Good afternoon and thanks for the opportunity to present here today.
My name is Charles Beaudry, and I am here as a member of the board of directors of the Prospectors and Developers Association of Canada, PDAC, and as a member of the management team of a junior exploration company focused in the Abitibi region of Ontario and Quebec. I'm a geologist with about 35 years of experience in the mineral industry.
PDAC is the voice of Canada's mineral exploration and development industry, representing over 10,000 members. This industry is a major driver of Canada's economy, accounting for almost 4% of Canada's GDP and employing over 400,000 workers across the country, from remote communities to large cities. It is the largest private sector employer of aboriginal people.
The industry is also important to government revenues, contributing over $70 billion in the last decade to federal and provincial governments. According to the Mining Association of Canada, Canada's mining industry plans to invest approximately $160 billion in projects over the next decade.
Mineral exploration in this story is the first stage of the mineral development cycle. The purpose of this stage is to locate mineral deposits that could be economically developed. Mineral exploration is a costly and risky business, as you know. About one in 1,000 greenfield exploration programs results in economic discoveries, and even fewer become mines.
Recent data shows that making mineral discoveries has become riskier and costlier than ever before. Since 2006 the industry has been finding less even though it has been spending more, signalling that production could outstrip already shrinking base metal reserves. In Canada, per metre drilling costs, for example, which account for a considerable portion of discovery costs, have increased from $92 per metre in 2000 to $230 per metre today. This is because easy-to-find deposits have been discovered, and deposits are now deeper or in more remote parts of the country. These factors have contributed to Canada's declining attractiveness as an exploration destination. After having been the global leader in attracting exploration investments since 2002, in 2013 Canada fell to second place, behind Australia.
Rising cost challenges are compounded by the challenges companies face in their efforts to raise capital to finance exploration. In 2013 the value of financing has decreased by 23% over that in 2012, which was itself substantially below 2011 levels. Funding for grassroots exploration in particular has been hit hard, with expenditures dropping 50% in 2013. The continuation of both of these trends may compromise the ability of the mineral industry to make new discoveries in Canada, which means fewer new mines in the future.
This is why the Prospectors and Developers Association of Canada is making the following recommendations: one, to renew the mineral exploration tax credit for an additional three years; and two, to renew the targeted geoscience initiative.
One of the policy tools that has helped Canada become the number one destination for mineral exploration financing has been the mineral exploration tax credit. On behalf of the mineral exploration industry, I would like to thank the committee for recognizing the importance of the METC and recommending its permanency in your report “The Future We Want: Recommendations for the 2014 Budget”.
PDAC is recommending the renewal of the METC for an additional three years. This three-year renewal would provide longer-term stability to junior companies, enabling them to plan the financing of multi-year exploration programs and boost investor confidence.
Renewal of the METC is particularly important this year for two reasons. First of all, the industry finds itself in one of the worst financing downturns in the last 20 years. You can't explore if you can't raise money, and the METC can be a critical source of risk-tolerant capital when other sources dry up. Second, other jurisdictions are not sitting still. This once uniquely Canadian tax policy innovation is being borrowed by our closest competitor. In May 2014 the Government of Australia announced a $100-million exploration development incentive, enhancing the attractiveness of investing in that country.
As well as through its fiscal policy, the Government of Canada can also enhance Canada's competitiveness by investing in innovative public geoscience. The targeted geoscience initiative is about finding new ways to explore more efficiently and to establish camps where near-surface deposits have likely been found and developed. Technological process and methodological innovations arising out of this important initiative have already enhanced the capacity of the exploration industry to detect buried mineral deposits.
The program has already improved exploration models for a number of active mineral regions and mine sites, including the Canadian Malartic region near Val-d'Or, the MacDonald mines in the James Bay lowlands, and Cameco's millennium deposit in the Athabasca basin of Saskatchewan.
The PDAC recommends the renewal of the TGI for an additional five years and the maintenance of the program's funding at $25 million overall. We also recommend that the TGI include greater industry participation, particularly at the planning and design stages, and that enhancing discovery rates be made an explicit objective of the program.
By committing to research and development programs like the TGI and innovative tax policies like the METC, the Government of Canada can play a role in enhancing the competitiveness of Canada's mineral exploration industry and help our country regain its status as the number one destination in Canada.
Thank you. I will be available for questions.