land.

Foreign companies working in Finland may hit a few more bumps along the road to success: Finnish personnel are relatively inexperienced with Canada’s National Instrument 43-101; and the famed Finnish tendency towards introversion can sometimes make communications difficult, even when using the latest newfangled product from Nokia.