Thank you, Mr. Chair.
I'm the vice-president of economic affairs with the Mining Association of Canada. MAC members account for most of Canada's production of silver, gold, nickel, zinc, diamonds, and other base and precious metals.
Let me say a quick word about our industry. As you may know, Canada is a global mining superpower ranking among the leading producers of many minerals. The industry employs 388,000 Canadians and contributes $42 billion in Canadian GDP. The industry paid $1.6 billion in federal corporate income tax in 2004, as well as large sums in royalties. An estimated 2,500 companies also benefit from the mining industry each year by providing engineering, environmental, transportation, financial, and other expertise. Internationally, TSX-listed companies have 4,000 mining projects in play in foreign countries; an estimated 1,000 Canadian exploration companies are active in other countries; and our industry has around $50 billion in direct investment abroad.
Times are good within the Canadian mining industry. Driven by demand from China and other growing markets and technologies, mineral prices have increased in recent years, as have exploration expenditures, profits, royalties, and taxes. However, while times are buoyant, we do not believe this means the industry or government should develop a sense of complacency. There are several important challenges on the horizon, including the need to improve the federal project review process and the need to address human resource issues.
Of all the challenges, however, one ranks high above the others in both the threat it poses to the industry's long-term prosperity and the ability of the federal government to contribute to a solution. Our submission focuses on this one issue—the crisis in Canadian levels of mineral reserves.
Over the past quarter century, Canadian levels of proven and probable reserves and key minerals have declined by 50% to 80%. Silver reserves, for example, have declined from 34 million tonnes in 1980 to 7 million tonnes today. Canadian smelters and refineries rely upon a stable supply of quality inputs in order to operate. In 2004, for the first time ever, Canada actually imported more raw concentrate than it exported. If domestic reserves are not replenished, this is unlikely to be a sustainable economic model over the longer term.
There are two commitments the federal government should make to address this crisis. First, the federal government's annual investment in basic geoscience, particularly in mapping by the Geological Survey of Canada, has declined by 50% since 1988. The result is that some Canadian regions are largely unmapped or poorly mapped. Nunavut, for example, is attracting significant global resource interests but is some 73% unmapped. At the current level of investment, it will not be fully mapped for another 80 years. It is important to emphasize that investment in modern and accurate geological mapping is a core public infrastructure responsibility for government. It is essentially the price of admission for governments that wish to entice smart and effective private sector exploration. It is estimated that every dollar invested in basic mapping triggers $5 in exploration spending, which could translate to the discovery of new resources worth $125. In response to this decline, MAC has advanced the CGMS strategy, as developed through cooperation at the federal, provincial, and territorial levels. We believe the federal government should offer its wholehearted commitment to this strategy, which promises to become a key driver of national growth and prosperity.
Second, we believe the federal government should adjust the definitions of the exploration and development categories of the Income Tax Act so as to provide greater incentive for exploration in proximity to existing mines. The present system discourages exploration in exactly those areas in which prospectivity is greatest. It is much more expensive to explore at depth than at surface. If the federal government wishes to address the declining reserves crisis, then it should provide the appropriate incentive to explore in these deeper, more expensive, yet more promising areas.
To conclude, in his September 28 address at Queen's University, Minister Flaherty declared that liberating the forces of investment would be among the government's top economic priorities. We could not agree more with this priority. The two requests outlined in this submission are directly linked to liberating the forces of investment. These federal government actions will contribute to the sustained investment of billions of dollars in exploration and to related project development, engineering, financing, and other activities. We will be providing our formal pre-budget submission to Minister Flaherty and committee members over the next week or so, and it will focus on these two issues.
Thank you.