COMMENTARY — Restructure reclamation funds

Mining is an integral part of Canada’s economy, and without necessary steps taken by the federal government, this vital national industry will wither away, says Wayne Fraser, a professional engineer and director of environment for Hudson Bay Mining & Smelting.

“The unfortunate reality is that many communities dependent on mining are already suffering as investment heads towards friendlier climates in Latin America,” says the spokesman for the Keep Mining in Canada campaign. “I am well aware of the need for environmental responsibility, but I also see an immediate necessity to restructure mine reclamation funds to keep the mining industry alive.”

In some provinces, he says, these funds are currently designed so a company must provide cash up front to cover future mine reclamation, similar to an environmental registered savings plan (RSP). However, unlike an RSP, the interest on this fund is subject to taxation, which means a fund may not be worth its initial value after tax, inflation and today’s low interest rates are taken into account.

For example, Fraser says, a 6% interest rate taxed at 50% means 3% interest is accrued in the fund. Factor in a 5% annual inflation rate, and the fund is found to be losing value every year. This means a company will have to add to the fund even further before reclamation can begin — an exceedingly expensive prospect.

“The mining industry is determined to live up to its environmental commitment,” he says. “In fact, the Canadian mining community is already a world leader in environmental laws, practices and technology, and many Third World countries turn to Canada for guidance in these matters. It seems ironic that these same countries, where startup costs are often significantly lower, are attracting investment away from Canada.”

The federal government must foster a better climate for the mining industry by deferring all tax on reclamation funds, Fraser says.

Keep Mining In Canada is a national grassroots campaign designed to increase public awareness of mining matters and to encourage government to take action on key mining issues.