Amid an increasingly competitive landscape, mining companies around the world are giving Quebec a lacklustre review with it comes to policies that appear to be making it a less desirable destination for exploration.
“Government policies have, do, and can reduce the attractiveness for mining and can reduce access to minerals and can reduce the economic returns for mining,” said Kenneth Green, senior director, natural resource studies with the Fraser Institute, at a breakfast session hosted by Fasken Martineau DuMoulin LLP last week in advance of the Prospectors and Developers Association of Canada convention in Toronto this week.
Green gave a teaser of the institute’s annual 2013/2014 Survey of Mining Companies, which last year covered 96 jurisdictions around the world and will reach 112 jurisdictions this year. The survey considers responses from 690 executives in the mining sector and will be presented in full Monday as part of PDAC.
The Fraser Institute ranks jurisdictions in two ways — one based on its Current Mineral Potential Index (balances policy and mineral potential) and on its Policy Potential Index (which assesses the attractiveness of mining policies in an area and is composed of survey responses to 15 policy factors that affect investment decisions). Green spoke to the results of the PPI only — how jurisdictions stack up on policy issues.
The top 10 highest-rated jurisdictions for mining are similar to last year with Sweden edging out Finland for the top spot. Alberta comes in third globally — and No. 1 as the best place in Canada — for mining investment, with New Brunswick in seventh. Newfoundland and Labrador is ninth in the global rankings, moving up from last year and improving its score the most of all Canadian jurisdictions. British Columbia followed closely behind in terms of improving its score.
For 2012-13, Green said Quebec “was not a happy story and will continue to be so in the future.”
Once No. 1 in the annual mining survey (2007), Quebec dropped to 11th last year and this year drops 10 places in the rankings to 21st. Saskatchewan was 12th, Yukon 19th, Manitoba 26th, Ontario 20th, Nova Scotia 29th, Nunavut 44th, and NWT 47th out of 112 jurisdictions.
“Canada is always ranked very highly but it’s not without precedent for a jurisdiction like Quebec to just go off — they know what the best practices are — but for what one assumes are political reasons are unable to establish that regime,” he said.
Quebec’s policies around mining are influencing how companies view the province in terms of their interest in doing business there. Last May, Quebec announced changes to its mining royalty regime that will raise the province’s mining royalties to the highest in Canada and introduced what the Fraser Institute referred to in an August report as “a host of factors that decrease Quebec’s attractiveness for mining investment.”
As well, Quebec’s taxation regime appears to be discouraging investment. The 2012/2013 mining survey revealed, “38 per cent of mining managers were mildly or strongly deterred” from investing due to the province’s taxation regime.
However, sometimes in spite of a province’s efforts to be more mining friendly — B.C., for example, is viewed as having made some significant advances and is considered more “friendly” — the federal government can step in and upset that perception. For example, on Feb. 27, the federal government rejected for the second time the Taseko New Prosperity Mine project — a proposed $1.5-billion open-pit, gold-copper mine in B.C.’s interior — due to environmental concerns.
“The federal refusal is troubling. When the provinces are behind it they are supposed to have the thumbs up/thumbs down authority so for it to be overruled at the federal level is not a good precedent,” said Green.
A government report found the New Prosperity project would cause “significantly adverse effects” on water quality, fish, and fish habitat in a lake important to First Nations.
“One of the really big challenges we face as a society is trying to teach people about the concept of trade-offs and balances,” said Green. “Similar to damming a valley to build a hydro facility, the average person can’t wrap their head around the idea of temporarily harming a lake significantly and then remediating it. It used to be understood that’s sort of how things worked — you cause short-term damage and remediate it over time.”
First Nations land claims also factor significantly into why survey participants click the “deterrent to investment” box.
This year, the institute will be conducting further research into lost opportunities in Ontario’s Ring of Fire region, mineral rights regimes in the U.S. and Canada, as well as a study on fracking in Canada and the duty to consult regarding aboriginal land claims.