MAC, AMQ decry proposed Quebec mining taxes – by Marilyn Scales (Canadian Mining Journal – March 26, 2013)

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.

Quebec’s reputation as one of the best places to explore for and mine minerals has taken a beating recently. From 2007 to 2010 the Fraser Instituteranked it as the best jurisdiction, but it slipped to fourth in 2011 to fifth in 2012.

There remain many resources yet to be discovered in the province, but the political climate is one reason Quebec is losing favour. First there was the re-election of a Parti Quebecois government in September 2012. That led to uncertainty that Plan Nord would be carried out as originally outlined.

Now comes word that the province is proposing a new tax regime. Two new levies are expected – a 5% tax on the gross value of annual production and a 30% royalty on “super-profits”. Quebec already jacked up its business tax rate in 2010 when it raised taxes on profits to 16% from 12%. High taxes are a major disincentive for any kind of business.

Both the Mining Association of Canada (Mining.ca) and the Association du miniere du Quebec (AMQ-inc.com) have been vocal in their opposition to new taxes in Quebec. As MAC rightly points out, global competition for mining investment is fierce. Investors will look elsewhere – to Europe, Latin America and Africa – where the prospect of making a reasonable profit exists. Without continued investment, Canada stands to lose significant royalties to government, well paying jobs in mining, and the many spinoff business opportunities a mine brings to a community.

“The new regime would tarnish Quebec’s reputation as a mining friendly jurisdiction for investment,” said Pierre Gratton, MAC’s president and CEO. “Moreover, from a global mining company standpoint looking to build its next project, I am concerned that there will be little distinction between Quebec and the rest of Canada, thus harming the country’s reputation as a whole.”

“The hikes are positioned as just penalizing the mining industry, whereas in reality, they put into peril the livelihoods of thousands of families in the province who rely on the industry for employment – both direct and indirect jobs. The fact is, companies will simply find somewhere else to mine,” stated Josée Méthot, president of the AMQ.

We hesitate to say the government of Quebec suffers from a “money grubbing” mentality. But its outlook is short sighted. It will no doubt raise additional revenue on the backs of the mines for a few years. Then as resources at existing operations are exhausted and investors stay away, revenues will inevitably drop as there are no new mines to replace the wealth of the former ones.

The Quebec government lacks understanding of the mining industry. If it wanted to foster the health and prosperity of this industry sector, the government would do all in its power to attract investment in exploration and development. It can take a generation or more to find, plan and build a mine. Without long term commitment, mining grinds to a halt.

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