Mines ministers tackle host of issues

The 60th annual conference of mines ministers was recently held in Halifax, N.S. The mining industry was represented by the Mining Association of Canada (MAC), the Prospectors & Developers Association of Canada (PDAC), the Canadian Association of Mining Equipment & Services for Export (CAMESE) and the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), as well as numerous provincial mining associations. Some of the issues discussed are outlined below:

q Taxation — The MAC sees taxation as one of the most significant issues affecting the industry’s low rate of return on investment. This year, the federal government’s Bill C-48 will begin to gradually phase out the resource allowance and eliminate it by 2007.

However, one perverse effect of this change is that it will increase taxes for mining companies in several provinces. The hardest-hit will be base and precious metals operations in Ontario, Quebec and Manitoba. The MAC is proposing some modest changes to offset the elimination of Bill C-48.

q Kyoto Protocol — Canada is the world’s seventh-largest producer of non-fuel minerals, and exports 80% of its production. Energy use in mining accounts for 15-30% of production costs. Thus, Canada’s ratification of the Kyoto Protocol raises some serious questions that can not be answered without a more detailed implementation plan. It’s possible some mineral processing could be done in Third World countries that do not have to abide by the same rigid guidelines.

q Exploration spending — A presentation by the PDAC showed that exploration expenditures in Canada increased to more than 20% of the global total in 1999 from about 12% in 1977.

The PDAC attributes most of the improvement to better tax concessions provided by flow-through shares, and is calling for governments to support a 3-year extension of the program. Not only is the program successful at financing exploration, the PDAC says; it is resulting in the discovery of new mineral resources. The association estimates that there have been 68 mineral discoveries since October 2000, and that 13 of these are likely to become producers.

Governments require extensive consultation with local communities as a prerequisite to exploration or development. These negotiations are often expensive, and the PDAC believes such expenses should be eligible as a tax writeoff. Furthermore, Canadian securities regulation should have one set of rules consistently applied across the country by one regulator, as this would reduce the cost of financings.

— The preceding is from a bulletin published by CAMESE, which is based in Markam, Ont.