Cash-hungry governments are digging into the mining boom

Joe Oliver, Canada’s natural resources minister, speaks at the Prospectors and Developers Association of Canada (PDAC) convention in Toronto, Ontario, Canada, on Monday, March 4, 2012. Photographer: Norm Betts/Bloomberg

More from Tasha Kheiriddin available here.

That same year the Liberal government of Dalton McGuinty passed the Far North Act, which gives First Nations a role in determining the development of public lands in northern Ontario. But the Act has come under fire both from aboriginal groups and the opposition Progressive Conservatives. The latter claim it creates uncertainty for investors and promise to scrap it if elected. The province currently ranks sixteenth among the world’s mining destinations, according to the latest Fraser Institute Report on the subject, but would rank eighth were it not for land restrictions in the Act.

iPolitics asked Ontario Minister of Natural Resources Michael Gravelle whether the Act impedes development. “I truly don’t agree,” he said. “While I recognize that a number of First Nations and certainly a number of Chamber organizations have expressed some concerns about it, we have also seen significant progress made on a piece of legislation that is actually unprecedented, in that it actually partners for the first time with First Nations in the northern part of the province to give them decision-making power on how their lands are used, whether for regional development purposes or protected cultural purposes. That’s never happened before.”

Meanwhile, in Quebec, the green lobby is girding for a fight on the PQ government’s take on the previous Liberal administration’s Plan Nord, which seeks to develop northern mineral resources. In an interview with iPolitics Sunday night, Ouellette indicated that the PQ is consulting for 45 days on a new set of environmental regulations, which already has attracted the “voluntary adherence” of two companies, Osisco and Tata, “even before we introduced it. When there is a better environmental protection, there is more confidence among citizens. The mines that come from Quebec, they know the environment of Quebec but those from international owners do not necessarily know.”

The rules also would ensure that communities share in the economic benefits of mining, including the use of local expertise, manpower and processing of raw materials. In Ouellette’s words, “wherever possible we want to do processing in Quebec.”

That approach is shared by the NDP in Ontario, who are demanding that the minority Liberal government ensure the processing of raw materials in the province. The NDP has a big beef with Cliffs Natural Resources, which is reportedly planning to export fifty per cent of the chromite extracted in the Ring of Fire for processing in China. When asked whether the government would take steps to ensure domestic processing, Gravelle told iPolitics that “we want to see the greatest value added benefit from the mining sector in the province”, adding that Cliffs had made a $3.3 billion dollar investment proposal that included a domestic processing facility.

But forcing companies to process locally could hurt the industry. According to Chris Hodgson, president of the Ontario Mining Association, “it’s OK as long as nobody else does it in the world. Our whole steel industry in Hamilton is imported material. What usually happens is other provinces start to retaliate and that would be a net loss of a lot of jobs in Ontario.”

The PQ’s protectionist approach concerns the industry in Quebec as well. But even more worrisome has been the lack of consistency in the government’s statements on resource development. According to Michel Kelly Gagnon, president of the Montreal Economic Institute, “in an industry involving long-term investment, where companies don’t get a return for ten or twenty years, to create confusion about the regime is about the worst thing you can do.” Kelly-Gagnon cited the example of a mining company in Rouyn Noranda which saw its foreign investors back out of a signed memorandum of understanding following the election of the PQ government and “not even policies, but musings of policies.”

Ottawa is keeping a close eye on development in both provinces, for different reasons. The Ring of Fire represents a potential economic bonanza of $30 to $50 billion in minerals. Ottawa had the sense, though, that McGuinty wasn’t taking the file seriously enough — or, in the blunter words of one industry watcher (who will remain anonymous), “screwed it up.” Hence Ottawa’s appointment of Clement, who was equally blunt in his remarks to PDAC Sunday night: “There is a lot at stake and we cannot afford to allow this development to stall and become mired in paralysis and uncertainty. We can’t let this opportunity pass us by.”

Meanwhile, Quebec’s development agenda represents a potential boost to the province’s economy — and to the sovereignty movement. A minority PQ government can only do so much, but should the party win a majority in the next election, widely expected to be held within a year, mining will be as hot as hydroelectricity was in the 1970s, politically speaking.

So will northern development prove to be a gold mine — or a minefield? For politicians in Ontario, Quebec and Ottawa, the stakes are sky-high, and the issues won’t be resolved any time soon. In an uncertain business, though, one prospect is sure: PDAC 2014 will be as politically charged as this year’s version.

tjk@tashakheiriddin.com