EDITORIAL PAGE — The future of mining

Whether or not the mining industry in Canada is in decline, maturing, or tired and recuperating after the ebullient times of the past decade remains a subject for debate.

That mining is still an important factor in the future growth of this nation is not in dispute. The question, as asked by Falconbridge Ltd. senior vice-president Lars-Eric Johansson in a speech at the recent Ontario mines symposium in Toronto, is how the structural change under way can best be managed to the benefit of all.

Johansson, who was addressing the situation in Ontario but whose remarks might apply to all 10 provinces, offered two suggestions: build on the industry’s strengths and put those strengths to work in other areas of the economy; and convince the provincial government that it is in everyone’s best interest to foster an environment that encourages, supports and helps to stabilize the industry.

Make no mistake, mining contributes greatly to the economy. Take mining away from Northern Ontario, for instance, and the devastation to that region’s economy would be enormous. “The value-added contribution from the mining industry is far higher than any other sectors of the economy,” says Johansson, listing employment levels, tax revenue, value-added materials and trade balance as areas in which the industry is a major contributor. The mining industry, according to Johansson, provides the province with some 30,000 jobs, produces minerals worth more than $7 billion, spends $300 million annually on environmental protection, pays on average about $500 million in taxes each year and, on the national level, provides some $18 billion annually to the country’s balance of trade.

In short, mining remains a positive economic force.

Of course, the Ontario and Canadian mining industries do not live in glass houses and are not immune to the economic pressures being felt around the globe. Lower metals prices on international markets have the same effect in Canada as they do in Australia and Chile.

Nor is the industry exempt from political pressure at home or abroad (albeit sometimes applied in different ways). On the foreign side, a recent announcement by the government of Papua New Guinea to the effect that it wants to triple its interest in the Porgera gold mine to 30% makes this point exactly.

The huge Porgera project (1.4 million oz. per year) is owned 30% by Placer Dome’s Placer Pacific (the project manager), 30% by Highlands Gold and 30% by Renison Goldfields, all of which are based in Australia. The newly elected Papua prime minister, Paias Wingti, reportedly complained that his government is getting a raw deal from Australian mining companies and hence would like to boost the government’s equity interest in Porgera, negotiated settlement or no negotiated settlement. The joint venture is understandably upset; according to the partners, the people of Papua New Guinea currently receive up to 60% of Porgera’s profit through a combination of equity interest, taxes and royalties.

It is not a pleasant situation and it makes one wonder whether Canadian mining companies will begin to think twice, and perhaps three or four times, about investing abroad (as if the risk isn’t great enough already). Provincially, nationally and internationally the times are a-changing. Learning to live with the changes will help to ensure the mining industry’s survival. Sharing its successes with the rest of society can only make for a better world all around.