Finance Committee on Oct. 15th, 2018

[Scott Northey, Chief Operating Officer, Nunavut Resources Corporation]

Thank you, Mr. Chair and committee members.

We are here on behalf of the Kitikmeot Inuit Association leadership, who are not able to be here today due to their annual general meeting, which is being held in Cambridge Bay this week. The Kitikmeot Inuit Association, or KIA, represents more than 6,000 Inuit living in the westernmost region of Nunavut. I'm the chief operating officer of Nunavut Resources Corporation, or NRC, which is a wholly owned subsidiary of KIA. Patrick is an adviser to both NRC and KIA. On behalf of our colleagues, I'd like to say that KIA very much appreciates the opportunity to present to you.

Our focus today is on a transformational project that KIA is proposing, the Grays Bay road and port, or GBRP. This project will profoundly improve the economic and social prospects of the residents of the region, and simultaneously yield significant benefits for all of Canada and assist in reconciliation efforts with the Inuit of western Nunavut.

The GBRP project is a nation-building initiative. It's a modern-day version of Canada's 19th century railway development. It consists of three major components: one, a brand new port at Grays Bay, strategically located on the Northwest Passage; two, an all-weather gravel road running due south 230 kilometres from the port to the Jericho mine site, where it connects to the winter road that goes all the way to Yellowknife; and three, an 1,800-metre-long runway at the port site.

[Patrick Duxbury, Advisor, Nunavut Resources Corporation]

The primary economic rationale for this project is that it would lower the cost to access, explore and develop the mineral-rich Slave geological province. It will lower the cost of developing known projects and increase the likelihood of finding significant new mineral deposits. In short, it will bring a new Canadian mining district online. With abundant and known gold, diamond, base metal and rare earth deposits, the Slave geological province is recognized as one of the most promising mining regions in Canada.

There are already mining companies holding mineral rights along the Grays Bay corridor. However, without this type of publicly financed infrastructure in place, which has supported resource development in other Canadian regions, most of these projects will remain unfeasible. The minerals will remain in the ground, and Canada will forgo a substantial opportunity to benefit from this region's economic development.

This opportunity cost is very real. Already one mining company is poised to invest over $1.5 billion in development, with an additional $300 million in shared use infrastructure that would be available to other users, including the Canadian government. We have provided a copy of the letter to the clerk, which outlines this company's commitments.

Just a single mine going into production is expected to generate an annual average of 3,500 jobs nationally over an 11-year period, with more than 700 of these at the mine site alone, with projected tax revenues of more than $665 million to either the federal or territorial governments over the same 11-year period, and a $7.5-billion surge in gross domestic product.

While we have outlined a compelling enough economic argument to merit government investment, there are many aspects of this project that bring value to Canada. The Department of National Defence and the Canadian Coast Guard could have access to a central deepwater port that would facilitate the exercise of Arctic sovereignty, while simultaneously improving marine safety. The project will also provide a climate-resilient resupply route for diamond mines in the Northwest Territories. The infrastructure will reduce the cost of landed goods to the region by up to 40%, thus lowering the cost of doing business in this area, while reducing household expenditures and increasing food security in an area that has extremely high food insecurity. Finally, job creation will lower dependency on government social programs.

[Scott Northey]

Why are we here today? Our extensive efforts in Ottawa to promote this project have garnered near-universal praise. However, there is no clear path to obtaining the necessary public financing that would unleash the economic potential of this area. The northern envelopes for existing infrastructure programs are not large enough to accommodate this nation-building project.

Beyond direct support for our project, we have three recommendations to the federal government that would help us to unlock the vast mineral wealth in this region. First, add new funding to the national trade corridors fund, which would align well with the government's objective of diversifying trade. Second, ensure that any northern envelope for infrastructure funding is sufficient to support large-scale projects, with the significantly higher cost of infrastructure development in the north and the lack of conventional public resources compared to the rest of Canada. Third, create and ensure sufficient funding for programs like the strategic partnerships initiative, to allow indigenous proponents to seek to lead and develop their own projects in support of the natural resource sector.

Thank you for your time. We would be pleased to answer any questions.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Scott and Patrick.

From the Whitehorse Chamber of Commerce, we have Ms. Acheson.

[Colette Acheson, Executive Director, Whitehorse Chamber of Commerce]

Thank you.

Thank you for the invitation to appear this morning. My name is Colette Acheson. I'm the executive director of the Whitehorse Chamber of Commerce.

I know you will have already received a comprehensive submission from the Canadian Chamber of Commerce on most of the larger issues, so I will focus my thoughts today on concerns that are closer to home for us in the north.

The chamber has been involved for many years, almost 15 years that I'm aware of, in developing and delivering a number of training and support resources to the business community in and around Whitehorse. That is typically a partnership, with some funding from our economic development department in the Yukon, and some funding from CanNor. Although we've seen cycles and there were times when things were easier and more complicated, in general, of those three partners that take part in pulling those things together, CanNor is often the weakest link, due to what looks like a complicated internal approval process and instability of funding. Even as recently as spring 2018, I believe, the CanNor programs were under review, so for those of us who are delivering programs to improve the economic infrastructure of businesses in the north, that's a bit of an axe hanging over our heads.

We would encourage the federal government to consider making CanNor a permanent part of the annual budget and, if possible, to look at multi-year programming or multi-year budget agreements and a simplified internal process.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Colette.

From the Yukon Chamber of Mines, we have Mr. Hartland.

[Samson Hartland, Executive Director, Yukon Chamber of Mines]

Thank you, Mr. Chair.

Good morning, everybody.

Thank you for the invitation and for the opportunity to speak to you this morning. It's great to see some of you again. I've met some of you in the past.

I, too, would like to acknowledge and thank Kwanlin Dün First Nation and Ta'an Kwäch'än Council for allowing us to meet this morning to discuss these important issues.

I'd like to tell you a little more about the Yukon Chamber of Mines before starting my remarks.

The Yukon Chamber of Mines is a chamber organization that was created in 1943 and represents over 500 members with direct or indirect interests in Yukon's mining industry, and that's everything from a prospector all the way up to a fully operating quartz mine.

The Yukon Chamber of Mines fully supports the Prospectors and Developers Association of Canada's pre-budgetary recommendations. You may have heard some of these already. We're adding strength to some of those recommendations, as well as interweaving some northern aspects to those recommendations.

The five recommendations that would have a direct impact on supporting economic development in Canada's north are about the renewal of the mineral exploration tax credit for a minimum of three years, and I'll speak to that a little more; strengthening competitiveness in Canada's north and remote regions through an infrastructure investment fund; enhancing the capacity of indigenous peoples in the industry; creating a funding mechanism to support comprehensive mineral resource assessments; and finally, supporting geoscience mapping and innovation.

We believe the north would benefit from all these initiatives. However, the most pressing to us are strengthening competitiveness in Canada's north and remote regions, enhancing the capacity of indigenous peoples in the industry, and renewing the mineral exploration tax credit.

When we talk about strengthening competitiveness in Canada's north and remote regions, the cost of operating Canada's north and remote regions is high, which directly affects investment in the region, and in turn economic development opportunities for northern indigenous communities. We've heard that from some of the previous panellists here. The future of Canada's mineral industry lies increasingly in remote and northern regions. We represent 40% of Canada's land mass.

While many factors influence decisions about where to explore and mine, cost is a primary driver. Costs are largely a function of remoteness, and remote deposits are significantly more expensive to find, develop and mine. Due to significant infrastructure deficits, it can cost up to six times more to explore, and two or two and a half times more to build new mines in remote regions. A disproportionately high percentage of known mineral deposits also remain undeveloped in Canada's territories, compared to non-remote regions. Infrastructure investments are key to unlocking mineral potential in the north.

The federal carbon pricing backstop and the resulting output-based pricing system will add additional costs to mineral projects in Canada's north and remote regions, further reducing the viability of these projects. Given the lack of energy infrastructure in the north, companies operating in these environments rarely, if ever, have viable alternatives to the diesel fuel used to power drills and camps.

Other costs associated with mineral exploration will also significantly increase. Taken together, these costs will adversely impact Canada's mineral industry competitiveness. Without any action, Canada will lose out on development opportunities and associated benefits to more competitive jurisdictions.

The federal government can do two things to improve competitiveness in Canada's north and remote regions. First, to address the region's infrastructure deficit, it can increase strategic investments in critical transportation and energy infrastructure, which in this case would mean maintaining the federal government's support for the Yukon resource gateway project, which was identified through the northern envelope of the infrastructure investment fund.

Second is ensuring that any new carbon pricing regime addresses the unique challenges faced by remote and northern regions, and includes a fiscal support mechanism for mineral exploration projects that must rely on diesel and other fossil fuels. We heard that through a presentation and a submission from the Mining Association of Canada, which provided recommendations—everything from delayed implementation to rebates, a funding pool, or potentially a tax credit.

Speaking of tax credits, the renewal of the mineral exploration tax credit is a fiscal and tax incentive that supports the flow of capital into mineral exploration projects, ultimately supporting Canada's competitiveness in the global mineral industry. Mineral exploration is a high-risk endeavour, and the probability of a successful discovery of an economic deposit is very low. Attracting investment for small- to medium-sized exploration companies is extremely difficult, especially given today's investment climate. METC is an innovative, made-in-Canada policy tool, complementary to the flow-through share regime. The tax incentive supports exploration financing by providing individuals who invest in companies that are exploring for minerals in Canada with a 15% tax credit on eligible expenditures.

Extending METC for a minimum of a three-year period would catalyze investor interest in flow-through shares and support access to exploration financing for proponents. In fact, a three-year extension would provide greater certainty and boost confidence for investors in Canadian projects.

With regard to enhancing the capacity of first nation peoples in the industry, government investment is critical to enhancing the meaningful participation of indigenous peoples in the mineral industry. The mineral industry strongly supports efforts to facilitate meaningful participation of indigenous peoples and the economic opportunities it generates through training, business development and procurement, employment, and mutually beneficial partnerships. There is a great potential to further increase participation by indigenous peoples in the industry, particularly given the young and growing indigenous population, the impending mineral industry labour shortage, and the proximity of indigenous communities to projects.

However, many indigenous communities are faced with various barriers that affect their ability to participate. Investment in indigenous communities by government to improve health, living conditions, early childhood development and secondary or post-secondary graduation rates is critical to increasing participation and maximizing the opportunities generated by mineral exploration and development.

The federal government can support efforts to enhance the participation of indigenous peoples in the mineral industy by making foundational social investments—as we heard earlier this morning—and also through housing, water and infrastructure, which contribute to improved health and educational outcomes for indigenous communities, as well as providing targeted funds for skills training and entrepreneurship to assist indigenous peoples in maximizing opportunities generated by the industry.

To tie that back around, we heard earlier from Yukon U. Of course, it has the Centre for Northern Innovation in Mining facility, which trains up a lot of the locally trained workforce for the mines of tomorrow.

If I have one more minute, I can talk about mapping and innovation.

[The Chair, Liberal, Wayne Easter]

Go ahead.

[Samson Hartland]

Thank you, Mr. Chair.

Government investment in geoscience and innovation is critical for spurring mineral exploration activity and enhancing the industry's efficiency, productivity and environmental performance. Geological surveys in Canada play a critical role in producing high-quality public geoscience information, which has attracted exploration activity to Canada and led to successful discoveries.

Presently, the absence or the low quality of geological maps and models compounds other challenges faced by the industry in exploring Canada's northern and remote regions. The lack of detailed mapping in potentially prospective regions reduces the likelihood of economically viable discoveries.

First-pass mapping programs need to be followed up with more detailed programs to better target mineral occurrences. Lacking detailed maps and models negatively impacts Canada's attractiveness for mineral investment compared to other mineral-rich countries, such as Australia. Innovation in the mineral industry is critical for advancing efforts to improve efficiency, enhance environmental performance, and increase the mineral deposit discovery and extraction rates needed for modern society. While the mineral industry invests millions each year in research and development, Canada underperforms compared to its peers.

To remain sustainable, progressive and profitable, the Canadian mineral industry must innovate and collectively challenge existing ways of thinking. Through investments in innovation for both industry and governments, critical business challenges can be addressed and continuous improvement of Canada's mineral industry performance can be realized.

The Government of Canada can support geoscience mapping and innovation in the mineral sector by providing increased funding to the Geological Survey of Canada, particularly for the mapping of remote regions, as well as funding or fiscal incentives for mineral companies to encourage the testing and adoption of innovative technologies and processes. To add to that, CanNor also provides funding to the Yukon Geological Survey, so a strengthened and maintained CanNor funding system also supports the geological mapping system of the Yukon.

Thank you very much for the opportunity to speak to you this morning.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

Thank you to all.

Starting on the seven-minute rounds, we have Mr. McLeod.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you, Mr. Chairman.

Thank you to everybody who presented here today. These were very interesting discussions.

I want to start with Dechinta.

The issue of employment in our small indigenous communities is something I talk about non-stop at this level. I watched with interest, as we have hundreds of thousands of indigenous people across the country who are sitting in communities unemployed. There are many issues we could point to.

Then I see programs such as the one being conducted by the Mine Training Society, where they train indigenous people to go into the mining workforce. Every person who goes through is hired. I see your program, where you have indigenous people go through the training and get the certification through your facility, and almost every one of them goes on to post-secondary college.

We know that some things have to be conducted differently when we're dealing with indigenous populations, in order for them to move from a community into either post-secondary education or the workforce. The opportunity has to be there. For me, and for many other leaders across the country who are promoting indigenous hires, a job is the best program we could provide.

I'm curious. What do you do differently? What is it you're doing that other facilities are not doing and that allows you to have the success rate that you have? That's my first question.

[Kelsey Wrightson]

I think we're doing a lot of things differently.

Dechinta is recognized across Canada and globally as leading in indigenous education, land-based education and land-based pedagogy.

For the last 10 years, we have really been developing this new way of teaching, which is actually an indigenous way of teaching. It's bringing elders, youth, children, and students of all ages together on the land, in this really immersive environment.

One of the things that make it so successful is that we make sure it is accessible to students. We do a lot of work making sure they're able to bridge from wherever they are into our programs. We meet students where they're at.

I think the design of the program especially reflects the value that's put on indigenous knowledge. Students come into our program and see that their knowledge, what they have, is already valued. They see their elders being treated as professors; they see students and children being respected as valued members of a learning community. That's incredibly important.

The other point is that the way we reach out to the communities, the way we employ elders and people who may not have other opportunities for job success, really helps to foster a holistic approach to community wellness. We're not just educating the students; we're educating and working with the entire community.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you.

I was just in the town of Hay River, and we cut the ribbon on a marine training facility. Every position was filled by students from the communities, and it was really good to see a lot of excitement in the area. I'm hoping we're going to be able to expand that through programs such as yours, where we start tapping into the need for pilots, nurses and social workers, so that we can fill some of the void of some of these areas and sectors that really need it.

You mentioned that you're looking at $5 million a year, for the next five years. Would you be also looking at trying to access some of the research money that is passing us by? I think Nunavut has the same issue as the Yukon, as do we in the Northwest Territories. A lot of research is being done in the Arctic and in the north, but we don't have any universities in the north. Would that also be something you'd be looking at trying to attract?

[Kelsey Wrightson]

Yes, absolutely.

One of the things Dechinta has been informed by is research-led teaching. We have a research component to our academic programming, as well as the instructional side. Up to this point, we have not been able to access research funding through the federally funded research bodies, and that includes SSHRC and NSERC.

This is a serious problem, because we have researchers who are really excited and want to work with Dechinta. They want to work in northern communities and indigenous communities. All of that research money has been housed at southern institutions. Along with that research money come indirect costs from the federal government to support administration, which is up to 80% of the first $100,000 of research funding. Rather than that money going back into northern communities, it goes again to these southern institutions. Dechinta really wants to change that and to make sure that research funding is actually grounded in, and stays in, the north.

[The Chair, Liberal, Wayne Easter]

If anybody else wants in on any of these questions, just raise a hand.

Go ahead, Michael.

[Michael McLeod, Liberal, Northwest Territories, NT]

My next question is for Scott. Thanks for coming here to talk about one of my favourite subjects—infrastructure investment in the north. We really worked hard to get a carve-out for the trade and transportation pot of money, because we knew that going up against national projects where there are large populations is always a challenge for us in the north. The pot of money that was earmarked for us for trade and transportation infrastructure was good to see, but it is very small.

What should that number be? If it were $400 million, we could keep it all in the Northwest Territories and it still wouldn't be enough. That would probably be focused on only one project. There are many projects in the Northwest Territories, the Yukon and Nunavut. What should that number be? What should we be working toward to get a carve-out? There needs to be a carve-out; otherwise we wouldn't be able to compete.

[Scott Northey]

I totally agree with you. Our project is $550 million in the Slave geological province. It's the other half of our corridor from Yellowknife to the Jericho mine, which is over $1.2 billion. There's another corridor in Nunavut, for another $1 billion. I can't speak for anything in the Yukon, but I suspect the requirements are closer to $500 million or $800 million as well.

We're talking about $3 billion to $4 billion as a start. For Nunavut, the corridor we're talking about is the first terrestrial connection to the rest of Canada. Nunavut is 25% of Canada's land mass that's not connected to Canada right now. It seems to me that $550 million is a relatively small price tag to connect the territory to what the rest of us enjoy.

[The Chair, Liberal, Wayne Easter]

Thank you.

We'll turn to Mr. Jeneroux.

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

Thank you, Mr. Chair.

Thank you to everybody for being here and travelling to come here as well.

I want to pick up where my colleague Mr. McLeod left off with you, Mr. Northey, and you, Mr. Duxbury. I want to give you a bit more time to explain the true impact that road will have. If you could, speak in terms of jobs and revenue for the region, as well as the levels of support you currently have or hope to have to be able to maintain the federal support for this road.

[Scott Northey]

Patrick alluded to some of the jobs and opportunities. Really, this is meant to stimulate mineral exploration activity and mine development. There's a mine that's ready to go into production, but they can't afford the infrastructure because the size of the deposits is a little too small to be able to absorb it. As we alluded to, that mine alone will result in 700 jobs in the area.

We're anticipating that the corridor is going to result in additional mineral exploration activity. We hired an economist, who has determined that for every million dollars spent on exploration activity, 5.2 jobs are created in Nunavut alone. That's logistics support, whether it's trucking, helicopter services, etc.

We also believe it will lower the cost of community resupply, which is crucial right now. For example, a litre carton of juice, which you can get for $2.99 at the Superstore here, would cost about $14.99 in Nunavut. Those kinds of healthy foods are very expensive and hard to bring in. The general view is that the corridor will result in savings of about $500 per person per year in our region. It doesn't sound like a lot, but for a family of four, $2,000 savings in a region where the median income is around $10,000 means an ability to really bring the cost of living down and promote additional liquidity within the household.

The last part is the stimulated activity associated with all the other mining-related activities. We can see barging services getting formed, and additional logistical services. Some of the communities will become much more of logistical hubs. We would see primary, secondary and tertiary stimulation developing from that corridor.

[Patrick Duxbury]

It also improves the quality of services that already exist there. Some of you may be aware that there was a scrubbed resupply barge that was coming from the west and going up to the Mackenzie River. Due to the ice situation in the Beaufort, the barge is not able to reach Cambridge Bay and Kugluktuk, so effectively there are millions of dollars' worth of equipment, goods and vehicles sitting in Inuvik right now that were destined for Cambridge Bay and Kugluktuk.

Our view is that with a project such as the Grays Bay, this would never have happened. If you're able to deliver goods over to the port site during the winter resupply trucking season, then this area opens up in July for barging, rather than having to wait for resupply that's coming from either the Montreal region or Hay River, and typically delivering in September or October. There are huge advantages to just improving the logistics of this area.

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

Just quickly before I ask you my follow-up question, how much are you asking for? Is it $550 million?

[Scott Northey]

Well, there are no programs right now that will allow us to access that, so that's the big ask. Our short-term ask is to try to get the projects up already, which could take us two to three years. Just under $30 million is really the primary ask.

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

A $30-million investment would have a long-term impact of 700 jobs and $500 savings per person, essentially.

[Scott Northey]

Thirty million dollars would get us to the point where the next step would be to put shovels in the ground and start the construction process. Our hope is that, by asking for $30 million, we will have two to three years for some program or some other source of funding to emerge that would make more sense.

I want to point out that we think we can finance 25% to 30% of it through third party capital. We are asking for the net of that number.