Canada’s Mining Ministers Urged to Support Mineral Industry Growth – by Marilyn Scales

Marilyn Scales is a field editor for the Canadian Mining Journal, Canada’s first mining publication. She is one of Canada’s most senior mining commentators.

ST. JOHN’S — The 66th Mines Ministers Conference was urged once again to take active measures in support of the Canada’s mineral industry. The plea came from the Canadian Mineral Industry Federation (CMIF), a group of 17 mining-related associations headed by the Mining Association of Canada (MAC) and the Prospectors and Developers Association of Canada (PDAC).

First, the ministers were reminded of mining’s economic importance to Canada. It contributed $40 billion to the country’s gross domestic product (GDP) and provided 351,000 jobs in 2008. There are an estimated 3,140 suppliers to the industry. The mining industry paid $11.5 billion in taxes and royalties to all levels of government. 

There are challenges ahead for the industry, and the CMIF brief addressed them.

1. Enhance commitment to the core mandate of natural resource ministers

 Many organizations, government departments and NGOs have adopted an aggressive anti-mining focus. It is critically important that Canada’s natural resource ministers maintain and enhance their dedication to economic development. In this sense, advocacy for infrastructure projects, for more open access to minerals, for northern development, and for tax incentives to encourage increased investment, among other objectives, remains fundamental.

2. Improve Canadian tax and budget incentives

The CMIF believes that, with appropriate tax measures for exploration and plant investment, Canada can build on its competitive advantages and continue to have an important presence in value-added activities. In particular:

• A deep drilling investment tax credit applied to exploratory drilling within a defined proximity of production areas should be defined and introduced. As well, exploration near mine sites closed for over five years should qualify as Canadian exploration expenses (CEE).

• Accelerated capital cost allowance measures should be defined and implemented to encourage investment in the modernization of mineral processing facilities.

• Enhancing the super flow-through share incentive for a limited period would encourage exploration and better position Canada for the post-recession period.

• To facilitate long-term planning, the 15% Mineral Exploration Tax Credit should be made a permanent feature of the federal income tax system.

• Given the importance of the Canadian oil sands, and the significant investment cuts of recent months, ministers should consider deferring the phase-out of accelerated capital cost allowance (CCA) treatment for oil sands operations by five years.

• The importance of federal, provincial and territorial governments’ re-investment in geological mapping should be recognized through appropriating these funds as “permanent” rather than “temporary”.

The intent of these tax/budget measures would be to maintain exploration investment competitiveness, to help discover deep ore deposits, to extend the reserve life of existing mines, to enhance the raw material supply chains for value-added facilities and to encourage capital investment in efficient facilities.

3. Invest in human resources, infrastructure and innovation

The Canadian mineral exploration and mining industry faces a human resource challenge in the coming decade and will need to hire over 6,000 new workers per year. This comes at a time when the skilled core of the industry will reach retirement age and when enrolment in post-secondary programs falls short of needs. Governments must work with industry, schools, Aboriginal peoples and other stakeholders to address the sector’s skills training, mobility and immigration needs. In this respect, the federal government’s support for the work of the Mining Industry Human Resources Council (MiHR) is valuable as is enhanced support for, and co-ordination of, related sector councils.

The mining industry is the largest customer for Canada’s transportation sector, and investment is needed in areas such as all-weather roads, sea ports, rail and inter-modal links. Companies also face energy management challenges related to rising costs and inadequate capacity. Strategic investments in transportation and electrical capacity would serve to open up new regions for exploration and development, and the industry has proposed certain energy and transportation projects in this regard.

There is also a need for government investment in innovation. The mining industry invests around $650 million annually in R&D. Evolving technologies include 3-D data maps, seismic imaging, remote-operated equipment, automated loading systems, tailings management, and hydrometallurgical processing. The newly-created Canada Mining Innovation Council (CMIC) will develop a management team and strategic direction through 2009. As this evolves, governments should be prepared to invest in the innovative future of the industry, on a scale seen in other sectors.

4. Improve regulatory efficiency and modernize legislation

Exploration and mining companies depend on governments for a clear understanding of information needs, approval processes, timetables and social-environmental expectations. Government performance in these respects in recent years has been uneven.

On project review issues, while the industry is pleased with progress by the Major Projects Management Office (MPMO) in the past year, there remains scope for governments and specific departments to improve their processes and timeliness. The ongoing economic recession and a decreased number of projects in the pipeline make it premature to gauge the actual level of improvement flowing from the MPMO.

Directions in the climate change and clean air regulatory areas remain unclear. Companies fear that duplicative regulatory systems may emerge as federal regulations intersect with provincial requirements. On the greenhouse gas front, industry needs certainty with respect to regulatory processes and mechanisms in order to make appropriate investments. In regard to emerging air pollutant targets and processes, industry is encouraged that governments are working toward a framework wherein the best-placed jurisdiction would regulate industry. Finally, with respect to the recent court decision on reporting to the National Pollutant Release Inventory (NPRI), it is important that the federal regulatory response be cognizant of broader implications – for the integrity of the NPRI and for potential communications challenges facing ministers and companies.

Important questions have been raised regarding the interrelated issues of Aboriginal consultation, land use planning, and government sharing of resource revenues. Companies are concerned that ambiguity in these areas could have a negative effect on Canada’s status as a destination for capital investment. In Ontario, for example, some suggest that the government’s new requirement for completed community-based land use plans in northern regions prior to project approval essentially amounts to a “moratorium” on mineral exploration and mining in these areas.

The CMIF has presented a very long wish list, but the list is long because government needs to refocus on what it can do to support the mineral industry. That support goes far beyond “mining” and covers infrastructure, regulation and recognition. For example, no one in the industry expects pollution rules to be relaxed, but they should be clearly written and achievable.

Only when knowledgeable industry supporters such as the CMIF repeat their message again and again to the government, will government become an asset to the mineral industry rather than a hindrance.

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