Natural Resources Committee on June 1st, 2006

[The Acting Chair (Mr. Richard Harris (Cariboo—Prince George, CPC)), Conservative, Dick Harris]

Good morning colleagues, and good morning in particular to our presenters today. We really appreciate your being here to tell us a little bit about the mining business. There's a lot we don't know, and we on this committee are trying to get a broad understanding of all facets of the natural resources sector in the country. We appreciate your coming.

We have the department here. Natural Resources Canada is going to go first. Mr. Nash and Mr. Duke, you will have 10 minutes. Then the Mining Association of Canada and the Prospectors & Developers Association will have a combined 10-minute presentation, and then Mining Watch Canada will have 10 minutes as well.

Mr. Nash, if you would like to begin, we'd appreciate it.

[Gary Nash, Assistant Deputy Minister, Minerals and Metals Sector, Department of Natural Resources]

First of all, does everybody have a copy of this deck that was circulated? Good. I'll go through this as best I can.

As you can see from the first chart, the value of production is about $60 billion. It's one of the largest industries in Canada when you work it all out. If you were to compare it, say, dollar for dollar with the forestry sector....

The forestry sector includes forest products; we don't. We go only as far as the primary metal stage, which is the material that goes into the manufacturing process. If you were to do that in forestry, you would probably do it with pulp, not paper. It's a manufactured product. So this is one of the largest natural resource industries, if you compare apples to apples, even with the oil and gas sector as opposed to energy.

You'll notice on the next chart that it is a large investor of capital abroad. In fact, that alternates between energy and our sector, the mining sector.

They are in over 100 countries. Between the exploration industry and the mining industry, it is indeed the face of Canada internationally. Whether you like the face or not, it's there. They are all through South America, and if it hadn't been for the mining industry, which invested over $10 billion in Chile, and they're investing more in South America.... It's opening doors to free trade agreements. It's one of the major factors that opens those doors. It opens doors as well for the suppliers of consulting services, equipment, and other types of supplies.

Currently, the industry is investing nearly $6 billion in Africa, with plans of another $15 billion over the next five years. It's global. You're dealing with a global industry.

As you can see from the next chart, right now the total amount of Canadian direct investment is roughly $50 billion, but there will be a lot more.

The next chart, on page 5, shows you a cluster that says the mining industry supports activities in all these other areas. One of the most important areas is the financial community--the Toronto Stock Exchange, the brokers, the banks. I've met with them two to three times. They are very much tied to our mining industry.

If you go to the next chart, you see on page 6 the Toronto Stock Exchange. It's one of the most important exchanges in the world, and they will continue to be as long as we have support for the mining industry.

Page 7 gives you just some flavour of some of the most important centres that relate to mining across Canada, including Toronto. Toronto is the headquarters of most of our major companies. It's our financial community. It's a number of other things.

If you look at R and D, on page 8, there are R and D centres across Canada. We have found out that there are nearly 1,200 aboriginal communities within a couple of hundred kilometres of a mine. One point that is extremely important is that the aboriginal communities have a young population. They need jobs. The mining industry, the forest industry, and others can provide opportunities for them as long as they have the capacity to meet the skill requirements within those industries, because the mining industry and the forestry industry are in those areas where they live.

If you go to the next page, page 10, you see all these little dots. Those are aboriginal communities--just to give you a feeling for it--right across the country.

The Canadian mining industry is largely Canadian controlled. That is an important factor. As long as it's Canadian controlled, it means the following: we will use largely consulting services from Canada; we will purchase largely from Canada in terms of supplies or equipment. It also offers opportunities in terms of bilateral relationships with many countries, because they see Canada as having the expertise and the wherewithal to make investments in their countries, and so on. So they're always coming here. It's a very important factor. I have enough experience in the field to tell you that this is indeed the case.

I don't have to go into a lot of detail, other than to say that if you look at the question of inorganics, we produce an inorganic material from an environmental point of view. Metal is one material that can be recycled ad infinitum, as long as you can capture the material. Gold is a perfect example; you never throw that away. Copper can be recycled ad infinitum, and so on. It's a very important factor.

R and D in Canada has been falling badly. Consequently, I consider this one of the shortcomings with what is happening today in Canada with regard to R and D.

There are a number of international issues set out on page 15.

Concerning market access, Europe is continually putting up constraints to our markets. They did it in lumber, but they're doing it in metals as well. They have a number of risk assessments that are saying you shouldn't use nickel for this and maybe you shouldn't use zinc for that, etc. They don't say get rid of everything, but they restrict your market access incrementally. It's a big issue.

Today we have competition from China, India, and Brazil. So the question I hope you would think about is, what is the strength of Canada? How do we build for the long term? What is our greatest strength? Is it in manufacturing, or is it in natural resources? If so, how do we use our natural resource industries to provide for a longer-term, competitive future? If you lose the natural resources industries, what do you have left in terms of a meaningful future for Canadians?

There are investment restrictions, and of course we have a problem with image. Last year I met with the Standing Committee on Foreign Affairs and International Trade, and they were very concerned, and rightfully so, about some of the problems that occur in some of the developing countries.

There are a number of domestic issues. We have a number of problems in Canada. First of all, we do have the question of mergers and acquisitions. What does this mean? Regulatory burdens: they're rather complicated and long, and we're hoping they'll be streamlined. We have problems with skilled labour shortages. We need our geoscience base. That is an extremely important factor for exploration. There are infrastructure shortages, notably in the north. As for base metal reserves, again we need exploration and geology. Then there are the issues of declining mining R and D and aboriginal involvement in the industry.

That's a general overview. You have an annex, and I know the time is short, but I want to give you a feeling for some of the areas where we play fairly significant roles.

Canada, and our group in particular, established the Intergovernmental Forum on Mining. I am the international chairman, and developing countries from around the world are members. It's an opportunity to position Canada, to try to influence the regulatory system over mining, because many of our companies are very concerned about how arbitrary the situations are in many developing countries, and so we are working on that.

We helped established the African Mining Partnership, which is 26 African governments that now meet annually. Canada is the only other country invited to their meetings. As I mentioned before, we have big investments in Africa, and there are opportunities in Africa over time.

Also it shows you federal-provincial responsibilities. We play a very significant role with the provinces. I co-chair a federal-provincial committee of all provinces and territories. Last year we had at least 10 meetings, and we are holding our next meeting for mines ministers in Whitehorse, Yukon.

I hear, “You're in an area of provincial jurisdiction.” No, we're not. We're dealing with international matters. We are dealing with issues of national concern, national standards. We deal with science that complements theirs. We are not in their jurisdiction.

There is the question of environmental assessments. A very good ruling in Alberta not too long ago said we have the option now of complementing each other during an environmental assessment, and that's the way to go. So we are working things out.

Page 18 gives you a feeling for some of the work we do with some of the provinces. The average wages give you an idea. In the last 20 years nearly 60% of transportation in this country has been tied to mining. We have a number of relationships with various countries, and you get a feeling for it on page 22.

Canada is still the big source of equity financing, certainly for our exploration industry. This industry can do an awful lot for Canada, if it's done right.

You will notice we have over 7,000 properties in different countries worldwide. That tells you of the opportunities. On page 25 we list projects that show you the relative importance of different regions.

That, Mr. Chairman, is a general overview of the mining industry, as I see it. I hope it was within 10 minutes.

[The Chair, Conservative, Lee Richardson]

Thank you very much. It was well within 10 minutes, and I'm sure we could have gone on for half an hour even to get through this deck. Thank you for rushing this through. I hope we have adequate time for questions.

First of all, let me apologize for being a little late getting here. I'm glad Mr. Harris was able to get things started.

I don't know if it was established early on, but in the interest of the committee we will hear all the presentations. We'll do it that way, because often one question is supplemented by one of the other witnesses.

With that, I thank you, Mr. Nash. We will go to the next one and try to keep it at 10 minutes each.

The next witness is Mr. Peeling from the Mining Association. Thank you for coming, and please proceed.

[Gordon Peeling, President and Chief Executive Officer, Mining Association of Canada]

My pleasure.

I am President and Chief Executive Officer of the Mining Association of Canada. I am very pleased to be here and have this opportunity to discuss issues of importance to our industry.

Because we are splitting this slot with our colleagues from the Prospectors & Developers Association of Canada, although we have common views on many of our elements, I'm going to leave some of the key issues on geoscience and exploration to my colleague and I will focus on a few key issues that are important for the mineral producers and metal producers in Canada. I'll try not to duplicate the information that Mr. Nash and the department have put in front of you.

One of the things we're particularly proud of as an association is the fact that we were the recipient in 2005 of the GLOBE Award for Environmental Performance, and one of the key activities that we've taken on through our sustainable mining process is to become, in the area of both social and environmental performance, a responsible corporate citizen of Canada. That is an ongoing program.

Mr. Nash has mentioned a number of the key mineral facts,and I won't go over those again in detail, although I will make one distinction on R and D, because we have agreed that we'll put together a small working committee on research and development. You will note that the numbers in my deck on slide 3 are slightly different. They comprise for 2005, from Statistics Canada, $54 million in extraction research and development, $274 million in primary metals research and development, and $176 million in metal manufacturing R and D, for a total of just over $500 million.

This is an ongoing issue for many people, as to whether the industry is pulling its weight in R and D or not, like other sectors of the economy. This is a moveable feast that changes over time. In fact, a large part of our discretionary expenditures obviously have to go to defining the next ore body, and Tony is definitely going to talk about that. That is the primary draw on our discretionary expenditures, and you always have to bear that in mind when you're looking at the research and development numbers.

I have also put in place the same map as Mr. Nash has shown you, and that again is to simply remind you of the east to west, north to south breadth of this industry.

Before I go to challenges, I do want to stop for a moment and thank you very much for creating a natural resources committee. This is something we have not seen for many parliamentary terms. It is something that I think we badly need at a parliamentary level, to have a focus on the requirements of this industry and to recognize that there is no distinction between parts of the economy and that our resources are central to the future economic health, growth, and social, educational, and environmental programs of this country. If we are to seize the opportunities in front of us, we need a healthy and growing industry that meets all its responsibilities.

Let me turn to the challenges. First, and probably the most important for us over the immediate five-year to ten-year period, is in the skilled labour area. The Mining Industry Human Resources Council, formerly the Mining Industry Training and Adjustment Council, just released a two-year study that indicated that we are going to be in need, even under modest growth scenarios, of between 57,000 and 81,000 new people over the next 10 years. These are skilled people. These are mining engineers, they are metallurgists, they are lab technicians, and the system as we currently understand it, in terms of post-secondary education, geological schools, engineering schools and technical schools, is only going to deliver 9,000 to 12,000 of that requirement.

As Mr. Nash has indicated, this is the highest wage sector. We're ready to deliver on those jobs and we're going to need your help. We're going to need the government's help, both on the immigration side and on the skills recognition and upgrading side. We need to do a better jobs of gender balance in the industry. We need to do a better job in partnership with governments and first nations. In our aboriginal communities there's a future workforce for this industry, and that's a growing part of the Canadian demographic.

These become extremely important issues for us, and many of those solutions are beyond the control of the mining industry itself. They can only be achieved through partnership with government and our indigenous Canadians.

I would also put down another note there, that because the front end of many of the oil sands producers' businesses is open pit mining, their numbers are not included here. You could add another 35,000 to that total for oil sands alone.

So you can see that the challenge in front of us over the next years is really quite significant, and the implications of not meeting it means a slowdown in progress of development and inability to achieve the economic opportunity of the Chinese market and, following that, the Indian market, etc.

The sound solutions that we see are as indicated in a report done by the Mining Industry Human Resources Council, and indeed we would like to see support for that council and its work. We need the continuous investment between industry, government, community training, and education partnerships, and as I mentioned, we need to enhance our aboriginal participation in mining and we need to make it easier for skilled immigrants to come to Canada.

Another key challenge in front of us that I want to touch on today is project review, which is a multi-sector priority. I am currently the chair of the Resource Association Group, which is an informal gathering of the Mining Association, the Canadian Association of Petroleum Producers, the Forest Products Association, the Canadian Energy Pipeline Association, the Canadian Electricity Association, and the Canadian Gas Association. We are all like-minded on this issue and on the need for improvements in this area, which stands in the way of billions of dollars of new investment. We need a more efficient process. We don't need less regulation; we need the regulation to work better and more efficiently.

Some of those key challenges that I indicate in those dashes there are multiple changing scopes of projects in terms of environmental assessment, lack of coordination between departments and between governments, oversight gaps. Amendments that were agreed on in 2003 both by first nations, us as an industry, and NGOs are not implemented yet. So this is one where solutions can be quite straightforward through better administration and can be more cost-effective.

This is also a key point that's been raised by the regulatory advisory committee, which is multi-stakeholder, to the Minister of the Environment. They passed a unanimous resolution calling on the government to implement the 2003 improvements.

Some of the key things here that we would like to see in how this could be improved are the passage of a new Canadian Environmental Assessment Act cabinet directive by the new cabinet; allocation of necessary funds to carry out the cabinet directive--the previous government allocated an additional $5 million per year; the creation of a central project office, similar to the Australian government model, to oversee and coordinate the project approval process; provide assistance to proponents navigating the system; and implement regulations to set schedules and timelines. Changes will enhance the rigour and quality of environmental assessment processes.

One of the key opportunities that we see for a natural resources committee is that this committee can become a champion of a booming resource sector that in previous decades was seen to be out of favour. However, now it is at the heart of the economic opportunities that confront Canada, and those opportunities we need to look at carefully. If we are going to seize them--and my colleagues will spend a bit more time on this--we need support for a geoscience strategy at the front end of the business, the jobs and skills agenda that I've outlined, and improved regulatory processes.

Merci beaucoup.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Peeling.

Again, I'm sorry for the shortness of time. We were able to let you go a little longer. We're going to have you split your time with Mr. Andrews. This is a lot of information, and I appreciate your trying to boil it down as tightly as you did. I'm sure that it's going to generate a lot of questions.

I'm going to go quickly now to Mr. Andrews of the Prospectors & Developers Association. Do the best you can at keeping it tight. Thank you.

[Anthony Andrews, Executive Director, Prospectors & Developers Association of Canada]

Thank you, Mr. Chairman and members of the committee. I appreciate the opportunity to be here today, and I'd like to add my voice to Gordon's to say that we really appreciate the reformation of this committee. It will be a very useful venue going forward.

My presentation is supplemented by a deck and a brief that was submitted to the clerk last week.

All I need to say about the PDAC is that we represent the Canadian exploration business, and our members include pretty well everyone who has anything to do with this business. Since they're all around the world, our activities are not only in Canada but extend internationally as well.

I'd like to begin by making a few key points about the fundamental nature of the exploration business. Exploration is the R and D of the industry. We've heard R and D mentioned a few times this morning. This is the way we look at it. A manufacturing company will invest in R and D to generate a new product. The mining industry will invest in exploration to develop a new mine. There's an interesting distinction here. A new mine creates new wealth; a new product primarily redistributes wealth. I think that's important.

In addition, exploration activity on its own stimulates economic activity in northern and rural activities. It creates employment, and that employment can include aboriginal people and students. That is an important thing.

The second point is that Canadian juniors are very significant in the exploration business, both at home and abroad. There are over 1,000 of these small enterprises, and they consist of three to five highly qualified, experienced people. They depend primarily on the capital markets to fund their exploration efforts. These are our modern prospectors, if you will. At the present time they account for no less than 60% of exploration that's spent in Canada, and about 30% of worldwide exploration.

The third thing is that exploration is a high tech business, but discovery is very challenging. The problem is that most of the deposits lie beneath the surface, and we have limited direct access to that third dimension. That's why the GSI database is extremely important to exploration.

To illustrate the challenge, only one discovery in about 10,000 will become an operating mine, and it takes about seven to twelve years to go from discovery to an operating mine. In the process, most of the time we'll spend tens of millions to billions of dollars. So it is a high-risk and capital-intensive business.

Important factors of competitiveness in our industry include the fact that we are price takers, not price makers. Commodity prices are cyclical and can dramatically affect the availability of exploration capital. Exploration funds are extremely fluid and flow toward the best opportunities around the world, wherever that may be. Right now there are about 100 countries competing for the global pool of exploration capital. So it's not only a high-risk, capital-intensive business; it's also very competitive.

The global context in which we find ourselves today, if you want our current reality, is characterized by unprecedented opportunity and some challenges. We are in the midst of a global commodity boom, as you know, and this could be sustained for quite a long period of time--we estimate maybe two or three decades. Canada, as one of the world's leading mining jurisdictions, should be able to derive significant economic and social benefits from this. In order to position Canada to fully benefit, we have to deal with two key realities. One is declining reserves of commodities, in particular, base metals. The other is a shortage of new discoveries in the pipeline.

In recent years Canada's reserves have been declining, particularly base metals. It's been a gradual decline over a couple of decades, but it is now at a point where we're very concerned about our mining infrastructure and the communities that depend on it. We're also looking at a potential lost opportunity here in the context of the global commodity boom. Given the long lead times from exploration through to production, as I talked about before, we'll not be able to take advantage of this global commodity boom unless we address our declining reserves pretty quickly.

The shortage of new discoveries in the pipeline is more of a global nature. The mining industry suffered a very serious downturn from 1997 to 2002. The severity of this was unprecedented in recent times. As a result, there was little investment in exploration and discovery rates declined dramatically. Since 2002, as you know, there has been a strong recovery, driven by demand from China, but not enough time has passed for the exploration efforts to produce the fruit and generate significant new discoveries. We need an extended period of strong exploration to recover.

The PDAC has proposed a strategy to address these challenges. Basically, it focuses on two fundamental elements that have served us well in the past. One is a reinvestment in geoscience, and the other one is to maintain tax incentives for exploration. The details of this are included in our brief. I won't go into them now. But it's important to note that this strategy was unanimously supported by all the mines ministers from the territories, the provinces, and the federal government at the last mines ministers conference in September 2005.

The super flow-through share program was extended in the last budget, and we very much appreciate that. We now await the federal government's decision to initiate the other elements of that strategy. Probably the most important one is the reinvestment in geoscience through the cooperative geological mapping strategy.

Thank you.

[The Chair, Conservative, Lee Richardson]

I'm going to have to spend an hour studying this afterwards. It's a lot of information. Thank you for that.

We're now going to hear from Mining Watch Canada. Ms. Kuyek, you have 10 minutes. Thank you.

[Joan Kuyek, National Coordinator, Mining Watch Canada]

Thank you very much for the opportunity to present our views to this committee on the key issues related to mining.

We have submitted a brief that I believe is in your documents.

Mining Watch Canada is a coalition of 21 different organizations--aboriginal, environmental, development, and social justice groups, including churches and some labour unions. We work to support communities affected by mining, to do research about issues pertaining to mining, the environment, and health, and to advocate for responsible mining practices. Our work deals with mining in Canada and with Canadian mining companies that operate internationally.

I need to make it clear from the beginning that we are not opposed to mining. What we are interested in is seeing some proper respect for the huge ecological, social, and cultural costs that mining entails and in making sure that mining is done in a responsible fashion.

We're keenly aware that NRCan sees its role as an advocate and supporter of the mining industry in Canada and the Canadian industry that operates abroad. The Canadian mining industry includes suppliers of services and equipment.

NRCan includes CANMET, the Geological Survey, and an economics division, all of which provide research that is driven by the needs of the industry. They see the mining industry as their primary client. We've often said that it would be a lot better if Natural Resources Canada saw its clients as the public as well as industry, because it would mean a broader perspective on matters.

What I will address with you is what we see as being the key issues at this time. It's in contrast to some of the presentations by my colleagues, although I don't disagree with anything they're saying.

From our point of view, ensuring that the Constitution is respected and that aboriginal rights are protected with regard to mineral development and access by mining interests to aboriginal territories is of primary importance.

There are increasing conflicts between aboriginal governments and communities and mining companies over the use of aboriginal lands all over Canada and internationally. In Canada, court decisions such as Mikisew, Musqueam, and Haida and Taku make it clear that aboriginal peoples must be consulted and accommodated before any third party interest is created on lands of their traditional use and interest. Mineral claim-staking is the moment at which that third party interest is created. It's now squarely on the table of the Ontario government, because the case over Platinex has just been filed in court in Thunder Bay.

We need to prevent the depletion of our mineral resources through staged mineral extraction. Unfortunately, that isn't how mineral extraction gets planned. We need to be concerned about the depletion of mineral resources in Canada and in other parts of the world and about the protection of natural capital and the services provided to us by nature in the lands where those mineral deposits are found.

High commodity prices are resulting in irresponsible pillaging of mineral resources, with no regard to the needs of future generations. Many of these mines will last only 10 to 15 years. They are taking resources that have been there for thousands of years, and they won't be there for my great-grandchildren or yours.

Staging mines that come on stream will ensure resources for future generations, the long-term survival of those mining communities that have grown up around mines and depend on them, adequate supplies of labour and equipment for developing mines, and balanced economic development.

When you have a commodity boom, communities like Attawapiskat are rushed to development when it's clear, even from the proponents' documents, that it will be five to ten years before they are ready to take the contracts or get the jobs from that mine.

Shift taxes and subsidies away from prospecting for new ore bodies and towards research and development of recycling and conservation. If we properly respect the ecological, cultural, and social costs of mineral production, we will reuse, recycle, and conserve mineral products as long as we can.

Investment in product stewardship will also ensure long-term jobs in mining communities, use a lot less energy and water, and provide a greater return to governments. The latest report from the OECD supports this tax shift. There is one small part of Natural Resources Canada that investigates recycling. It's vastly underfunded and much too small.

At present, workers in smelters have a number of concerns about health and safety hazards associated with recycling--beryllium poisoning and other things like that--because there's not enough knowledge, enforcement, or control.

If we are to look at seriously recycling and conserving these precious minerals, we need to look at not renewing focused flow-through shares, providing a recycling innovation program through Industry Canada, providing more resources to the NRCan recycling program and providing incentives to economic development opportunities in recycling to mining-dependent communities.

Ensure that Canadians benefit from Canadian mineral resources and get a return on the investment they make in subsidies to the industry. In Canada, our four biggest diamond projects, Ekati, Diavik, Snap Lake and Victor, are all owned by companies that are controlled outside of Canada. Companies like Glamis and Ivanhoe have no directors in Canada and no real office here but are considered Canadian for tax purposes. Our taxes on mining companies are lower than those in the United States, and in 1997, the last year for which data that disaggregates these figures was actually available, the federal government only received less than $251 million in mining taxes.

On controlling Canadian mining companies operating abroad through legislation at home, some of you will have heard about this and it's been raised with me by some of the members of this committee. Canadian mining companies operating in the third world are often predatory in terms of local economies, resource rents, indigenous and traditional rights, and the environment. We don't have a good reputation abroad. There are mines of note where this is a particular problem: Barrick Gold in Tanzania, Glamis and Inco in Guatemala, TVI in the Philippines, Begoso and IAMGold in Ghana, Gabriel Resources in Romania, Inco in New Caledonia, Ivanhoe in Burma, First Quantum and others in the Congo.

NRCan has been opposing the regulation of the behaviour of Canadian mining companies operating abroad and, with the mines ministry in South Africa, is supporting a global mining activity, which Gary referred to, that brings together mines ministries of governments around the world to promote legislation and policy that will enable Canadian mining companies to expand in those countries. That doesn't mean that it's necessarily good for the economy or the regulatory framework in the countries where those companies are operating.

Provide adequate environmental and human rights controls on mine financing institutions, such as Export Development Canada and the World Bank, and on mining investment. EDC and the World Bank enable some of the most egregious mining projects to take place, and the screens are not adequate. This has been brought to the attention of members of Parliament over a number of years now, and the documents are there.

Clean up abandoned mines and prevent their occurrence with adequate mine reclamation and closure policies, including polluter pays and full reclamation bonding on mines in Canada and abroad. Mining Watch, along with the Mining Association of Canada, PDAC, industry, and governments have been part of the National Orphaned and Abandoned Mines Initiative since its inception.

A few years ago, $3.5 billion was allocated by the federal government to clean up federal contaminated sites, but this program effectively left the polluters, who had made the profits from these sites, off the hook, although recent court decisions indicate that historic polluters would be forced to pay if they were taken to court.

At key federal abandoned mines like Port Radium, Giant, Faro, Colomac, Conn, Ketza, Mt. Nansen, the taxpayer is paying for the cleanup. There is no policy or program for the cleanup of sites of shared jurisdiction, such as Lorado at Uranium City, Brittannia, or Devco Mines in Nova Scotia, or for sites on lands of aboriginal use and interest. This is actually a key point. There is no policy or program for this, and it should be established.

The National Orphaned and Abandoned Mines Initiative secretariat is housed at NRCan, but it should be staffed to a level that makes it work-effective. Right now, it's funded year to year by mines ministers.

Ensure that all mines receive a full environmental assessment. With devolution in the north and the harmonization agreements, the role of CEAA in properly evaluating mining projects has been greatly diminished. Most mines now go through environmental assessment with no participant funding.

In the past few years we've seen enormous projects, like the Victor Diamond Mine, to be found to have “no significant environmental effects”. Red Chris has only received a screening, although it's on the list, and mines of that size are supposed to receive a full environmental assessment and comprehensive study. The Prairie Creek Mine is being permitted through a series of environmental assessments for roads, drill holes and ramps, with no opportunities to review the entire project.

Other projects are approved for mitigation measures that may or may not be included in the permits and are rarely followed up. This is particularly true of Fisheries' letters of authorization, which are often based on inadequate science or ignore the science that is there. There's a damning study that's just been done by Steve Samis for DFO about environmental assessment and fisheries authorizations of diamond mines in the north. DFO itself admits that it has no idea of the success of its habitat compensation measures over the long term. In addition, there's a demonstrated lack of commitment to public participation in environmental assessment.

We need to ensure that the impact of uranium mines and their closure are properly evaluated. Uranium is a dangerous substance. It leaves behind radioactive materials that need to be monitored in perpetuity. It can cause problems thousands of years down the road. But there's nowhere that the lack of adequate environmental assessment is more obvious than with uranium mines.

The Canadian Nuclear Safety Commission, which reports to the Minister of Natural Resources, has been systematically avoiding full environmental assessment of its projects. No environmental assessment was undertaken to study the impact of breaching the dike at Wollaston Lake. The Cogema McLean Lake JEB uranium tailings pit in northern Saskatchewan was approved without a full EA. Cluff Lake was decommissioned without proper public participation in the comprehensive study. Even the community role in monitoring closed sites has been undercut with the closure of the Elliot Lake Field Research Station this year.

We need to insist on the public right to know about the dangers from mine wastes. Mining’s releases of CEPA toxins to tailings, dumps, and waste rock have not been included in the National Pollutant Release Inventory. With the end of the mining exemption in February 2006, mines should be reporting this year, although we understand there is a strong lobby to avoid this. Even when companies do report, we will still not have information about what has accumulated in these tailings ponds and waste dumps through history. Just to give you an idea of the size of some of them, Kidd Creek has 64 square miles of tailings.

The last point is just to stop the promotion and use of chrysotile asbestos in Canada and Canada’s opposition to including it in the Rotterdam Convention on Prior Informed Consent. NRCan has been the key lobby for the asbestos industry and provides over $250,000 a year to their operations. It also promotes a federal directive promoting the use of non-friable asbestos by the Department of Public Works. Chrysotile is a known carcinogen. What is required is a just transition and community economic development programs for workers in asbestos mining areas of Quebec.

That concludes what we consider to be the significant issues. I'm sorry, I went a little over.

[The Chair, Conservative, Lee Richardson]

No, let me apologize on behalf of the committee to all of you. This is a tremendous amount of information and all remarkably well done. I appreciate that we've asked you to condense it and I'm sorry we haven't had more time. But we do now have time for questions.

Mr. Nash, do you want to comment first?

[Gary Nash]

Yes, I can't sit here and let some of the assertions go by. Let me address one or two quickly.

With regard to opposing the regulation of the behaviour of Canadian mining companies abroad, as far as I know we've never opposed it, but we would argue that there is a legal issue of the extraterritorial application of domestic law. That is one fact.

The second point I would make is that much of what we do is in the public policy context, and I have the evidence to prove it. I don't make assertions without evidence, and I think there's a problem with regard to the assertions that have been made. I have evidence; others should be able to produce their evidence.

The other issue is with regard to the matter of chrysotile asbestos. We have every bit of evidence—scientific, all evidence—to demonstrate that it can be used safely. The fact that it's a carcinogen doesn't mean very much, and I'll tell you why. Under the International Agency for Research on Cancer, alcohol is a proven group one carcinogen; wood dust is a number one carcinogen; silica—sand—is a number one carcinogen.

What does that mean? They base it on what they call a hazard assessment. A hazard assessment is looking at the potential to do damage. It's different from risk. Risk is its actual, shall we say, operational aspect in terms of whether it does pose a risk and under what circumstances. So there's a big difference. The fact that it's a carcinogen doesn't mean very much.

The other issue is that with many of these environmental groups, the question has to be this. There's a huge legal community in the United States that makes a fortune on asbestos litigation, and I can show evidence after evidence for how bad it really is in terms of misinformation. We know that some of these groups are funded by people—

[The Chair, Conservative, Lee Richardson]

Mr. Nash, I'm sorry, but I'll have to interrupt you there.

[Joan Kuyek]

This is slighting, Mr. Chair.

[The Chair, Conservative, Lee Richardson]

Excuse me, Ms. Kuyek.

I'm sure this would develop into a fascinating debate, and if members of the committee want to pursue that in their questioning, they're at liberty to do so.

I didn't mean to cut you off, but you all had an opportunity to present cases, and the committee will then ask questions. Again, I'm sorry we don't have more time to get into this sort of debate and perhaps even allow Ms. Kuyek to respond to you, but hopefully that will come up during the questions.

We are going to go to questions now. We've established a round of questioning, and we'll try to give five minutes to each side so we get through this. I will try to keep close to it, so we can get everybody on by 1 p.m.

We'll begin the questioning with Mr. Cullen.

[Roy Cullen, Liberal, Etobicoke North, ON]

Thank you very much, Mr. Chairman.

Thank you to all the witnesses.

On the geological mapping strategy of the geoscience database, in this last budget the super flow-through shares were extended, but I didn't see anything on the geomapping or this database. My understanding is that for the department it would mean an expenditure of some $5 million a year over five years. Could you help explain the kinds of resources that would be required by the department to fully implement this? And maybe someone could answer why that isn't being done.

Maybe Gary could answer the latter question.

[Dr. Murray Duke, Director General, Geological Survey of Canada, Central and Northern Canada Branch, Earth Sciences Sector, Department of Natural Resources]

I'm Murray Duke with the Geological Survey of Canada.

Firstly, the cooperative geological mapping strategy is proposed as a cost-shared program with the provinces and territories. An implementation plan was developed and approved unanimously by all jurisdictions in 2004. The incremental federal investment in the program would be $250 million spread over 10 years, roughly $25 million a year, and that would be matched by the provinces and territories.

[Roy Cullen, Liberal, Etobicoke North, ON]

Instead of $5 million a year, it's $25 million, which would come from NRCan. Does the department not support this? I know resources are not unlimited. In going through the priorities, through the department or Treasury Board, does this not come up as a priority? Can't you find the money internally? Why is this not being funded?

[Dr. Murray Duke]

The $250 million over ten years is the incremental investment over and above what we're currently spending, which is roughly $20 million out of our existing budget. It's a substantial increase.

[Roy Cullen, Liberal, Etobicoke North, ON]

In other words, the department doesn't support this additional effort?

[Dr. Murray Duke]

The department supports it, and I believe our minister is on record as supporting it, but there aren't sufficient resources to increase it to that level.

[Roy Cullen, Liberal, Etobicoke North, ON]

Those resources would come from within the department. I'm sure that's what the Treasury Board would say: that there's no new money that would necessarily come.

[Dr. Murray Duke]

I think the department's position is that without new funding, the program cannot proceed.

[Roy Cullen, Liberal, Etobicoke North, ON]

Okay, maybe he'd switch.

I think when the minister comes we should ask him why he's not finding the money to do this within his overall set of priorities. You've made the point, all of you, that our reserves are shrinking, and that to get companies interested, they need to have a good sense of where the opportunities are the biggest, where the yield is potentially the greatest. This kind of work needs to be part of that, it seems to me.

Gary, you talked about the split, this silo. I brought it up with the deputy minister, but I never had a chance to get into it. If you look at NRCan, it takes the natural resources up to the point where they're sort of manufactured, or this...call it upgrading or value-added. That comes in, I guess, to Industry Canada, and once they're exported or about to be exported, that would be International Trade. But it encourages a silo mentality.

I'm wondering, does NRCan have a mandate within, let's say, the mining sector in terms of the economy? Let me give you an example. If we look at diamonds—and I think the other witness brought this up as well, Mining Watch Canada, Ms. Kuyek—I think it's something like 99% of our diamonds that are going offshore without much value-added being done here in Canada. It seems to me that's an area we should be looking at.

The case has been made to me that we should be setting up a diamond exchange in Canada. Where you set up a diamond exchange, the tendency is for the value-added sectors to cluster around it. Right now, of course, all the diamonds, or the vast major of them, go to places like Antwerp and what have you.

I think the federal government has it in our jurisdiction to mandate that some of that volume that is now going offshore would be directed to, let's say, a diamond exchange in Canada, and for the value-added to be done there. Could you tell me if that is the case?

Also, Gary, could you touch on the question of this silo mentality? Where do the different departments pick up? And shouldn't NRCan have some economic mandating capability?

[Gary Nash]

With regard to the latter point, while International Trade Canada does indeed take care of the trade aspects in general, and while Industry Canada has the legal responsibility or statutory responsibility, shall we say, for the manufacturing industry, the actual on-the-ground practice has been--certainly in our group, and I'm talking only about the mining sector--that we have been fairly involved in promoting the area of equipment and supplies internationally. Industry Canada seems to have vacated the area, and it seems as though International Trade Canada is not truly involved, other than providing funding for trade shows and matters along those lines.

One of the reasons we get involved is that in order to fully appreciate the use of certain materials or certain equipment, and so on, you have to have some in-depth expertise. We have mining engineers, metallurgists, and people who understand the operational aspects, so it makes it a little easier to communicate and to be able to promote some of the equipment and supplies or, for that matter, some of our interests, because they're able to communicate more effectively with their counterparts in whatever country they're dealing with.

I will give you another good case. When there was a problem in Guyana with the Omai tailing spill, we actually sent a team down there to look at the problem, to analyze it, and to give ideas on how to solve it--and the same thing in Kyrgyzstan. Although we don't have a full capability to do these types of things, we did try to respond.

On that aspect, though, in a way, those responsibilities are spread out in the context of statutes, but in reality we're very much involved, although in a very limited way. In fact, as a result of our budget cuts, I had to eliminate the business development division, which is the group that was taking care of the equipment. So it's gone. We just can't do it anymore.

In relation to the diamond issue, yes, you're absolutely right, almost all of our diamonds are rough diamonds. The Northwest Territories did try to establish a diamond cutting and polishing operation. That has been extremely difficult, and in fact, I think they went into deficit and I believe the company has closed. But there are a few in Canada, and the question of an exchange is on the table right now. I know the Government of Quebec has been promoting it very strongly. On the other hand, we don't necessarily have everybody onside. But it is an issue currently being considered and discussed, at least up to a point. That's all I can tell you.

If I were to talk about a strategy, I'd have to look at Aber Diamond. Aber bought downstream. They bought into the jewellery business. When you start at that end, if you look at your cost allocations within all of the activities, then the fact that you cut at a more expensive rate within Canada becomes a very small percentage of the overall price of the final product. So Aber actually is in the position to do what I would call diamond cutting, but because they went way downstream, it becomes a small portion in terms of affecting their profit.

Even though they can cut for $70 a carat in Antwerp and we cost $400, that's peanuts in terms of the overall jewellery. It depends on how we approach it.

Anyway, the issue of a diamond exchange is something.

[The Chair, Conservative, Lee Richardson]

I'm going to have to move on. I would appreciate it if we could try to tighten up the questions a little bit and also the answers, just so we are able to get around and do it all. Thank you very much.

We are going to proceed next to Monsieur Cardin.

[Serge Cardin, Bloc, Sherbrooke, QC]

Thank you, Mr. Chairman.

Ladies and gentlemen, welcome to the Committee. I, too, was in favour of establishing a Natural Resources Committee. I remember that when that happened, some of my colleagues on both sides of the House had serious questions about the mining industry and wondered just how important the government really believed it to be.

At the present time, what kind of budgets and tax benefits is the federal government giving the mining industry?