Indigenous and Northern Affairs Committee on June 8th, 2010

[The Chair, Conservative, Bruce Stanton]

Good afternoon, members.

We're going to get started as quickly as we can here today. We have one hour to hear from two of the last of several that we have left to finish our study on northern economic development. We know this to be specifically barriers and solutions that prevent economic development in the north. We'll get to our witnesses in a moment.

As I say, we only have one hour, members, and then we'll be taking a brief suspension and then going in camera to consider the report for the study on the Aboriginal Healing Foundation.

You'll also know that we will be having bells at 5:15, so we'll take as much time as we think we can here, and then we'll have to finish up.

On the orders of the day, we welcome here today first Lawrence Connell. Lawrence is the corporate director of sustainable development for Agnico-Eagle Mines Limited. And we also welcome John Stevenson, who is the manager of Nunavut Resources Corporation.

Gentlemen, we will essentially start off with a presentation of up to ten minutes from each of you. We will do them in succession, and after that we'll go to questions from members.

So let's begin with Mr. Connell, for ten minutes. You have the floor.

[Lawrence Connell, Corporate Director of Sustainable Development, Corporate Office, Agnico-Eagle Mines Limited]

Thank you, Mr. Chairman.

Members of the committee, thank you for giving Agnico-Eagle the opportunity to speak before you.

I'm sure that nearly everyone appearing before you on this study has indicated to you that the problem in the north is capacity, that it is a major obstacle to sustainable development. We would concur, but rather than spending time discussing that lack of capacity, I'd like to basically look at potential areas where we think solutions can be found.

AEM, or Agnico-Eagle Mines, is a widely held Canadian public company, and it has grown to become one of the top ten gold companies in the world. It is now one of the largest private sector employers in both Nunavut and northwestern Quebec.

Nunavut is an important component of the future well-being of Canada. There are significant mineral resources in this area that have already been discovered and delineated, and they're awaiting the next economic upturn in metal prices to become the future generation—

[Yvon Lévesque, Bloc, Abitibi—Baie-James—Nunavik—Eeyou, QC]

Could you speak more slowly, because the interpreter...

[Lawrence Connell]

Nunavut is an important component of the future well-being of Canada. There are significant mineral resources in this area that have been discovered and delineated, and they're awaiting the next economic upturn in metal prices to become the next generation of Canadian mines. These new mines will yield wealth for Canada as a nation, and under the right conditions could help Nunavut to grow out of its current economic dependency upon the federal government to become a net contributor to the future economic well-being of our country.

Development of our northern resources is also the fastest and surest way for Canada to solidify its claim to sovereignty over our Arctic region. AEM is a believer in the future mineral potential of Nunavut, in particular the Kivalliq region, and has invested close to $1.5 billion since 2006 to develop the Meadowbank Gold Mine near Baker Lake. The mine started production in February 2010 and has created close to 600 new permanent well-paying jobs. The company currently employs over 175 local Nunavummiut, which is 35% of our current workforce. This one mining project alone will generate an annual revenue equivalent to 35% of the current Government of Nunavut budget and will create annual operating expenditures of over $100 million for a minimum expected mine life of ten years. That's a total of $500 million in payroll, income, and mining taxes.

To be brief, we suggest that the major barriers to economic development in Nunavut are a lack of strategic infrastructure, specifically in the area of access, transportation, and electrical power. The mining industry relies upon transportation links to get its products to market and its operating supplies in. The high cost of transportation in the north is currently a significant economic disincentive to doing business in Nunavut. It is a significant factor in the high cost of living faced by northern residents and Nunavummiut in particular. It contributes to the poor standard of living seen across Nunavut and is an obstacle to creating a sustainable economy in the territory.

The mining industry will contribute to the development of the infrastructure needed to develop these mineral resources of Nunavut, but it cannot do the job alone. The federal and territorial government have to take a leadership role in supporting development of the infrastructure needed to increase the pace of this development. The problem is that the needs are great and the availability of cash limited, so how do we prioritize where to invest to obtain the greatest return to the people of Canada?

In our opinion, the focus should be on infrastructure initiatives that reduce the cost of living in Nunavut. This will also reduce the cost of doing business in the north and set the stage for the creation of a sustainable northern economy in which reliance on the south can be reduced. Northerners want to be in control of their own future, but at the moment they cannot see the way to bring this dream to reality.

What type of infrastructure will do this? We see it as an investment in strategic deep-water ports in the north to reduce the cost of transportation, strategically placed access roads that will allow for the distribution of goods and services across the territory, and investment in power generation in areas where reducing the cost of power will trigger industrial development.

The second point is the shortage of a skilled workforce in Nunavut. Nunavut needs a priority investment in its human capital to ensure that Nunavummiut have the ability in this generation to fully participate in the mineral development that is beginning to occur in the Kivalliq region. The people of Nunavut currently do not have the array of skills needed to fully participate in the development occurring on their land. The majority of the skilled workforce are still coming from southern Canada. This trend needs to be reversed for the north to become economically sustainable. We could also significantly reduce our costs of doing business at Meadowbank if we could source more of our workforce in the communities nearest to the mine. It is expensive to move a large workforce between southern Canada and Meadowbank every two weeks.

The federal and territorial governments should work with industry in an accelerated fashion to ensure that the people of Nunavut benefit from this mineral development in their backyard. The time is now for large-scale investment in adult skills training that is designed to get Nunavummiut involved in the mineral development of this region so that within five years, as Nunavummiut gain the skills and experience to take on these roles, the number of southern workers coming north drops significantly. The diamond industry in the NWT has been trying to accomplish this for close to ten years, with limited success. It cannot be left to industry alone. To make significant progress, the federal and territorial government has to take a greater role. The economic returns are there. Increased employment will lead to increased taxes and less dependency on social programs. The spinoffs to the communities will start to build sustainable economies in the communities of Nunavut where mineral development occurs. It will also indirectly enhance project economics by reducing our indirect costs.

We need to focus on the 25- to 40-year-old Inuit adult population. The high unemployment rate and the long-term dependence on social assistance in this age group has had a serious impact on the self-esteem of Nunavummiut. The Inuit are a proud people and need our help to climb out of this long cycle of dependence. If we work with them, we will see a positive response that will lead to the growth of a sustainable middle class. As the adults gain their self-respect by becoming independent, they will provide the role models for the younger generation. The current status quo is just not working.

The third and last point I had was the complexity and uncertainty in the existing rules and procedures surrounding access to land for exploration, and in obtaining regulatory approval in authorizations to allow development to proceed. The rules and procedures governing access to land for exploration and the regulatory process are too complex and are not living up to the expectations of Nunavummiut. This complexity leads to high costs for both industry and government and leads to uncertainty in the outcome for both industry and Nunavummiut. We acknowledge the need to protect our environment and its natural resources in Nunavut and to do this with the equitable and meaningful involvement of all Nunavummiut, but the current process has become too cumbersome and needs to be fixed to better serve everyone. The reduction of duplication in these processes will also lead to lower costs and provide credibility in the process.

We acknowledge the recent first reading in the House of Commons of Bill C-25, the Nunavut Land Use Planning and Project Assessment Act. Industry supports the intent of this legislation, and it is a good start, but this act alone will not reduce the complexity of the process and it will not create the streamlining that we need in the process.

In summary, the economic future of Canada is aligned with the future economic well-being of Nunavut. The mineral industy has shown that Nunavut possesses world-class mineral resources. If the potential for actual mines is to be fully realized in this generation, however, strategic investment by the federal and territorial government is needed.

Those are the three points I've made: investment in human capital; investment in critical transportation that reduces cost of living and hence cost to business; and investment in community infrastructure to allow new northern small businesses to grow.

Thank you, Mr. Chairman.

[The Chair, Conservative, Bruce Stanton]

Thank you very much, Mr. Connell.

It is now Mr. Stevenson's turn.

I should say also that Mr. Stevenson here comes at the recommendation of the Kitikmeot Inuit Association, which was an organization that contacted us about presenting on this important study.

Mr. Stevenson, you have ten minutes, and hopefully you'll be able to hear us all right. Once we get to questions, there will be an opportunity to have translation as well. We'll tell you a little bit more about that at the end of your presentation.

Go ahead.

[John Stevenson, Manager, Nunavut Resources Corporation]

I can hear you.

Thank you, Mr. Chair and members. Good afternoon, and thank you for the opportunity to address the committee.

Your work is viewed by KIA, the Kitikmeot Inuit Association, as very important, indeed critical to the development of the north.

Before I continue, I'd just like to acknowledge Larry Connell. I do know him from AEM, and I actually wholeheartedly agree with just about everything he said, and particularly, from a KIA standpoint, what he related to with respect to infrastructure and skills training. Those are very important components to KIA.

Mr. Charlie Evalik, the president of the Kitikmeot Inuit Association and the chair of the Nunavut Resources Corporation, sends his regrets. Unfortunately, he is travelling this week on NRC business. Assisting Mr. Evalik with the NRC project have been Mr. John Donihee, as project lead, Dr. Ron Wallace, as project manager, and me.

The purpose of this presentation is to provide an overview of KIA, or the Kitikmeot Inuit Association; introduce one of KIA's strategic objectives, the NRC, or the Nunavut Resources Corporation; and to provide an overview of the NRC concept and its potential role in northern development.

The Kitikmeot Inuit Association was incorporated in 1976 to represent the interests of Kitikmeot Inuit. In those days, it was referred to as the central Arctic, an area just north of Yellowknife—well, quite a ways north of Yellowknife actually. It achieved many of its early goals with the signing of the Nunavut land claims agreement in 1993. Since then, it continues as an important body and acts as a designated Inuit organization under the claim. It has responsibilities for ownership and management of Inuit-owned lands—some 103,000 square kilometres, which is just a little smaller than Nova Scotia and New Brunswick combined. It is also responsible for negotiating impact benefit agreements and oversight of water quality on Inuit-owned lands, just to name a few responsibilities.

KIA's head office is in Cambridge Bay. It has offices in each of the five main Kitikmeot communities. KIA has negotiated impact and benefit agreements with mining companies in the past, including diamond mines in the Northwest Territories primarily due to adjacency reasons, and more recently with Miramar, now Newmont Mining Corporation Canada, in the Kitikmeot region. However, in at least two recent cases in the Kitikmeot region, developers have sold properties located on Inuit-owned lands for significant returns prior to benefits flowing to Inuit.

It has become clear to KIA that it needs more tools in its toolbox than just IIBAs, or impact and benefit agreements, if it is to meet its mandate to ensure lasting and meaningful benefits for Inuit and indeed for Nunavut. Hence the idea of the NRC, an idea that would take Inuit from level one of the economic value chain, just receiving rent, and level two of that same chain, providing goods and services primarily negotiated through impact and benefit agreements, to levels never seen before in Nunavut: level three, which would be investing equity in major resource projects, and level four, which would be reinvesting earnings from those investments into other future projects.

Inuit equity participation offers the potential for Inuit to participate in a meaningful way in major resource and energy developments planned for Nunavut. Many such projects presently offer tremendous economic opportunities, not just for Nunavut but for Canada as a nation. Such initiatives also advance the securing and reaffirmation of Canada's Arctic sovereignty interests. There are existing strong precedents and models for aboriginal equity participation and ownership in Canada. Further, several Canadian private sector mining, energy resource, and financial companies have stated that they are actively seeking aboriginal and northern partners.

Commitments made to the north in the 2008 Speech from the Throne were reaffirmed in Canada's economic action plan with the announcement of the creation of a regional development agency called Canadian Northern Economic Development Agency, or CanNor. In announcing the agency, the Prime Minister noted,

CanNor is a tangible acknowledgement that the federal government places the north higher on its agenda than ever before, and it will be a fundamental component of the government's northern strategy going forward.

The Prime Minister two days later in Pangnirtung said,

We are very concerned that as development occurs here in the territory that the local people don't just share in the wealth generated by that development but that they share in the development itself... In our judgment, there's not enough of that happening.

Kitikmeot Inuit Association and NRC Nunavut Resources Corporation strongly agree with and support these observations, and we applaud the northern vision that the statements imply.

Here it is suggested that what is missing from the northern policy is a possible recognition of the value of and need for direct equity participation by Inuit in major resource developments in Nunavut through private sector investment vehicles. Through the promotion and formation of an NRC, the potential for Inuit corporate partnerships with major Canadian resource development and financial interests would be significantly enhanced. Using such an economic development model, Inuit could work through their own corporate entities to secure and enable their own economic and social security.

The NRC could provide Inuit with another valuable economic development tool, in addition to IIBAs and other mechanisms, to work constructively with northern developers, investors, and related national and international financial houses to secure those resources. In short, it is Charlie Evalik's vision, and now that of many more Inuit since Mr. Evalik began the journey to establish the NRC, to take Inuit involvement in northern economic and resource development in Nunavut to a new level through the NRC. In doing so, we aspire to develop a different economic vehicle for the north, one that works for the benefit of Inuit and of Canada as a whole.

I would like to quickly read the three recommendations that were made in the submission that was provided to the standing committee in January:

It is recommended that the potential of the NRC to enhance northern economic and resource development activities be recognized by the committee and that it make specific recommendations to government to support this initiative in principle.

It is recommended that the committee consider and recommend to governments that innovative financial support mechanisms be defined to allow the NRC to achieve its initial aims to participate and achieve an equity interest in certain major resource developments in Nunavut.

It is recommended that the committee acknowledge, indeed emphasize, the importance to Inuit...of achieving more direct control of, and participation in, future major resource developments in Nunavut through equity participation in those projects.

We respectfully request the support of the standing committee to encourage Canada to assist the KIA and NRC to realize their goal.

This concludes my statement. I look forward to any questions you might have.

Thank you, Mr. Chair.

[The Chair, Conservative, Bruce Stanton]

Thank you very much, Mr. Stevenson.

Mr. Stevenson, there will be some questions en français et en anglais.

We're going to begin with Mr. Russell.

This is a seven-minute round, for both the question and the answer, so the more succinct you can keep your questions and answers, members and witnesses, the more questions and the more material we can get through.

So let's go to Mr. Russell for seven minutes.

[Todd Russell, Liberal, Labrador, NL]

I want to thank each of you for presenting to us this afternoon. I have a couple of questions, one for each of you.

Mr. Stevenson, you mentioned greater equity participation on the part of Inuit-owned corporations or entities in certain developments, and you talked about innovative financing solutions. I'm paraphrasing a little bit. Could you just expand on what you mean by innovative financing solutions or approaches that would allow Inuit to have more of an equity stake in a number of these developments?

To Mr. Connell, I guess we can note that you've certainly had some success in terms of your operations in the north. I believe you have a number of mines up and running, and two more coming on stream. I'm just wondering if you could outline what initiatives your company took in particular to engage Inuit in Nunavut, and what kinds of strategies you employ in terms of your company today to bridge the employment barriers that might exist.

I'd just like to get a better sense from each of you on those particular questions.

[The Chair, Conservative, Bruce Stanton]

We'll start with Mr. Stevenson. Go ahead, Mr. Stevenson.

[John Stevenson]

Thank you, Mr. Chair.

It's what Dr. Ron Wallace, one of the leads on this project, calls “highfaluting finance”. I think it involves a number of partnerships in order to achieve this equity interest. The other thing we are also trying to achieve is not to use any Inuit money. We are not going to be using the Nunavut Trust, for example. We are seeking partnerships with investment houses; there are a number of them in Canada. We are talking to the major banks.

So it's equity interest, financing, and we're also talking to the Government of Canada for a bit of seed capital to get started. We recognize it's not going to be easy.

I believe the first project will be and needs to be one that provides some cashflow for NRC so it can keep its lights on and we're not reliant on government for operations and maintenance. Also, of course, a major partner will be industries themselves.

[Todd Russell, Liberal, Labrador, NL]

Does the IIBA allow you to have an equity stake in a number of these developments now? Could that not be negotiated under that particular vehicle?

[John Stevenson]

IIBAs could be used as a mechanism to achieve an equity interest, but the problem with IIBAs, as I stated earlier, is that you need a project to have an IIBA. By the time you have an IIBA, you have an Agnico-Eagle on your lands, an IIBA that's paying dividends. You have a gold mine on your lands.

What happens before you get to the Agnico-Eagles is that there are a number of interim companies making small fortunes from the Inuit lands without building a project. The vision is to take advantage of those interim steps so the Inuit will benefit from the entire process, not just the end.

[Todd Russell, Liberal, Labrador, NL]

Thank you.

Mr. Connell.

[Lawrence Connell]

Some of the initiatives we have taken... I'll tell you briefly about them, because there are quite a few. During construction we recognized that the chance of us getting local or Inuit skilled construction workers would be very limited, so we chose to take on the role of acting to provide all the services for the construction companies that came north to build Meadowbank. In doing that we supplied the accommodation, the food, the moving of materials, and the delivery of materials. That allowed us to build a strong base of lower-skilled Inuit employees who have now become the core of provisional skills to the mine.

We chose the model to get us a quick start during the construction phase. Recently, working with Human Resources Canada, the Government of Nunavut, and the Kivalliq Inuit Association, we created the Kivalliq Mine Training Society. We've committed $9 million to that venue over the next three years. I think the federal government is putting $2.5 million into it, and the Government of Nunavut is putting in $600,000. The concept of the training society is to provide skills to new employees that will get them into entry-level jobs at Meadowbank. Our target is to get 50 new skilled employees in each year over the three years.

The kinds of programs we've been running, for example, are taking local people down to Morrisburg College in the Ottawa Valley to be trained as heavy equipment operators. We now have 40 haul-truck operators, all from the local communities.

We've done the same with Northern College in Ontario, with mill operators. We're engaging in that. The problem is there are still only 50 employees per year. We're making a small dent in a bigger problem. I think there's room to take that model and build on it.

We do have an Inuit impact benefit agreement that's flowing money to the Kivalliq Inuit Association. It has scholarships, but we have found that scholarship programs are very unsuccessful in motivating students to come south for higher education. So we have recently engaged McGill University and Nunavut Arctic College to look at how we can bring some of those training programs into the north.

I'll use this good case in point as an example. Nunavut Arctic College is getting the engineering for a mines training centre to be built in Cambridge Bay. That's been on the books for almost five years. I think they received $1.3 million last year to do the assessment and the design. They know that the next impediment is that the capital cost of building is $45 million, and there is nowhere on the horizon where they're going to get that. That process is probably going to be another five or six years before we see the first student from the program, which is almost halfway through the life of the Meadowbank mine.

The local communities were asking this to be moved forward in 2005. We see the slowness of this and where there's the need for an accelerated program, as partnerships together, to increase the pace.

[The Chair, Conservative, Bruce Stanton]

Thank you very much.

We will now move to the Bloc Québécois. Who is going to ask the questions?

Mr. Lemay, go ahead.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

Thank you for being here. I listened carefully to your remarks and I am asking myself a question. We are almost at the end of our study. Mr. Connell, I read what you wrote very carefully. By listening to you and reading what you wrote, I am wondering if we shouldn't try to trigger—I am going to be careful about how I word this—a change in thinking?

There are Aboriginal people in the north. I understand there are Aboriginal people in the Yukon and the Northwest Territories, but if we look at the Inuit case, given everything that I have heard during the last months, I am not sure Inuit are ready for an invasion like that. You can contradict me if you do not agree with me. This invasion is just starting, especially in terms of mining exploration and exploitation. Let's just look at mines. I am wondering how we are going to do it. I know Meadowbank well. In my riding, there is a mine called Lapa. It is just at the border with my colleague's riding and it is operated by Agnico-Eagle Mines Limited.

When Lapa mine opened, we told them there would be small problems because of the way they think in the north. So I ask myself how we will do it. It is all very well to invest millions, but if Inuit are not on board—since it is they we are talking about—why would we do that? And how can we get them on board?

I would like to hear what you have to say about that since, in my view, that is one of the main obstacles.

I am not even concerned about money; there is lots of money. When I look at the potential profits of Agnico-Eagle Mines Limited, I am not worried about money. But the workforce and training, and especially labour retention, do worry me.

I would like to hear what you have to say, Mr. Connell, and perhaps you too, Mr. Stevenson. Take your time, I am listening.

[Lawrence Connell]

Thank you, Mr. Lemay.

You're quite right. I wouldn't say they weren't ready. If I take the example of Baker Lake, which is where the Meadowbank mine is, we have to look at a bit of history. In the 1980s they were approached by a company called Urangesellschaft to develop a uranium mine near the community. They were not ready at that time. The elders of the community said to the mining company, “No, go away; we're not ready for you yet.”

When Meadowbank came along—it's 20 years later—the elders had recognized that over 20 years they had not improved. Actually, things had got worse in their local community. So they were very willing to participate and help us in the creation of the Meadowbank mine. We have a very engaged community liaison committee of elders and other business leaders working with us on Meadowbank.

I think the aspiration, the desire, is there. But I believe there has been some disappointment for the people of Nunavut with the slow pace at which government has helped them come forward. We continually see conflicts between the Government of Canada and Nunavut, and we wonder if this is not getting in the way.

But from a community level, I really believe that the people of the communities want to take their lives into their own hands. They feel it's time. They want to participate and they're looking for help. And they will respond.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

Mr. Stevenson, what about you?

[John Stevenson]

Thank you.

I agree with what Larry said. I would also add that in the eastern part of the Kitikmeot region—which is, again, the area north of Yellowknife, formerly known as the central Arctic—the Inuit worked in the Polaris mine 20 or 30 years ago. There is some experience there. In the western part of the region, the Inuit have worked in the Beaufort on the oil rigs. They've worked at the Lupin mine, which is a gold mine in the central Arctic. Right now they're working at the Diavik diamond mine and the BHP diamond mine in the Northwest Territories because they have an impact benefit agreement with those mines.

So I think the desire is there. I agree with you. It is a bit of a chicken-and-egg thing when it comes to building a $45-million school. But it's Kitikmeot Inuit, at least. I've been requesting that the construction of that school be ramped up. And they've been requesting, for many years now, that the mine training centre be built. And it still has not been officially announced that it will be constructed. The construction of it would enhance the skills of the Kitikmeot Inuit, and so will... This is another initiative KIA is working on, but one that involves something similar to what Kivalliq has done, which is to develop a skills strategy. The skills strategy obviously will require centres like a mine training centre in the Kitikmeot region.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

Thank you.

[The Chair, Conservative, Bruce Stanton]

Merci, Monsieur Lemay.

Let's now go to Madam Crowder, for seven minutes.

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

Thank you, Mr. Chair.

I want to thank both of our witnesses today.

I want to start off with you, Mr. Stevenson, by referencing a Harvard study on mining that was just released. Although it doesn't apply to your area—it deals specifically with the Takla first nations in northern British Columbia—I think some of the recommendations from that study are probably relevant to the north.

Just broadly, the study indicated that first nations “bear an unfair burden at every point in the mining process, from the registration of claims to exploration, production, and abandonment of closed sites”, and that “urgent law reform is needed to shift at least some of this burden onto government and industry”.

I can't, obviously, in the short time I have available, deal with all the recommendations, but I want to focus in on the equity in revenue sharing, because that's one point that you raised in your presentation.

One of their recommendations to governments and key stakeholders is that they need to develop revenue-sharing plans and provide training and job opportunities for first nations. The recommendation talks about the fact that mostly what we see is employment agreements, which are simply trickle-down effects for the communities. It says:

This situation is particularly problematic because the revenue is derived from the natural resources found on traditional First Nation lands and comes at the expense of harm to those lands. Mining companies can improve upon this situation by sharing their revenue from mineral development with affected First Nations.

I'll come to the training when I talk to Mr. Connell, but could you give us more detail about what you would like to see in terms of revenue sharing or equity in these proposed mines?

[John Stevenson]

Well, right now throughout Nunavut, Inuit own land. That's different from many other jurisdictions in Canada for aboriginal people. Inuit actually own, fee simple, the land, or some of the land. They also own the sub-surface rights, in some cases. In the case of the Agnico-Eagle mine, much of that land, surface and sub-surface, is Inuit-owned land.

The opportunity for the NRC, though, is before all that. It exists now in terms of maybe an infrastructure deal or some other deals that Mr. Connell mentioned, but the opportunity for Nunavut Resources Corporation would have been Agnico-Eagle's predecessor: the people who went into Baker Lake and established the relationships, explored the land, found the gold, and made a lot of money when they sold the company to Agnico-Eagle Mines. That's where--

[Jean Crowder, NDP, Nanaimo—Cowichan, BC]

Sorry, Mr. Stevenson, but let me interrupt. With the Inuit, they end up with the royalties but there still isn't an equity interest, right?

[John Stevenson]

That's exactly correct.