Thomson Reuters






By Euan Rocha and Susan Taylor


TORONTO, March 5 (Reuters) - Canadian gold projects once
shunned by miners in favor of more alluring opportunities
overseas are regaining their sheen, as a weaker currency, new
tax breaks and greater security of tenure are wooing miners to
return home.


In the gold rush during the last decade, Canadian miners had
largely focused on projects in far flung countries that often
offered much larger potential output than what was available at
home.


But a rash of windfall gains taxes, political turmoil and
even outright expropriation have caused those miners to rethink
their strategies.


"Canada is, for all intents and purposes, one of the best
places you can explore," said Ian Ball, president of Abitibi
Royalties Inc. "It had fallen out of favor a bit, but it
is coming back quite rapidly."


At this week's Prospectors and Developers Association of
Canada convention, the world's largest mining gathering, the
mood was somber. Many junior mining companies ravaged by the
downturn in metal prices have struggled to raise financing, or
attract the interest of larger rivals.


But that trend is beginning to turn for some of those with
gold projects in Canada.


"We have noticed that mining companies are really, really
looking at Canadian projects," said Richard Boulay, a director
with Moneta Porcupine Mines Inc. He said Moneta, which
owns gold projects near Timmins, Ontario, had been approached by
five major miners at the convention seeking details on its
assets.


These Canadian mines generally do not hold the promise mega
projects like Barrick Gold Corp's Pascua Lama asset in
South America and Kinross Gold Corp's Tasiast mine in
Africa. But bets like those soured badly and resulted in
billions in write-offs.


Miners are now keen on smaller assets in safer jurisdictions
that cost less and are faster to build.


And even though project permitting can be arduous in Canada,
much of the recent takeover activity in the sector has centered
around Canadian gold assets.


In January, Canada's Goldcorp Inc agreed to buy Probe
Mines Ltd in an all-stock deal that valued the owner of
the Borden Gold project in Ontario at C$526 million ($421
million).


Late last year, Osisko Gold Royalties Ltd agreed to
buy smaller rival Virginia Mines for C$479 million, winning
control of royalty interests in two major Quebec mines.


Those deals came less than a year after Yamana Gold Inc
and Agnico Eagle Mines Ltd bought Osisko's
Canadian Malartic gold mine in the province of Quebec and other
assets in the area for C$3.9 billion.





"Investors have yet to catch up with the corporates who see
value in these assets. In time, that trend is likely to change,
as it has in previous cycles," said James Wilson, mining analyst
for Morgans Financial in Perth.


He sees a similar trend eventually playing out in Australia
as well, as a weaker Aussie dollar pushes miners take a closer
look at gold assets there.





CANADIAN ATTRACTION


Of 13 major equity financing deals announced by Canadian
mining companies this year, 12 were focused on funding gold
assets. And eight of those were specifically to fund work tied
to Canadian gold projects, an indication of where investors see
value.


"Everything is happening in Canada. One because it is a safe
jurisdiction and two because of a much weaker Canadian dollar,"
said Abitibi's Ball.


While gold is traded in U.S. dollars and has stayed
in the $1,150 to $1,350 an ounce range in the last year, costs
for Canadian gold miners are largely denominated in local
currency, which has weakened to about 80 U.S. cents.


Agnico Eagle, which produces some two-thirds of its gold in
Canada, recently estimated that local currency declines could
reduce its U.S. dollar-denominated cash production costs by 5 to
6 percent.


Canada, home to the majority of the world's publicly-traded
mining companies, is also putting in place incentives that give
exploration companies and investors tax credits for early stage
permitting and community consultation.


Ball says the tax credits will help.


"Canada is experiencing a resurgence in gold, it is a cycle
and we may well fall out of favor again, but right now Canada is
coming back."


($1 = 1.2499 Canadian dollars)