Good afternoon Chair and committee members.
I'd like to start by acknowledging that we are on the lands of the Algonquin people.
I'm Lisa McDonald, executive director of the Prospectors and Developers Association of Canada, otherwise known to many of you as PDAC. I'm joined here today by my colleague Lesley Williams, director of policy and programs.
Thank you for the opportunity to offer comments on behalf of the mineral industry. PDAC is the national voice of Canada's mineral exploration and development sector, representing nearly 8,000 members. Our work centres on supporting a responsible and competitive mineral industry.
Canada's mineral exploration and mining industry generates significant economic and social benefits in remote communities, indigenous communities and cities, employing over 600,000 workers and contributing $96.5 billion annually to the GDP. It is the largest private sector industrial employer on a proportional basis of indigenous peoples in Canada, and a key partner of indigenous businesses.
I'd like to provide a brief overview of mineral exploration in Canada. Mineral exploration is a staged process of information gathering with the hopes of discovering an economically viable mineral deposit. Junior exploration companies do the bulk of this high-risk, high-reward, grassroots exploration work in Canada, which leads to new discoveries. They find the new mines of the future. These companies are a key feature of the mining ecosystem, accounting for upwards of 70% of all discoveries made in Canada. Essentially, without new discoveries through exploration, there will be no new mines.
Junior exploration companies are small businesses. They operate projects on limited budgets and timelines. Most do not generate revenue, and fund their activities by raising financing from investors, primarily by issuing shares.
The Canadian mineral industry faces strong global competition for investment dollars. Sourcing investment to fund exploration activities has become increasingly challenging. Financing is quite volatile and difficult to come by due to increasing competition, and it has been in general decline for a number of years.
A variety of factors affect the decisions made by investors about where to invest in projects, and by companies about where to explore and mine among competing jurisdictions.
As an industry that operates across the country, generating significant economic impact and social benefits, it is critical that the mineral sector has the means to responsibly capitalize on Canada's natural resources while also being able to compete globally.
In conjunction with many other policy measures, effective fiscal policies in support of a strong mineral exploration and mining sector will help to support Canada's mineral industry competitiveness. One of these fiscal tools is the mineral exploration tax credit, METC. The inclusion of a five-year renewal in budget 2019 was widely celebrated by the mineral sector. As you may know, this is the first multi-year renewal of the METC since its inception in 2000, and something that PDAC has long championed and advocated for.
Five-year METC renewal will provide longer term stability for exploration companies, including multi-year exploration program funding and planning. Exploration companies and investors need certainty that they can finance not only the current year of their exploration programs but also any subsequent exploration necessary to fully scope the mineral potential of a particular property. It will also provide a sense of stability for suppliers and service providers, as well as for the cities and northern and indigenous communities across Canada that depend on exploration and mining for growth, employment opportunities and local trade.
Flow-through shares and the METC have proven to be effective tools in raising financing over the past 18 years, including during difficult times. We can see the manifestation of the success of these fiscal tools through the many exploration projects financed by flow-though financing that later became mines: the Éléonore mine in Quebec, the New Afton gold mine in British Columbia, and the Meadowbank mine in Nunavut, to name a few.
Furthermore, the future of Canada's mineral industry lies increasingly in remote and northern regions. These regions experience economic and geographic circumstances that impact their ability to harness the vast potential for mineral development in many ways, particularly with respect to costs.
Measures included in budget 2019 that are targeted towards northern Canada are important. We welcome additional funding for northern economic development programming, and measures to enhance skills training and education, particularly for indigenous peoples.
Also of interest is the inclusion of commitments in budget 2019 to invest in various types of infrastructure, for example, the national trade corridors fund and hydroelectricity in the Northwest Territories. Due to a significant infrastructure deficit, it can cost up to six times more to explore and 2.2 times more to build new mines in remote regions. As a result, a disproportionately high percentage of known mineral deposits also remain undeveloped in Canada's territories, compared to non-remote regions.
Challenges related to the high costs of operating in remote and northern Canada must be addressed to support mineral investment and project advancement and to enhance economic development opportunities for northern and indigenous communities. It will take a long-term, well-funded, coordinated infrastructure plan to address the lack of transportation and energy infrastructure in the north. This would truly unlock the potential of the region and enhance economic activity.
We would be remiss if we did not note that while fiscal policies can help to boost mineral industry competitiveness, getting other legislative and policy mechanisms right, such as the proposed impact assessment act and the Canadian ombudsperson for responsible enterprise, is absolutely critical for the success of our sector. These policy decisions must work in conjunction in order to ensure that Canada does not lose out on development opportunities and associated benefits to more competitive mining jurisdictions.
Finally, I would like to thank this committee for including the recommendation of a multi-year extension of the METC in your report to the Minister of Finance. No doubt the consideration by this committee went a long way to securing this multi-year renewal.
Thank you for the opportunity to appear here today. We'd be pleased to answer questions.