The head of the Mining Association of Canada warned that Canada’s position as a mining superpower should not be taken for granted, or jeopardized by political short-sightedness. Pierre Gratton told the Montreal Council on Foreign Relations that the Canadian mining industry must remain competitive if it is to continue to benefit Canadians.
“Canada is currently a global mining powerhouse and its economic contributions reach far beyond the mine gate and the communities where we operate by providing high-paying jobs and spinoff business opportunities across the country,” said Gratton. “However, our current leadership status should not be taken for granted as mining investment dollars are highly mobile and global competition for it is fierce.”
Gratton is especially concerned that the province of Quebec is falling behind other regions in Canada in terms of mining output. He warned that expected changes in Quebec government policy, whereby mining companies would be subject to higher royalties and taxes, would drive away investment and hamper economic development and employment.
“I am concerned that mining growth in Quebec may fall off significantly due to the present policy direction of the government,” Gratton warned. “Quebec should be aiming to maintain its status as a sophisticated mining jurisdiction, one that understands that tax instability and higher royalties will drive away investment, economic development and employment.”
Gratton outlined a number of economic, regulatory and trade-related steps that Canada must take to maintain its competitiveness. Maintaining low inflation, reducing debts, and preserving and improving competitive tax levels is key to inviting investment to Canada. Proactively engaging emerging markets, especially China, should also be a top priority.
The mining industry must address the looming skills crisis; it is estimated that 145,000 new workers will be needed over the next decade. And there must be continued investing in the infrastructure necessary to support new mining projects—all-weather roads, ports, rail.
Canada’s mineral production reached new highs in 2011, when its value soared to $50.3 billion. That declined to $46.9 billion in 2012. Canada is among the top five producers in the world of uranium, potash, nickel, platinum, aluminum, diamonds, zinc and steel-making coal. Canada leads the world in attracting exploration spending. In 2011, 18 per cent of that spending was in Canada.
Though not addressed by Gratton, a perennial problem that the mining industry must deal with is the volatility of prices, illustrated dramatically by the current problems of the gold mining industry. Since last week, gold futures have lost 13 per cent, the biggest drop since 1980. The crisis will force gold producers to cut costs and produce less gold, analysts say. It now costs $1,300 or more to produce and ounce of gold. The spot price of gold fell to just $1,374.28 last Monday. It has declined more or less steadily from close to $1,800 last fall.