Political analysts will undoubtedly remind us that details of the Liberal government’s provincial Budget delivered on March 29 will be repeated many times over leading up to the Ontario election on October 6. The Budget contains specifics about protecting health care and education, jobs and growth and promises to make the delivery of public services more efficient.
But where does mining fit into the government’s plans? It might not be obvious from a cursory reading of Budget documents. There are no references to mining in either Ontario Finance Minister Dwight Duncan’s Budget speech itself, titled “Turning the corner to a better tomorrow,” or the press release and its supporting background papers. However, if you delve into the 300-page book on “Budget Papers,” you will be able to piece together some clues.
In the chapter “Key Ontario Sectors,” two pages are dedicated to Mining and Opportunities in Ontario’s Ring of Fire. “Mining, a traditionally strong part of the Ontario economy, is benefiting from growing world demand for commodities and from tax relief provided through Ontario’s tax plan for jobs and growth,” said the document. “The government is supporting the development of new mineral deposits in the North and Far North, including helping promising mining opportunities in the Ring of Fire area of the Far North with potentially large deposits of minerals such as chromite, nickel, copper and platinum.”
“Mining employment increased by about 5,200 jobs, or 20%, between 2009 and 2010. The Ontario mining sector plans to invest a record $3.4 billion in 2011.” While direct mining employment is in the range of 26,000, the broader minerals industry cluster employs about 200,000 people in Ontario. The value of mineral production in Ontario last year was $7.7 billion and it is supported by a mine supply and service sector, which generates revenue of more than $6 billion annually. In looking back a couple of years and forward one year, capital investments by mineral operations in the province are in the range of $10 billion.
The Budget papers state “exploration expenditures are forecast to reach $939 million in 2011, a new record for Ontario. There are more than 600 properties being explored by over 3000 companies across the province.” Ontario regularly attracts about 30% of the total invested in mineral exploration expenditures in Canada annually.
There are also a couple of pages in the Budget papers dedicated to the Northern Economy. The Northern Ontario Heritage Fund’s bankroll has been expanded from $60 million in 2007-2008 to $100 million in 2011-2012. These funds support community infrastructure and economic development projects in Northern Ontario creating jobs and enhancing the quality of life.
Details in the Budget Papers also provide reminders of the gradual reduction of the Corporate Income Tax (CIT) rate for manufacturing and mining to 10% and the elimination of the Capital Tax. There was also an adjustment to the Mining Tax Act announced. In addition to paying all corporate taxes which are paid by other industries, mine operators also pay something extra, the Ontario Mining Tax, which is essentially a profit-based royalty.
Many globally traded commodities produced by mines in Ontario are bought and sold in international markets in U.S. dollars. Changes will allow miners to pay the Ontario Mining Tax based on a functional currency, such as the U.S. dollar. “As a result of these amendments, mine operators who follow functional currency for CIT purposes would no longer have to prepare a separate set of Canadian dollar financial statements solely for the purposes of filing the Ontario Mining Tax return.
To be fair, while mining may be neither front, nor centre, nor even in the wings in this Budget, it is recognized as a wealth generating engine of economic growth, job creation and regional development. And perhaps that accurately reflects the role of mining – not the star but a strong team player providing the solid foundation, which makes other successes possible, including the Budget’s goals to improve health care and education in Ontario.