Editorial Prescription for a mineral policy

The following guest editorial is from George Miller, managing director, The Mining Association of Canada, Ottawa.

The Honorable Gerald Merrithew, Minister of State (Forestry and Mines), is expected to announce a new federal mineral policy at the Mineral Outlook Conference, to be held in Ottawa on May 20. What would the mining industry like to see in that policy? What do we expect?

The ideal mineral policy at any time would be a set of measures that reinforces the industry’s own efforts to survive and prosper, to face up to the challenges of the day. Our challenges are these: we must survive in the face of low metal prices, heavy debt burdens and protectionist markets; we must keep on finding superior mineral deposits; and we must embark on a major program of technical renewal.

One thing must be clear. Canadian mining is not looking for handouts from government. A policy of subsidization is self- defeating in the long run. We don’t want to catch the agricultural disease, where worldwide subsidy begets worldwide over- production, and where Canada’s own producers call for still more subsidies to survive.

How can a mineral policy support our fundamental goals of survival, financial stability, technological innovation and market penetration?

First, survival. Since the advent of the recession in 1981 the industry has survived by its own desperate efforts. Our record of reducing costs and increasing productivity is well known. Government must reinforce these efforts. A mineral policy for survival should encourage maximum operating flexibility through employee mobility and retraining, as well as transportation reform. Most of all, it should put a cap on the growth of government- mandated costs and if possible roll them back. This is not the time for a new Environmental Protection Act, for increased employer contributions to unemployment insurance, for new “user fees” or for new taxes on energy and other inputs.

One of the best ways to reduce costs in future is to find superior deposits. The current flow-through share policy is providing funds for investment in exploration, and several new gold mines have been discovered. But we also need some exceptional base-metal finds. A mineral policy for exploration should include a commitment to continue flow-through shares, at least until the industry is generating more profits.

The industry, particularly base metals, must regain financial stability, get its debt loads down, and gather cash for future investment. It cannot fully achieve this goal until it returns to profitability. When that day comes, cash generated by profits must be allowed to stay with the companies, and not be stripped out by ill-considered tax reforms. It is said that tax reform will bring lower tax rates but that industries will lose certain preferences. A mineral policy for financial strength should ensure that a proper balance is struck and that existing investment incentives are not totally abandoned.

In the longer term, the industry cannot prosper without undergoing a technical revolution. Other countries’ producers are working hard to reduce their costs. The only way that we can match or surpass them is by technological innovation. And that means more research, better-focused research and faster adoption of new methods. Industry must take the lead by hiring more well-trained young engineers, by supporting research and by innovating more quickly. A mineral policy for innovation can help by providing tax and other incentives for research, by ensuring that government research facilities such as canmet continue to receive full support, and by encouraging the rapid adoption of new technology.

Finally, we must recognize that our ability to penetrate markets will ultimately define our scope as a great mineral nation. As an industry, we have an obligation to become sharper marketers by developing distinctive products and more effective strategies. But government has the prime role in negotiating access to our foreign markets. Access is threatened by a rising tide of protectionism. A mineral policy for exports should mobilize an all-out effort in support of U.S. free trade talks and multilateral trade negotiations.

Having set out a “wish list,” what is a realistic expectation for Mr Merrithew’s mineral policy? Stated government policy already supports some of our recommendations such as free trade. But other recommendations are primarily in the hands of other ministers such as the minister of finance or the minister of the environment, who have competing objectives. Thus it is most unlikely that a single document will produce new, favorable policies in all areas.

We do have the right to expect that those policies and programs under the control of Energy, Mines and Resources will be fine- tuned to match the current needs of mining. And we expect that Mr Merrithew will continue to represent our industry’s interests at the cabinet table with vigor and enthusiasm.