Canada Makes a Significant Investment in Geoscience – by Paul Stothart

 Paul Stothart is vice president, economic affairs of the Mining Association of Canada. He is responsible for advancing the industry’s interests regarding federal tax, trade, investment, transport and energy issues.

During the past five years of strong growth in mineral prices, the mineral exploration community in Canada has been facing an increasingly difficult challenge — namely, how to find resources in promising northern regions where underlying mineral data is either weak or non-existent.

The federal government has been under-investing in its geological mapping responsibilities for some 20 years, with annual spending declining from $98 million in 1988 to $50 million in 2007. This decline has been equally dramatic at the provincial and territorial government levels. One interesting consequence of this neglect is that some 73 per cent of Nunavut, for example, is unmapped or poorly mapped and, at present investment levels, the first full mapping of the territory would not be finished for 80 years.

Given such a weak foundation of data, private companies are less able to undertake effective exploration programs. While exploring for minerals is, to some extent, akin to “searching for a needle in a haystack,” it is the public policy investment in basic geological survey work that allows those accessing the data to at least find where the haystacks are. In view of the high level of interest in diamonds, uranium, base metals and other northern resources, one must question the public good served by this pattern.

Questions of national sovereignty in the North are also raised by this under-investment.

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The Future of Northern Resource Development in Canada – Optimism or Pessimism? – by Paul Stothart

Paul Stothart - Vice President, Economic Affairs - Mining Association of Canada Paul Stothart is vice president, economic affairs of the Mining Association of Canada. He is responsible for advancing the industry’s interests regarding federal tax, trade, investment, transport and energy issues.

For a number of reasons, natural resource development in the Canadian North is emerging as one of our country’s most exciting economic policy issues. Climate change, the human resources gap, high mineral prices, potential economic benefits to aboriginal groups, northern sovereignty, and the efficiency of environmental review processes are among those national issues that are closely integrated with northern resources and that will influence the pace of development.

The relationship between natural resources and northern development has been hit and miss throughout Canada’s history. It presently remains very unclear whether the necessary array of variables will fall into place, leading to a sustained boom in northern economic development, or whether key pieces will go missing and the full long-term economic potential will again be missed. In this sense, one could logically have either an optimistic or pessimistic take on future developments.

On the positive side, there are three general variables that should lend an air of optimism. First, the level of mineral exploration spending underway in northern Canada can best be described as staggering. Driven by historically high global mineral price levels, companies will spend some $440 million in the three northern territories on mineral exploration and deposit appraisal in 2007, up from $160 million five years earlier. Approximately one of every 20 dollars in mineral exploration worldwide is being spent in the three Canadian territories. Companies are seeking potential developments in uranium, diamonds, gold, and other minerals in northern Canada.

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Realities Surrounding Nuclear Energy Ensure Prosperity for Uranium Miners for the Rest of this Century – by Paul Stothart

Paul Stothart - Mining Association of CanadaPaul Stothart is vice president, economic affairs of the Mining Association of Canada. He is responsible for advancing the industry’s interests regarding federal tax, trade, investment, transport and energy issues.

Few energy sources attract the controversy that is associated with nuclear energy and the fuel it requires – uranium. The spectre of potential radioactive accidents and leakages has long been presented by environmental groups as a cause for opposition, as has the technical and social challenge of long-term waste management. A number of governments over the years, ranging from nations such as Germany to provinces such as British Columbia and Nova Scotia, have introduced policies specifically prohibiting uranium mining and/or nuclear reactor development.

Available evidence suggests that these opponents are generally engaging in exercises of political hypocrisy. No energy source is without environmental and social consequence. Fossil fuel combustion has links to smog, acid rain and attendant health concerns. Wind energy requires large land masses, creates noise pollution and poses a hazard to birds — all to generate minor amounts of unreliable power. Hydro-power requires large-scale flooding, ecosystem destruction and resultant mercury releases. Even supposedly clean ethanol is proving to be disruptive to world food prices while presenting a marginal (or by some studies, negative) benefit regarding greenhouse gas (GHG) emissions relative to gasoline. On the health and safety front, in terms of worker and population impacts, few if any major energy sources measure up to the record of nuclear energy.

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The Canadian Oil Sands: Where Economy Meets the Environment – by Paul Stothart

Paul Stothart - Mining Association of CanadaPaul Stothart is vice president, economic affairs of the Mining Association of Canada. He is responsible for advancing the industry’s interests regarding federal tax, trade, investment, transport and energy issues. This article was originally published in May, 2007.

Arguably the single most significant development in the Canadian economy over the past decade has been the emergence of the western oil sands as a creator of jobs, exports, tax revenues, and wealth.

Technological advances since the 1970s have made the recovery and processing of oil sands financially feasible. Increases in world oil prices, from the $20 to $30 level of decades past to the $60 to $70 range today, have further enhanced the economic viability of these projects. Political rhetoric about Canada as “an energy superpower” and talk of “reserves larger than Saudi Arabia’s” speak to the emergence of the oil sands.

It is difficult to over-state the magnitude of this development. On a macro scale, it has served to increase wealth and economic activity in western Canada. On a micro scale, the city of Fort McMurray has grown from a population of some 20,000 two decades ago to 75,000 today. The 200,000 jobs that have been created in the oil sands over the past decade is of similar magnitude to the job losses seen within the central Canadian manufacturing sector— in effect creating a job cushion for the entire country.

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China as an Economic Superpower – Implications for the Canadian Mining Industry – by Paul Stothart

Paul Stothart - Vice President, Economic Affairs - Mining Association of CanadaPaul Stothart is vice president, economic affairs of the Mining Association of Canada. He is responsible for advancing the industry’s interests regarding federal tax, trade, investment, transport and energy issues. This article was originally published in May, 2007.

There is no shortage of printer’s ink being spilled in recent years writing about the emergence of the Chinese economy. This is, without question, one of the top global news stories of the past decade. After 15 years of double-digit annual growth, the size of the Chinese economy has now reached a state where continued double-digit growth has very meaningful implications for many industries and countries.

Where 10 per cent growth in 1990 may not have had much impact on a global scale, similar growth in
2007 on a much larger economic base has reverberations throughout the global economy.

The emergence of China as a world economic power, and its continued growth, will have direct implications for the Canadian mining industry in three important areas.

Impact 1 – Driver of World Mineral Prices

First, China remains the prime driver of world mineral prices. China is building a domestic infrastructure for 1.3 billion people and is concurrently expanding its role as the world’s manufacturing centre for many product areas. The country simply cannot meet its own needs for copper, zinc, nickel, and other core ingredients of a transportation, power, and communications infrastructure.

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Turbulent Times on the International Mining Scene – by Paul Stothart

Paul Stothart is vice president, economic affairs of the Mining Association of Canada. He is responsible for advancing the industry’s interests regarding federal tax, trade, investment, transport and energy issues.

Times remain quite good within the global mining industry. There is no shortage of challenges to be sure, ranging from a dearth of workers to mounting social license issues. Nonetheless, the enduring strength of mineral prices continues to drive the industry. Nickel prices grew from $3 per pound in 2002 to $17 in 2007, and copper from 70 cents to over $3. Gold and silver are at prices not seen in decades. The result is record mineral exploration spending, high capital investment, and buoyant stock prices and mergers and acquisitions activity. Demand from emerging economies will continue to drive strong mineral prices in future years.

In this context, a key challenge for the industry worldwide relates to increased international turbulence as governments of many countries aim to capture a larger share of the overall mining revenue streams. Towards this end, governments in many regions are taking a range of actions and, in some cases, following questionable processes. For example:

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Canada’s Mineral Reserves Crisis – by Paul Stothart

Paul Stothart - Mining Association of CanadaPaul Stothart is vice president, economic affairs of the Mining Association of Canada. He is responsible for advancing the industry’s interests regarding federal tax, trade, investment, transport and energy issues.

The mining industry’s fundamental importance to the Canadian economy actually predates Confederation. The fact that the Geological Survey of Canada was founded in 1842, a full quarter century before Confederation, speaks volumes about the role that mining has played throughout Canadian history. To this day, the industry remains the backbone of over 100 communities, including larger communities such as Sudbury, Flin Flon, Thompson, Timmins, and Trail.

The industry’s presence also extends well beyond the mine site to include smelters, refineries, and semi-fabrication operations – defined broadly the industry employs almost 400,000 Canadians. In the larger urban setting, the industry is important to the financial and legal community in Toronto, and features an exploration cluster in Vancouver, and research and headoffice activity in Montreal, among other examples. Beyond this, several thousand supplier firms provide engineering, environmental, transportation, and other expertise to the industry. Internationally, companies funded on the Toronto Stock Exchange have over 4,000 mining projects in play in foreign countries, and Canadian mining firms have some $50 billion in direct investment abroad.

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Is China Buying Africa? – by Paul Stothart

Paul Stothart - Mining Association of CanadaPaul Stothart is vice president, economic affairs of the Mining Association of Canada. He is responsible for advancing the industry’s interests regarding federal tax, trade, investment, transport and energy issues.

In a recent column, I noted that China remains the prime driver of world mineral prices. In building a domestic infrastructure for 1.3 billion people, while expanding its role as the world’s factory, China simply cannot meet its burgeoning demand for copper, zinc, nickel, and other raw materials. In response to this growing gap, China now imports $100 billion worth of base metals annually, buying 25 per cent of the world’s supply today versus a 5 per cent share in the 1980s. As a specific example, China’s share of world consumption of zinc has tripled from 10 to 28 per cent in a mere decade, while the US share has fallen from 16 to 10 per cent.

This dramatic growth in raw material demand is one of the central factors leading to a second, equally significant development; namely that China is becoming an important catalyst to the growth of Africa—a continent that offers untapped raw material supply and market demand potential. In decades past, few observers of global economic development would have envisioned the emergence of such a linkage. Few thought beyond the traditional model, where aid flows from the west would supposedly some day pull Africa to a more advanced state of development.

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iPods, Environmental Groups and the Mining Sector – by Paul Stothart

Paul Stothart - Mining Association of CanadaPaul Stothart is vice president, economic affairs of the Mining Association of Canada. He is responsible for advancing the industry’s interests regarding federal tax, trade, investment, transport and energy issues.

Few industry sectors are subject to as much scrutiny from environmental and social groups as the mining industry. Mineral extraction and processing, virtually by definition, involve intrusion upon the landscape — whether to conduct open pit or underground mining, to build access roads and power lines, to remove exploration samples, or to treat and manage waste products. These actions represent encounters between humans and the surrounding environment — and the attendant need to manage and minimize the risk that accompanies these encounters.

In the Canadian context, mining can involve accessing lands situated within the Boreal Forest. Accessing land and resources in northern Canada can frequently raise issues of aboriginal rights and relationships. Comparable issues, though on a greater scale, face the mining industry in its international operations, which often occur in countries with less developed infrastructure and with thinner environmental protection and community consultation capacities.

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How Long Will the Mining Boom Last? – Paul Stothart

Paul Stothart - Vice-President Economic Affairs - Mining Association of CanadaThe Canadian and international mining industries are enjoying buoyant times. As shown in the adjacent table, while the specific figures vary by mineral, overall prices have grown by roughly two-fold to five-fold over the past five years.

In some instances, prices have continued to increase through 2007. Gold, for example, has increased in value by another 35 per cent since 2006 — to around $850 per ounce. Copper is expected to climb another 50 per cent to 450 cents per pound in 2008 according to Bloomsburg projections. Nickel and zinc prices generally levelled off or declined in the latter part of 2007.

At these high price levels, exploration spending, both globally and in Canada, has increased significantly as companies seek to find new mineral reserves. Global exploration spending has grown exponentially from $2.4 billion in 2003 to $10.5 billion in 2007.

Merger and acquisition activity has also exploded in recent years. In Canada, Xstrata bought Falconbridge for $20 billion, CVRD bought Inco for a similar amount, and Rio Tinto bought Alcan for $38 billion.

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