ELECTION ’93 — MINING FOR ANSWERS — Liberal Party warns of

In preparation for the Oct. 25 federal election, The Northern Miner has asked representatives of four of the main political parties to respond to a series of questions pertaining to mining. All representatives were asked the same five questions, which were devised with the assistance of The Mining Association of Canada, The Prospectors and Developers Association of Canada and Watts, Griffis and McOuat. The following is an interview with MP David Kilgour, mining critic for the Liberal Party of Canada:

* Do you support the retention of a federal department responsible for mines?

Well, a nice easy question to start with! One of the things Australia has done extremely successfully is to put all their exporting natural resources together, and I gather that agriculture, mining and forestry are all in the same ministry. The head of each of them, I am told, has direct access to the minister. And Australia, as many people in the Canadian mining industry know, is doing extremely well compared to Canada, but that’s not just because of the way they have it set up.

So as critic, I guess I would like to see mining get the sort of respect it deserves in terms of its wealth generation, exports and employment across Canada, and if that takes an organization like the Australian model to be most efficient (and I suspect that it probably does), that seems to me to be the most sensible way to do it. Now, does that mean I think there should be one separate minister with one separate department for mining? I think that will be up to the prime minister to decide.

* Although the matter falls within provincial jurisdiction, does your party support the decision by British Columbia’s NDP government to transform the Tatshenshini-Alsek wilderness area into a park and thereby prevent Geddes Resources from mining the $8.5-billion copper-gold deposit known as Windy Craggy? How do you blend the concerns of environmentalists and the under-informed public with those of the mining community?

I understand that this is a test case in the sense that, if the Windy Craggy project is mothballed, the mining industry in British Columbia (and I suspect elsewhere in Canada) will see that they are no longer in a friendly environment and they will act accordingly. I don’t think it’s any accident that in 1990, for example, Canadian companies invested $480 million in mining projects in Chile alone, and money is also going into other South American countries, as well as Africa. So if the reality is, as it seems to be, that the Windy Craggy decision is going to be the last straw for the Canadian mining industry, I personally, as mining critic, would like to have seen an accommodation and I am told that an accommodation could have been made where the property could have been developed and the aesthetic or environmental issues could have been dealt with in a completely satisfactory way. But that is only me speaking as mines critic. I’m sure there are members of my caucus who would not agree with that, and again that will presumably be an argument that will go on around the cabinet table, if not about Windy Craggy then about some other issue on some other mine, between people who believe mining is crucial to Canada and others who believe the environment is more important.

I know that many people, including U.S. Vice-president Albert Gore, have gone on record as being opposed to the development of Windy Craggy. And, to be candid, the environmentalists came to see me and they presented a case and I was persuaded that it was outrageous to develop the thing. Then I was told by a British Columbian, in whom I have some confidence, that this thing was literally a vast body of ore which could be developed in an environmentally correct way and with input from all kinds of people — including environmentalists. Now, maybe he was exaggerating, but he said that if it didn’t go ahead, the mining people in British Columbia, and I guess elsewhere in Canada, would say that the NDP government was not one which is hospitable to what we’re trying to do.

I think I have here in my notes that British Columbia has only one new mine opening in 1991, and roughly half of the province’s 32 mines may close by the end of the decade if no reserves are recovered. So if that’s the case, can we say we don’t need Windy Craggy? There may be factors of which I’m not aware, but from my limited knowledge of this issue, that’s one of those defining moments that occur between government and industry.

I hope I stressed in my answer that I’m somebody who tries to speak on mining issues and I know there are people in the caucus and Liberal members of the legislative assembly in British Columbia who would probably want to lynch me or boil me in oil for taking a pro-development stance on this. I suspect (Liberal Party Leader Jean) Chretien will probably avoid that one as much as he can. He can say correctly that it was a provincial decision. Regarding the public, again, let me go back to Australia where the government takes a strongly supportive role. They put ads in the papers and constantly hammer away at the fact that so many Australians depend on mining for their living. They make no bones about it, and make clear that this is the key to prosperity in Australia. I personally have seen no ads where the government of Canada has gone on television and said that mining is a crucial industry and more than 300,000 Canadians work in it and 150 communities across the country depend on it. You can’t have it both ways. You either say Canada has been largely built on mining and we’re going to continue to encourage it while striving for environmental safety, or not. You can’t fudge it. You either have to have a bias in favor of opening mines or you’re going to end up doing as we do now, which is watching our mining industry move, to a considerable extent, to more hospitable climes.

One of the problems your question deals with is how the public can see the issues, and I think we are going to have to do something about a public hearing process. I’m told that in British Columbia, it now takes between 17 and 23 months to get a mine approved. That is simply outrageous, and the time lag is one of the reasons people are moving offshore. It’s another reason why there has to be an expeditious hearing process. I don’t know why we can’t have provincial and federal and other hearings at the same time, so the public can hear in an expeditious way what was needed to accommodate a crucial industry with environmental concerns. I happen to be one who thinks you can do that in most cases. So I think the short answer is that it will take a lot of effort by a lot of people, including governments, to try to show the people just how much of our prosperity and jobs depends upon a growing mining industry.

* Most provinces require mining companies to pre-plan for mine reclamation by setting aside money in trust funds for several years. While these companies support reclamation plans to safeguard the environment, the requirements drain investment capital resources when they are most needed to start up new enterprises. Do you support the industry’s call for federal tax changes to allow companies both to protect the environment and allow funds to accumulate and earn interest free of tax, similar to a registered retirement savings plan?

Yes, I do. I think the paper we will be releasing soon will indicate that the party does, as well. There has to be some accommodation which gives a breath of life or a breath of hope to the industry, and I can see nothing but common sense in that approach.

* Will your government reintroduce flow-through share funding or other tax incentives to generate much-needed investment in mineral exploration? The current level of incentives with the present tax structure is not encouraging adequate investment in exploration. The flow-through share financing that has been available for a long time has gone through a lot of changes. I would like to summarize our paper on this issue.

There have been some problems with the flow-through shares in the ’80s, as I’m sure you know, and the large exploration expenditures dedicated to gold declined, resulting in the continuing depletion of gold metals reserves. Several factors — the cost to the federal government in frivolous expenditure of exploration funds, the current low level of incentives to encourage investment in exploration and declining cash flows due to price fluctuations and securities legislation which is hampering capital formation — have contributed to the low level of exploration activity in Canada. To summarize, we understand the implication of the insufficient levels of incentives for primary mining exploration and will review the current tax treatment of exploration expenditures. We would talk to the stakeholders, the mining associations and the provinces and territories and try to lay the groundwork for new mechanisms, including tax mechanisms, to increase significantly exploration across Canada.

I should add that incentives alone are not the answer. The whole climate for mineral investment has to be improved. There must be an overall competitive investment climate to create the right framework in which mining can thrive and will in turn then promote the level of exploration required to sustain the industry.

* Canada’s mining sector provides some 400,000 direct and indirect jobs and contributes 19% to our gross national product. What steps can we take to halt the erosion and possible fatal decline of Canada’s mining industry? If we fail, with what can we replace it? Where do you think the industry has been falling down on the job?

A friend of mine in northern Alberta who works for Syncrude, which is of course a mining job in essence, says that by taking in each other’s laundry and flipping hamburgers, we can’t pay for Toyotas. The sooner we get that into our heads as a people, the more we’ll understand the importance of mining, among other things. I see here in my figures that the total value of mineral production, including mineral fuels, was $35.4 billion in 1992. Minerals, as you know, dropped a little bit for various reasons. For every dollar invested in Canadian mines, there is an additional $1.53 value added elsewhere in Canada.

It’s not going to be a matter of pushing one hot button (to fix the problem). There is no quick fix. There are a whole series of problems which created this bad atmosphere, and all of them are going to have to be dealt with — including the changing regulatory climate as regards the environment, land access and security of tenure, lack of economic incentives for primary mineral exploration, and competitiveness — in order for the situation to be improved. Incidently, I’m told that last year there were something like six graduates from mining engineering at McGill, and I think the pattern is fairly similar in other faculties across the country.

I guess we as a party support the recent Whitehorse Mining Initiative and consultation among all the stakeholders. We think the Initiative will come up with some appropriate and effective public policies. I think we will have to look at any solution or recommendation that can come out of this process. The last mineral policy we saw was in 1987. I think that has to be updated. I guess there are other things which are part and parcel of that. I would think we should have things like a co-ordinated fiscal and monetary policy and taxation policy. For example, dumping gold from the Bank of Canada is, I think, causing real damage to our gold mining sector. We have to come up with a trade policy that will work and secure new markets for all of Canadian industry, including the mining industry.

We really do believe some good will come out of this Whitehorse process. But interest rates were at least a year too late coming down, and the dollar, as I’m sure everybody in the mining business knows, by being so high for so long, has cost lots of opportunities in mining. So there’s a whole range of areas where the federal government could be more helpful, and I don’t think it would be responsible for me or anyone else to suggest that just pushing one button is going to produce a completely new day or a new deal for mining. I think we’re going to have to look at everything. But we’re going to have to stop the sort of practice where the finance department or the environment department makes all the decisions now and then asks somebody from the energy or the mining section, “What do you think about that?” We’ve got to get people from the mining sector and the mining ministry at the table when decisions are being made. They can’t just be asked afterwards, “What do you think of this which we’ve just enacted?” They have to be there before the decisions are made. But it’s a multi-faceted, multi-dimensional problem and I think every responsible person in the mining industry recognizes that. I know the industry has been having a terrible time for the past few years, and I think it’s easy for me to say: “Why don’t they put ads on television or go into schools and tell kids that mining is a crucial part of Canada’s history, present and future?” They will say: “How do we do that? We’re struggling with this problem or that problem.” But perhaps they could do it in combination with governments and they could start initiatives or reach out to schools or universities, and so on. And reach out to the media and to the environmental movement to try to persuade people that mining is vital to Canada and anyone who thinks otherwise is kidding himself.

— Lisa Murray is a 7-year veteran of politics at the federal, provincial, municipal and consular levels. She is currently at Watts, Griffis and McOuat.