Mining in Canada’s north continues to be an untapped resource because of high costs and a lack of critical infrastructure, a new report reveals, stating several new policies are needed in order to improve exploration and development.
Entitled, Levelling the Playing Field, the study states the cost to explore and build new mines is as much as 2.5 times higher in northern Canada. It should be noted, the report defines "north" or "northern" to include Canada’s territories, as well as remote and northern regions of the provinces.
"This cost premium is directly linked to the lack of infrastructure in these areas," it reads.
"Unlike many of their southern counterparts, companies operating in these remote areas need to invest in costly, but essential infrastructure like ports, power plants, winter and permanent roads, and accommodation facilities. In many cases, there are also sparse populations or no people for hundreds of kilometres from the project or mine."
The report suggests further strategic investment or taxation policy reform to better entice companies to pursue exploration and development endeavours. The report was produced by the Mining Association of Canada (MAC), the Prospectors and Developers Association of Canada (PDAC), the Association of Consulting Engineering Companies – Canada (ACEC), the NWT and Nunavut Chamber of Mines, and the Yukon Chamber of Mines
"Much of the report certainly makes the case that the challenges of resource development both in remote and northern parts of the country are very real and tangible," said John Gamble, president and CEO of ACEC.
"The government more and more is relying on the private sector to be a driver. The private sector, they have to put significant money down in terms of exploration and investing in infrastructure to even access these sites, and develop these sites and then get the resources from the sites to market."
The report states capital costs were higher for a range of commodities, with base metals coming in at 2.5 times higher, approximately double for gold mines and 15 to 20 per cent higher for diamond mines in the territories.
In order to support exploration, the authors are advocating for a "new and enhanced" federal Mineral Exploration Tax Credit for projects in remote and northern parts of Canada at 25 per cent versus the current 15 per cent. Financial incentives to make the costs of drilling for early stage exploration projects more economically feasible was also suggested.
"What this study makes clear is that strategic investments and good public policy are needed to open up Canada’s remote and northern regions to responsible mineral development and for Canadian governments to achieve their social and economic development goals for those regions," said Pierre Gratton, president and CEO of MAC in a statement.
"Smart investments and a positive tax regime to overcome the unique obstacles of these regions will be the best way to catalyze more mineral investments."
The group also recommends several tax credits to support mining companies to build and operate in remote and northern areas.
"The group recommends a base 10 per cent investment tax credit, in addition to either: 1) a 15 per cent investment tax credit for eligible infrastructure, or 2) a pardonable 25 per cent conditionally repayable contribution for infrastructure investments," it reads.
Another policy recommendation calls for the establishment of a northern infrastructure investment bank for the territories for mining-related infrastructure that generates public benefit, but does not meet the "public use" criterion of existing federal programs.
"We’re asking the public sectors to share in some of that upfront investment," Gamble stated.
"The federal government will also see that return on investment. They will create economic opportunity and bring prosperity to the north. We need to create good high-skilled jobs. It’s certainly our hope that the First Nations will be significant beneficiaries of economic activity."
According to the report, the mining industry contributed $54 billion to Canada’s GDP in 2013 and employs more than 380,000 people across the country.
"Despite Canada’s current leadership in mining, there are two main indicators that suggest the industry’s long-term viability is in jeopardy: reserves for several base metals have experienced significant declines since the 1980s, and production volumes of key commodities have also been declining relative to other mining countries," it reads.
Increased exploration could help solve some of the industry’s problems, so long as it’s economically feasible, stated Gamble.
"We’ve seen companies that have been holding back on investments and these are missed opportunities for Canadians," he added.
"We have enormous potential up there (in the north). In this geopolitical climate you use it or you lose it."