New investment being turned off

A growing obsession with environmental regulations and an unnecessarily complicated tax structure are discouraging new investment in Canada’s mining industry, says Lars Eric Johansson, chief financial officer for Falconbridge.

“At a time when countries are falling over themselves to attract foreign investment and capital, Canada seems to be moving in the opposite direction,” Johansson said at the annual meeting here recently of the Canadian Institute of Mining, Metallurgy and Petroleum (CIM).

Johansson is in a unique position to speak on the Canadian situation. In the 1970s, while in Sweden, he reviewed Canadian projects for the Swedish mining group Boliden. In addition to being CFO, he is senior vice-president of Falconbridge, which is jointly owned by Noranda and Trelleborg AB, a Swedish conglomerate that owns Boliden.

Because of the division of powers between the federal and provincial governments, potential investors in Canada must consider laws in several jurisdictions, sometimes overlapping, regarding labor, taxation and the environment. And the amount of regulation and taxation is increasing. “Instead of recognizing the importance of natural resources to Canada’s economy, it seems we are being taxed and legislated into the ground. You cannot avoid getting this impression after looking at some of the recent negative proposals and legislative changes brought forward by our governments,” he said.

Despite his concerns, Johansson is optimistic for the future of mining in Canada if these problems are addressed.

“The problems we face aren’t insurmountable. We need to streamline our systems — taxation and environmental regulations especially. We need to foster greater dialogue and co-operation with our unions. We need to convince or politicians and the public that mining is not a sunset industry, that it is integral to our way of life and a significant contributor to the standard of living we enjoy,” he said.

The issues Johansson raised were heard often during the annual meeting, the CIM’s 94th. With the theme “socio-economic challenges,” many of the 210 technical papers delivered during the 5-day convention and trade show dealt with the problem of remaining competitive while facing increased costs arising from regulatory compliance, taxation and other government-mandated costs.

Indicative of how the industry is suffering, attendance was down to 1,983 delegates this year from 2,140 in Vancouver in 1991.

But with a trade show that attracted 129 displays — the maximum that could be handled at the Queen Elizabeth Hotel — the convention is expected to make a profit for the Montreal branch of the CIM which organized and hosted the event. This year, 75% of that profit will go to the national body of the institute. In previous years, the hosting branch kept 50% of the profits.