Finance Committee on Oct. 25th, 2011

[Philip Bousquet]

Thank you.

The matter you raise and which we have in our brief refers to the eligibility of exploration expenses; matters such as consultation with aboriginal communities and environmental feasibility studies. The PDAC worked with Canada Revenue Agency to clarify the eligibility of expenses, and the result of that was a table, which CRA developed and we have promoted and communicated to our members, that outlines those costs. But there are still some areas in which there isn't clarity about the interpretation of this matter. We're working with CRA on it. We raised it because it is important to companies. Tara perhaps can speak to the matter of what it means to an individual company.

[Tara Christie]

Yes. Particularly in the north, the costs are very significant of having consultations with first nations, and the standard for environmental base line work is ever-increasing. Having these as eligible costs is quite important to industry. There has been some success with CRA in clarifying it, but there still may be some differential application and confusion about what is eligible. We need to continue to work on it to make sure these are eligible expenses, because the consultations contribute to corporate social responsibility and our social licence to operate in communities. So it's pretty important.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Okay. Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Mai.

We'll go to Ms. Glover, please.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you, Mr. Chair.

I wanted to say I'm having just a blast here in the Yukon. I wish we had a little more time to do some site visits. There are a number of things of interest to us.

I'm going to start with Ms. Babcock. We were just talking about the need for energy. I reflect on something that is in the budget and would like your opinion on it. That is the accelerated capital cost allowance for clean energy generation. Is it beneficial? Would it help to address some of the situations here in the Yukon? Is it a good measure?

[Sandra Babcock]

I'm not sure how much impact that would really have in the Yukon. When we're talking large infrastructure projects, unless it were to move to a P3 initiative, private sector dollars would not be that involved to benefit from that.

[Shelly Glover, Conservative, Saint Boniface, MB]

When Mr. Mai suggests trying to encourage businesses and private sector agencies to lend some of the money they're holding onto because of the worries, what do you say to that?

[Sandra Babcock]

Typically our business community and our corporate world in the Yukon is very small with very limited financial resources. What we have been very successful doing is partnering with southern companies or international companies, particularly in the mining area with the Chinese government-owned companies and Chinese privately owned companies to invest in the territories.

[Shelly Glover, Conservative, Saint Boniface, MB]

So you would disagree with the statement made by Mr. Mai that your businesses are sitting on capital that could be used for that purpose?

[Sandra Babcock]

For projects as large as energy projects, it is my belief that our businesses really don't have the financial capacity to be involved in those.

[Shelly Glover, Conservative, Saint Boniface, MB]

Okay, very good.

I'd like to ask the prospectors and developers two questions.

You mentioned there were some INAC programs, Ms. Christie, that are actually benefiting this industry. Can you touch on a couple of those you found helpful?

[Tara Christie]

Well, in all the northern territories, INAC funds mine training associations. The training associations are independent, but they apply for the INAC funds. Certainly I know in my own business I'd applied for some of those funds through the training association. It's been very successful in getting first nation youth employed and training them. There is a cost when a company employs somebody without skills or background. In particular, many of the first nations that we hire may not even have high school and it has significantly offset the cost to train them. It's been very successful. That's certainly a program I think should be continued and even expanded, because it has been working very well. And now that the mine training associations are set up to administer the funds and they're local, one in the Northwest Territories as well here in the Yukon, it's helped our industry considerably.

[Shelly Glover, Conservative, Saint Boniface, MB]

I'm thrilled to hear that. Providing hope and opportunity, particularly to aboriginal youth, is truly something that needs to be given priority, and we are trying to work with aboriginal communities to make sure that progresses. So it's great news to hear that you're finding that some of the programs now in place—which I take it were not in place prior to our government taking office—are actually helping.

Do you know the stats on how many aboriginal people are working within your industry and what the change has been since the programs have come into place?

[Philip Bousquet]

The last number that we have through Stats Can was from the 2006 census, and it shows that about 7.5% of the mining workforce is aboriginal. That is certainly higher today. It's an area that as an association we've worked at promoting. One of our objectives is to increase aboriginal participation in the mining industry, and we do that through our program work as well as through our annual convention. I think it's fair to say that it's now higher than 7.5%.

[Shelly Glover, Conservative, Saint Boniface, MB]

Very good.

Now I want to talk a bit about the 15% mineral exploration tax credit. Can you just tell us how this tax credit has helped your members raise the necessary capital for mineral exploration?

[Tara Christie]

Particularly at times when the markets are unstable or jittery, it's hard for an investor to decide to put money into an exploration project. There is risk. You do not know whether that money is going to actually result in a new mine being found and developed. That mineral exploration tax credit, that extra 15%, is a bit of an extra reward for that investor to make the decision to invest in exploration companies. It brings in an average of $400 million and I think it's up to $700 million this year. Considering the uncertainty in the markets, that's impressive.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. Glover.

Ms. Christie, this is my round here, but I did want to give you a brief opportunity to respond to Mr. Van Kesteren's question. I know you wanted to respond to that.

[Tara Christie]

Thank you very much.

It was about the border crossing, particularly at Little Gold. That's a big challenge, not only for the tourism industry and for Dawson, where I'm a resident. I care about making sure that we get to travel, but it also has significant impact on the cost for the community and the mining industry there, because fuel and other goods are trucked across the border. People work on both sides of the border, and to have an extra 14-hour drive for your fuel, your people, or your supplies because we can't keep the office open a little bit longer or for an extra few weeks until the ferry goes is not going to be fair.

[The Chair, Conservative, James Rajotte]

Thank you.

On the question on the clean energy projects that Ms. Glover raised, I was going to raise that question, but perhaps we can have an ongoing dialogue in the future on this. With 90% of the generation in the Yukon being hydro, it seems to me that the accelerated capital cost allowance for clean energy generation would be a perfect fit. As a committee, it's something we can have a dialogue on with you to see if there's some way to make it a better fit, but it seems to me to be a perfect fit for energy generation here in the Yukon. That's my perspective.

I want to return to the mineral exploration tax credit and flow-through shares. As people know from the prospectors and developers, it's an annual battle, and I know you want to make it permanent. Every year I've been in Parliament, from the year 2000, we've had this battle.

The challenge is that there are economists across the nation who are very pure and say there shouldn't be any type of flow-through shares or tax credits. There's been an abuse of certain types of tax credits in the past that have been flow-through shares, mainly with the film industry. The Department of Finance is properly going through the tax code and says it wants to make it fair for everyone, lower the overall rates, but remove all the loopholes. Groups that have presented to this committee have said that with respect to the natural resource sector, we should eliminate all subsidies, as they term it, to the oil and gas mining sectors. As a federal government, we should not provide subsidies, as they term it, to your sector.

You've provided some facts on the money you've raised and spent and the benefits to the government. Could you and Ms. Christie tell us the difference on the ground in terms of raising capital at that junior level? What does it means in terms of having these two measures versus not having these two measures?

[Tara Christie]

What do you mean by “on the ground”?

[The Chair, Conservative, James Rajotte]

On the ground in the sense that we can look at it from 30,000 feet or from Ottawa or put something in a budget, but in terms of actually raising money to do the exploration, what does it mean to an investor to have these two measures versus not having these two measures?

[Tara Christie]

It makes a difference between whether I can go to work or not and whether I can employ people in the community. The program I had in the Yukon this year, where we employed 20 people, I think over 10% were first nations. We wouldn't have done it if we didn't have flow-through on that. We wouldn't have been able to raise the money. It wouldn't have happened.

Within the film industry, you can often find other ways to raise money, if it's a good project. Finding ways to finance exploration in remote parts of Canada is really hard. We compete with other industries for investment capital. It's a very challenging market.

[The Chair, Conservative, James Rajotte]

People in your sector have told me in the past that the reason is that you don't have a project like a film or a biotech company. You don't have that. You're doing exploration. You don't know whether you're going to hit something.

[Tara Christie]

Grassroots exploration is full of uncertainties. The people investing need to have faith in the management team, the geologists, and the region where they're doing the exploration. There are no guarantees. It is high-risk capital, but it is what's funding a lot of the economic activity in rural Canada.

[The Chair, Conservative, James Rajotte]

Is the combination of the two measures needed then?