Letter to the Editor: Foreign takeovers could signal end of Canadian based research

The October announcement of the virtual extinction of Inco’s, board of directors by Companhia Vale do Rio Doce concludes another chapter in the globalization of the mining industry and raises serious questions as to Canada’s continuing role.

Canada has always been amongst the leaders in mining, but in financial terms this leadership is becoming a thing of the past. In the last few years, great names such as Noranda, Placer Dome and Cominco have disappeared, digested by what have remained as Canadian-based companies. However, the recent purchases of Falconbridge by Xstrata and Inco by CVRD will mean that the majority of the financial power in the industry will lie outside Canada’s borders.

While consolidation of this kind may make sense to shareholders, it will have an unfortunate effect on the research that has contributed so much to the vitality of Canadian mining. Having been a member of the advisory boards of a number of non-Canadian universities, I know very well that when it comes to significant support of research (grants in excess of $500,000), subsidiaries in countries other than where the head office is based have very little clout when it comes to supporting local research. For many years, Inco and Falconbridge have been generous supporters of mining and exploration-focused research at Canadian universities. Research institutes such as the Mineral Exploration Research Centre (MERC) at Laurentian University and the Mineral Deposits Research Unit (MDRU) at the University of British Columbia are just two of the more prominent examples. Many of us at other universities, including my colleagues and I at the University of Toronto, have benefited enormously from the backing of Inco and Falconbridge, and other now-extinct Canadian companies. We cannot expect Brazilian-based CVRD or Swiss-based Xstrata to have the same interest in supporting Canadian-based research. As an example, take a look at the new slate of directors nominated by CVRD for Inco. Can one realistically imagine them as strong supporters of Canadian universities?

It behooves all of us to ask what the Canadian government is doing to fight this trend. I rather suspect that the answer is very little, apart from a few short-term initiatives. Those of us related to Canada’s mining industry in academia, industry and government should act purposefully and promptly to stimulate the Canadian government into recognizing and then remedying this situation, possibly by changing the tax structure to promote more strongly the investment of offshore companies in Canadian research.

Such a move would not merely be to maintain Canada’s current strong research base, but would have a real long-term benefit for the companies themselves. As the years go by, the large multinational mining companies are progressively obtaining a greater proportion of their resources by acquisition rather than by grassroots, in-house exploration. It is junior exploration companies, a large proportion of which are Canadian-based, that provide the feed for these acquisitions. The junior companies obtain their talent and ideas from students at Canadian universities who have worked with faculty engaged in research in the field. Starving the providers of this talent will ultimately impinge on the supply of good properties for acquisition.

A.J. Naldrett

Surrey, U.K.

Professor Emeritus

Department of Geology, Earth Sciences Centre

University of Toronto