Natural Resources Committee on Feb. 13th, 2014

[Dr. Vladimiros Papangelakis]

[Inaudible—Editor]

[Blaine Calkins, Conservative, Wetaskiwin, AB]

I want to touch on a regulatory component of it.

When I look at this thing that I'm not supposed to be looking at, government has a role to play in CREEN insofar as our Northern Projects Management Office or our Major Projects Management Office are concerned. Have those been helpful in any way, shape, or form in getting some of these projects going forward?

Is that too specific a question?

[Dr. Luisa Moreno]

I should actually just go back a little bit here. I was asked earlier what Canada has done, and I think we should acknowledge that NRCan has put together two workshops that have led to the creation of CREEN by the institutions.

In terms of direct support, individual support, to different projects, I think in the Northwest Territories maybe there has been some interaction between the local government there and Avalon and involvement of first nation groups to understand the project and so forth. I'm just not sure whether there's been any direct support.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Fair enough.

[Dr. Steven Wilson]

I understand that you'll meet with some producers in the future. That would be a much better question for them.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

It would be a much better question to ask them. Fair enough.

When it comes to the regulatory environment for the current mining operations we have, my guess is that there weren't a lot of regulatory considerations when the oil sands were developed. I mean, regulations get developed synonymously with the advancement of new technologies, new mining techniques, new exploration.

Where are we insofar as current mining is concerned, whether it's nickel mining or whatever we currently do? Does that regulatory framework work well, or will it need to be adapted, modified, and expanded for rare earth elements?

[Dr. Steven Wilson]

I would suggest that in general, the regulatory framework that exists for the existing base metal, precious metal, and uranium mining structures will be sufficient.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Okay.

We also talked about the competitiveness. I think today we're talking about a market window to potentially get into the game. Canada has to get into the game. That is what we're talking about here.

Given the environmental regulatory regime in Canada as compared with China, or our labour costs as compared with China or other places, or even our access to markets where the major destinations are, I would consider us to be, on at least all three of those fronts, at a competitive disadvantage. I'm not sad about the fact that we have a cleaner environment and all those things; that's a good thing.

What assurances can you give to this committee to suggest...before we as parliamentarians go through the decisions or the debates to make recommendations on spending taxpayers' dollars to invest in this? Given just these three things that I've identified, and other obstacles that might be in the way, what assurances can you provide to this committee that we should actually spend taxpayers' dollars to assist this industry?

[Dr. Steven Wilson]

I think it's important to balance what may be perceived as those disadvantages with the reputation that Canada has as resource producers and with the value that is placed increasingly in a global economy on being effective environmental stewards and appropriate-level employers. I think you leverage those positions against the best deposits in the world. You take advantage of the opportunity you have with the best geology, and with the experts who can exploit those resources effectively, to overcome what economically are real but relatively minor, I believe, disadvantages in the grand scheme of things.

If you look at the rest of the mining industry and the effectiveness with which Canada has competed in that arena for all the other metals that are produced here, I don't think that story changes for the rare earths.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Mr. Calkins.

We go now to the official opposition, to Mr. Julian. If there is some time left, we'll go to Mr. Gravelle.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you, Mr. Chair.

We'll be splitting the time evenly, so if you can cut me off after two and a half minutes, that would be great.

I'm sure you'd enjoy that.

[Voices]

Oh, oh!

[The Chair, Conservative, Leon Benoit]

I was going to suggest that I do that right now, Mr. Julian.

Go ahead.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

I want to go to the issue that we haven't explored yet, and that's around social licence.

A number of us were up in the Ring of Fire area of northern Ontario last week. The companies there are very concerned. They've basically been left to themselves in terms of discussing with first nations, who are often the stewards of the areas that the mining companies are looking at. They said they feel betrayed by a process where the governments are not involved in consulting with first nations and they're not working to facilitate the social licence.

I'm wondering to what extent this has entered into your considerations. For the moment we don't seem to have that kind of leadership in the Ring of Fire, from either the provincial or the federal government, in assuring that social licence and that duty to consult with first nations. Is this something that has entered into part of your considerations as you look to what could be an extremely interesting development for Canada in the years to come?

[Dr. Steven Wilson]

I think, sir, that the first general look has been that most of the properties that we're considering are not significantly impacted by first nations relationships. But I think it would be inappropriate for the three of us to try to answer that question. I think that's a question again that you would need to ask of those who are engaged in those communities, on a level of developing the properties. I apologize, but I suggest you defer that to the next committee meeting.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

My second question is around development costs.

You mentioned, Mr. Wilson, that development costs are considerably greater than they would be for other types of mining properties.

Can you give us a sense of what the order of magnitude of the increased development costs are for rare earth developed property as compared to a more traditional mine?

[Dr. Steven Wilson]

Perhaps I can give you just one example.

Inside the company that I work for, we do a lot of development work, so we would traditionally be contracted to run a pilot plant, for example, for a new copper mine. The difference is that we would be able to run that entire program for something less than $1 million. The challenge that we have in a rare earth organization, or in a rare earth property, is that we need to run that million-dollar campaign on an intermediate product, not on a primary feed source. So the company might spend anywhere between $5 million and $10 million to process enough material to generate the feed for that million-dollar development campaign. From my perspective, in terms of the actual test work, and then the follow-on work for both the separating and the refining, just a very crude estimate would be 10 times.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you.

[The Chair, Conservative, Leon Benoit]

Okay, Mr. Julian. Actually, you're way over time.

Mr. Gravelle, you've been cut short as a result of Mr. Julian.

[Claude Gravelle, NDP, Nickel Belt, ON]

Thank you, Mr. Julian.

If you were able to ask the government something tomorrow, what would that ask be?

[Dr. Steven Wilson]

I think there is real value in a public endorsement for the industry and that there would be confidence garnered in the capital markets and in the producing companies as a part of that. I think the other part of that ask would be around some assisted development funding for common problem issues, whereas we mentioned earlier that these companies simply don't have a cashflow opportunity now to be able to put dollars back into that kind of technology development.

[Claude Gravelle, NDP, Nickel Belt, ON]

Any idea what that amount might be? Ballpark?

[Dr. Steven Wilson]

I would prefer not to answer that question at this time.

[Claude Gravelle, NDP, Nickel Belt, ON]

I think it was Dr. Moreno who said that foreign companies that operate in Canada are hindering the advancement of rare earths. Can you expand on that?

[Dr. Luisa Moreno]

Sorry, what did I—