Ontario urged to address mining sector challenges

Ontario has a strong mining sector, a positive reputation as a mining jurisdiction and heaps of mining sector expertise.

But when the current commodities downturn ends, that doesn’t mean that capital will automatically flow back into the province, warns a new report by the Ontario Chamber of Commerce.

“Ontario mining is a competitive advantage for the province, and our expertise in mineral production, finance and innovation is in global demand,” Chamber president and CEO Allan O’Dette said in a news release. “However, there are critical steps that the government must take to ensure the sector’s continued role as an economic driver in Ontario,” O’Dette said. “We are calling on all levels of government to harmonize their efforts to ensure that mining investment continues to flow into Ontario now and in the future.”

Despite the market’s slump since 2011, last year Ontario mines produced $11-billion worth of minerals — more than any other province or territory in the country.

The report, Digging Deeper: Strengthening Ontario’s Mining Advantage, urges the province to deal with issues that could hamper the sector’s growth, such as the regulatory uncertainty surrounding aboriginal consultation, and increasing industrial electricity rates.

“Waiting for the next upswing in the mining cycle is not a sufficient response to these challenges,” the report says. “Active steps must be taken to ensure that the mining sector is set up for success in the future. This period of weakness in global mining affords Ontario a critical opportunity to take these steps.”

The Chamber’s report contains nine recommendations to the provincial and federal governments, including calls to invest in northern infrastructure and in mining research and innovation, as well as develop resource revenue sharing with First Nations.

The report’s first recommendation is to up investment in northern infrastructure, while coordinating planning with the mining sector, and aboriginal as well as other interests. The province should broaden the mandate of its recently created Ring of Fire infrastructure development corporation, the report advises.

It should also provide more clarity and certainty for mining companies and aboriginal communities by giving companies a list of the aboriginal communities they need to consult regarding a project. Currently, exploration and mining companies may receive different lists from different ministries, or they may see additional communities added to a list after they have already started the consultation process, with no clear reason as to why they are being added.

To provide more certainty and clarity to aboriginal communities, the province should also develop a framework for resource revenue sharing.

The existing duty to consult framework is set up to inform aboriginal communities of potential impacts of development, the report observed. However, that leaves companies on their own to outline any benefits the community may see from development.

“Sharing existing mining tax revenues between the Crown and aboriginal communities is one way to provide certainty that aboriginal people will gain from developing mineral resources, and align interests to ensure that the province, industry and communities all benefit,” the report says.

The report noted that resource revenue sharing would not replace the need for negotiated impact benefits agreements with aboriginal communities.

Citing a decrease in spending on exploration and economic studies on mineral deposits in Ontario — from a $460.7-million high in 2010 to $151.1 million in 2013, and an expected $102.4 million this year — the report suggested ways for both the Ontario and federal governments to ease the sector’s financial troubles.

It recommends that Ontario increase its flow-through share tax credit, which helps exploration companies pass on some of their exploration expenses to investors in return for a tax credit, to 20% from 5%. A higher rate would bring the credits available to Ontario explorers in line with those in other provinces.

The federal government should also renew the 15% mineral exploration tax credit — introduced in 2000 — for three years, instead of the one-year period that has become typical. This would provide more certainty to exploration firms and investors.

In addition, the report recommends that the province commit to keep mining taxes at current rates.

Research and innovation

Because of the downturn in commodities, mining companies have cut back on research and development spending. To ensure the province keeps its competitive edge once interest in mining returns, the report suggests that the province increase mining innovation funding for three years. Instead of matching industry funding for projects on a 1:1 basis, as it currently does, it should also increase its funding ratio to encourage higher-risk, potentially groundbreaking projects that could have greater impact on the sector’s productivity levels than the lower-risk, cheaper projects that will most likely get funding.

The study points out that Ontario’s mining expertise can be leveraged to create opportunities globally. It calls on government and industry to work together to find ways to “exploit this competitive advantage” to create new business opportunities and growth.

The Chamber report recommends that the province conduct a study to understand its relative attractiveness as a mining jurisdiction, and what steps it can take to improve its standing.

The Ontario Chamber of Commerce timed the release of its report in advance of the government of Ontario’s renewed mineral development strategy, which is expected shortly.

To read the full report, please visit www.occ.ca/wp-content/uploads/2013/05/Digging-Deeper.pdf.