Five leading Canadian mining industry organizations have released a study titled Levelling the Playing Field that puts numbers to the higher costs that go into finding, developing, and operating mines in Canada’s remote and northern regions. In general terms, the report stated that the cost to explore for and build new mines in northern Canada is as much as 2.5 times higher than in the southern provinces, largely as a result of a lack of critical infrastructure.
The study was produced by the Mining Association of Canada, the Prospectors & Developers Association of Canada, the Association of Consulting Engineering Companies–Canada, the NWT & Nunavut Chamber of Mines, and the Yukon Chamber of Mines. The study defines “north” or “northern” to include Canada’s territories, as well as remote and northern regions of the southern provinces.
The study seeks to provide policy makers and the broader Canadian public with “more information on the uneven playing field faced by mineral exploration and mining companies operating in northern and remote Canada, in order to catalyze smart and effective public investments that support responsible northern resource development. While the primary audience of the report is the federal government, provincial and territorial governments should also review the recommendations and explore to what extent they could adopt or adapt them for implementation at a regional level,” the study stated in its preface.
The study assesses the mineral industry’s value proposition for Canada’s remote and northern regions, outlining past and current contributions as well as future opportunities. The report then identifies a “disconnect” between stated federal social and economic development policy objectives for remote and northern regions and federal fiscal policy in light of several recent mineral industry tax policy reforms.
The body of the report quantitatively establishes the cost differential to undertake exploration and mine development and operation in remote and northern vs. centrally located jurisdictions. It determines the principal sources of those cost differentials and assesses their impact on the economics of remote and northern exploration and mining projects.
The report puts forward recommendations that “by enhancing the competitiveness of industry activities in remote and northern regions will help federal, provincial, and territorial governments deliver on publicly stated social and economic policy objectives for these regions.”
To support exploration, the study advocates for a new and enhanced federal Mineral Exploration Tax Credit of 25% for projects in remote and northern parts of Canada vs. the current 15%, as well as financial incentives to make the costs of drilling for early-stage exploration projects more economically feasible.
To encourage construction and operation of mining projects, the study recommends a base 10% investment tax credit, in addition to either a 15% investment tax credit for eligible infrastructure or a pardonable 25% conditionally repayable contribution for infrastructure investments.
To encourage infrastructure development, the study recommends establishment of a northern infrastructure investment bank in the territories for mine-related infrastructure that generate public benefits but do not meet the “public use” criterion of existing federal programs.
Brooke Clements, president of the NWT & Nunavut Chamber of Mines, said, “The north holds Canada’s mining future, and more mines are needed to ensure economic prosperity in the future. This study clearly illustrates that it is significantly more expensive to explore for and develop mines in the north relative to less remote southern localities in Canada. Leveling the playing field for mining and exploration through fiscal incentives would help to attract the investment required to find and develop more mines and lead to northern regions becoming more economically independent. That’s a win-win scenario.”
The full report can be downloaded at: http://mining.ca/sites/default/files/documents/Levelling_the_Playing_Field.pdf.
