Investors wary of NDP win in Ontario’s election

Investors reacted negatively to the unexpected election of the New Democratic Party to a majority government in Ontario on Sept 6. Several mining companies with operations in the province saw their share prices fall along with the Canadian dollar as investors fled to the safety of non-Ontario stocks.

Wary of the NDP’s plan to phase out nuclear power, increase government spending and corporate taxes, jittery investors went on a selling spree in anticipation of further profit declines for mining companies.

The dramatic election upset of David Peterson’s Liberal government took almost everyone by surprise. Observers described it as more of a Liberal loss than an NDP win, and a punishment to Peterson for calling the early vote which cost taxpayers about $40 million.

Immediately after the stunning NDP victory, there was downward pressure on the shares of several mining companies with operations in Ontario including Inco (TSE), Noranda (TSE), Teck Corp (TSE), Hemlo Gold (TSE), and Denison Mines (TSE).

Inco’s shares fell $1.58 to $31 before recovering to $31.25, while shares of Noranda dropped to a low of $16.38, and Teck shed $1.25 to trade at $24.

But a spokesman for Inco shrugged off the impact of the NDP victory and described premier-elect Bob Rae as a “well-reasoned and rational man” whose policies could eventually turn out to be more pro- business than most people anticipate.

“There is no sentiment at Inco that the NDP government is one to be feared,” he said. “Ontario is about to enter some pretty interesting times at Queens Park,” he added.

The NDP’s promise to introduce a minimum 8% corporate surtax is unlikely to affect senior companies like Inco which already pay substantially more than that rate.

Rae’s election platform also contained many positive features designed to boost the economy of northern Ontario including a $200-million-per-year northern development fund, and a $100- million Trans Canada Highway fund.

Patrick Reid, president of the Ontario Mining Association, said he thinks the NDP clearly understands the large contribution made by the mining industry to the tax base of Ontario. “I don’t presume the new NDP government will go around cutting off the economic base of the province.”

He said the member companies of the OMA are willing to “work with the NDP to ensure a viable and competitive mining industry in the province” After the automobile industry, mining is Ontario’s largest earner of export dollars, and a significant creator of high-quality employment, he added.

Robert Ginn, president of the Prospectors and Developers Association of Canada, said he expects Rae will honor his election promise to “consult widely” with all members of the mining industry before making any radical changes to government policy.

“We believe the mining industry is one of Ontario’s great assets in terms of the revenues and employment it generates. It would be disastrous for the NDP to threaten or impede it.”

The NDP originally supported Ontario’s new Mining Act as it was passed by the Liberal government in the legislature last December. The industry doesn’t expect any major shift in that position now, he said.

Plans are also expected to proceed as planned for the relocation to Sudbury of the Ministry of Northern Development and Mines.

But sources expressed fears that the NDP may try to flex its muscles on environmental issues for which the mining industry is often considered a lightning rod.

“We find it hard to imagine the environmental regulations in Ontario could be made any more stringent than they are already,” said Ginn.

The NDP’s promise to freeze the development of nuclear power is also a concern for uranium miners, although it might end up helping the coal mining sector which offers an alternative energy source to uranium.

Rae has yet to choose a cabinet but sources say he’s likely to select a new mines minister from among the NDP members elected in several northern Ontario ridings.

Other provinces to elect NDP governments in the past include British Columbia, Saskatchewan and Manitoba.

In addition to being Canada’s largest producer of nickel and gold, Ontario is also the nation’s leading province in terms of its value of mineral production. There are nearly 60 mining operations throughout Ontario. Ontario Election results 1990 Popular Party Vote Seats NDP 37.6% 74 Liberal 32.4% 36 PC 23.5% 20 Other 6.6% 0 Total 130