LETTTERS TO THE EDITOR — U.S. mining law reform needs

In a recent article in Time magazine on mine reform legislation in the U.S., the industry south of the border (along with the Canadian contingent of companies) was portrayed in a negative light. The readers of Time were fed only one side of the story. Here’s the other side.

All the open-pit gold mines in the U.S. take up less space than the parking lots of Safeway grocery stores.

The industry contributes US$35 billion to the U.S. balance of trade by producing 10 million oz. gold annually, placing the U.S. second in world gold production. In 1980, the U.S. ranked sixth in the world, producing just 1 million oz. gold.

The gold-mining industry employs 80,000 in jobs where the average salary is three times that available in alternative careers in the rural regions of the western U.S. The environmentalists want to close all new mine development with the Rahall-Bumpers bills. What job alternatives do these groups offer? The 8% royalty proposed (by the House of Representatives) will drive virtually all new mining out of the U.S. The reason for this is simple: you cannot impose an 8% royalty on an industry whose 10 largest producers had net after-tax margins of 5% last year. (The oil industry bears 12.5% royalty rates because its profit margins exceed 50% in the producing end of the oil and gas industry.) Most countries impose no royalty on mining; the few that do so have royalties in the 1-3% range.

The next argument the environmentalist lobby marshals is that the majority of gold-mining companies are Canadian-controlled. These Canadian firms have vaulted the U.S. to second place from sixth place in world gold production in a decade. In addition, U.S. control of Canadian manufacturing, oil and gas and industry exceeds by multiples the Canadian presence in the U.S.; if the U.S. discriminates against foreigners and they retaliate, the U.S. has far more to lose than to gain.

The environmentalist lobby, if successful, will allow unlimited harassment of mining operations in the U.S. by contingency-fee-seeking lawyers and end up driving the industry out of the U.S. This development will be a great loss because the current rehabilitation of existing mines is producing excellent results, and, aside from a few instances which magazines such as Time insist on blowing out of proportion, virtually all new mines have excellent reclamation records.

The environmental movement is well-meaning, but it is a largely negative force which will ruin the U.S. gold miners today and be attacking shopping centre parking lots tomorrow. Ultimately, it will erode the entire U.S. standard of living if allowed to proceed unchallenged.

Seymour Schulich

Chairman

Franco-Nevada Mining

Toronto