Mining industry works to reduce costs, red tape during downturn

In the midst of a significant economic downturn, the mining industry is working hard to weather the storm, says the head of an Ottawa-based industry lobby group.

“The mining business is cyclical and even though we don’t like it, we are used to it,” said Pierre Gratton, president and chief executive officer of the Mining Association of Canada (MAC). “The industry behaves as it always does when these things happen. [Our members] are focused on controlling costs and getting through it.”

While mining companies deal with the current slump, the association’s message to government is to remind it that this business is cyclical. “In a few years, the commodity market will bounce back and you want to be in a strong position to take advantage of that when it comes,” Gratton said.

To that end, MAC is urging the federal government to plan for the next cycle.

“[There are] key areas we think they should focus on,” Gratton said. “They tie in to some of the priorities of the new government, one of which is infrastructure. Canada’s mining industry is moving increasingly northward. That’s where most of the unexplored territory is and where we’re finding some of the more interesting deposits. But it’s also a part of Canada that has less infrastructure, so the costs of getting into production are much higher.”

He said it’s anywhere from twice to two-and-a-half times more expensive to build a mine in northern regions than in areas further south. Almost all of that added cost is infrastructure-related.

He said his association is hopeful the Trudeau government will align with that of Ontario Premier Kathleen Wynne and commit to funding for the Ring of Fire, one of Ontario’s largest potential mineral reserves.

Governments in Yukon and the Northwest Territories have plans for important infrastructure developments that will enable new mining development, Gratton said.

“Those are the types of things provincial and federal governments could work on as they commit infrastructure spending,” he said. “We don’t want it just to be an urban agenda. It’s also about investing in the long-term economic prospects in the country where we know new wealth can come from.”

Gratton suggests another key policy issue the federal government will have to deal with in short order is a review of the Canada Transportation Act, particularly as it affects railways. Former cabinet minister David Emerson is working on a report on the subject to present to the government.

“Suppliers and exporters of products have challenges with Canada’s two railways,” Gratton said. “[The railways] have a lot of control over tariffs and the service. It’s a very difficult policy issue, but it’s one the new government has an opportunity to better balance.”

He noted that the mining industry is responsible for 50 per cent of what runs on Canada’s rail system. “If we can’t get our product to market, the railway system itself won’t function,” he said. “That’s another area that is very timely now. It’s a good time to get it right — to make sure we can export our products to countries that want them.”

The Liberal government has also committed to a review of major environmental legislation, and the mining industry wants be involved.

“For us, mining is very much subject to federal oversight,” Gratton said. “Unlike some sectors, we’re still subject to federal environmental assessments and we continue to have issues with how long it takes. Canada is considered on many levels as one of the best places in the world to invest in mining. It has a lot of advantages, including geology and a highly literate skilled workforce. We have good infrastructure, too, but it is an expensive place to operate and one of the costs is our regulatory system and how long it takes projects to get approved.”

He said the greatest opportunities for improvement are in co-ordination within federal departments and between federal and provincial departments.

“There’s a lot of duplication that takes place, where they’re tripping over one another when they’re conducting separate reviews of the same project,” he said. “Part of that piece is also the obligations the Crown has to consult aboriginal communities. Sorting out who’s doing what and what they’re delegating, and clarifying expectations is certainly an area that is begging for improvement.”

Gratton noted that mining industry is an important employer for aboriginals, employing about 10,000 across the country.

This story was produced by the editorial department as a result of a Dentons interest in this topic. Dentons was not given the opportunity to put restrictions on the content or review it prior to publication.