Subcommittee on Canadian Industrial Sectors Committee on May 14th, 2009

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Thank you, Mr. Chair.

Thank you both for coming today. Again, as with all the presentations throughout this study, it's very interesting and enlightening to hear what's going on in the mining industry.

I'm struck a little bit by the uniqueness of the mining industry compared to others.

Mr. Baird, you used a phrase comparing mining to finding needles in a haystack, in a sense, and of course in Canada we're probably the largest haystack in the world. So there are real opportunities there, and in terms of competitiveness with other countries, one of the things you don't have to worry about when you're dealing with mining is having to compete on the basis of the number of minerals we have in the ground. We have them in the ground. They're going to be in the ground until we take them out. How we maximize that is the question.

It sounds as though there are some real issues moving forward with labour. I want to start by talking about labour, if I could, because we're in a unique circumstance where the global slowdown causes you or your organizations to reassess short-term plans. Some of those plans may involve layoffs of workers, workers who you're going to need again coming out of this.

The federal government has a program, a work-sharing program, that, to me, seems designed almost perfectly for your type of situation. Rather than lay off workers who are going to find jobs elsewhere—workers you'll need later—you can sort of share the burden amongst the workforce, have people working 80% of the time and EI topping up a portion of the difference, so that you can maintain people and keep the numbers of employees up. So when it comes time to ramp up the workforce again, you can do that.

Can you tell me if either of you know if the work-sharing program is being used, if your organization is doing anything to actively promote the work-sharing program for your organizations?

[Jon Baird]

My association, CAMESE, has certainly given out information about it to member companies through our bulletins and so on. I was talking to one company last week that's considering using it, but I don't have any statistics about that.

[Paul Stothart]

I think my answer would be along the same lines. We do have a communication product, called “Alert”, that goes out to about 600 readers within our industry. We've put information in that communication to members so they're aware of the work-share program. I don't have a sense yet of whether it's going to fit into some of the companies.

But you're right, companies are in a temporary layoff and temporary reduction mode, probably over the course of the summer, just to try to get supply and demand back into balance. They are going to need these workers going forward.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I would suggest there's only so much a government can do to communicate programs like these. I would suggest a real emphasis on this particular program in terms of an opportunity for some of your organizations to weather the storm, so to speak.

A lot of what we've talked about here in this committee has been cyclical versus structural challenges. I mentioned it to the last fellows who were here. It seems in your circumstance there's certainly a cyclical component beyond the cyclical component that is just the global storm. There's a cyclical component within that, that commodity prices or mineral prices are cyclical to begin with.

In terms of what could be kind of cyclical, but I want to make it sound more structural, I want to talk about minerals that are in declining versus increasing demand. I may differentiate a little bit between opportunities where moving forward there are going to be certain things that are in high demand worldwide...where there might be other minerals, other products that are coming out of the industry for which the future doesn't look so good. For example, we see that when we talk about the forestry sector. We've heard some people say in pulp and paper that there's maybe less demand for paper products as things go more online.

Are there maybe parallels in the mineral industry, areas that you see more challenged than others? Or is it that you see more opportunity in others there?

[Paul Stothart]

I'm not sure there are parallels. I spoke at the outset about the examples of China and India, which are changing their diet away from a rice-based diet to more of an animal protein kind of diet, which will mean demand for potash.

Many countries are building more nuclear reactors and moving to that source of energy as a form of energy that doesn't emit greenhouse gases.

On infrastructure and manufacturing, obviously there's a lot of activity taking place in those areas with stimulus programs, etc., not just in Canada, the U.S., and Europe, but in China and India, and that will mean a demand for base metals.

The growing middle class in a number of different countries around the world will mean more of a demand for gold and diamonds.

One point we do like to highlight in our industry is there is a lot of discussion about the clean energy revolution. I think we are on the cusp of a clean energy revolution. There are certainly many studies suggesting there are going to be tens and tens of billions of dollars spent over the coming years on clean energy. Whether it's hybrid engines, solar panels, wind turbines, or nuclear reactors, all of that means a significant demand for metals and minerals, whether it's nickel, copper, or rare earth elements like germanium. You can't have a clean energy revolution without the minerals and metals that support it. How we conclude that kind of discussion is to say if you are in favour of a clean energy revolution, you should also be in favour of mining and exploration to try to provide the minerals and metals that will provide the basis for that clean energy revolution.

That's an area where there's clearly going to be more growth in the coming years and decades, but again it falls back on the basic metals and minerals that we have in Canada and that we're looking for in other parts of the world.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

That provides a nice segue into—

[The Chair, Conservative, Dave Van Kesteren]

Time's up, Mr. Lake.

Mr. Thibeault, go ahead.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Oh, I guess it provides a nice segue into Mr. Thibeault's question.

[The Chair, Conservative, Dave Van Kesteren]

Mr. Thibeault has been waiting with bated breath for your arrival. He is so happy to see you here.

Mr. Thibeault, go ahead, please.

[Glenn Thibeault, NDP, Sudbury, ON]

Thank you very much, Mr. Chair.

I do have to mention, and my colleagues can vouch for me, that in every sector I've always mentioned mining. I've been able to bring it in somehow. I do that because I don't think many Canadians recognize the importance of mining. One of the things I've done since I've been elected has been to try to bring forward the importance of mining to our country.

If you look back at the very first slide you brought forward earlier, you'll see the mining industry payments to government are $10 billion. So mining has been supporting government and jobs, and the list can be endless, for decades if not centuries.

One thing I was very happy to hear was that, in the mining sector, we don't see this necessarily as a downturn but as a pause. I'm excited to hear it because in my community of Sudbury, we've been calling it death by a thousand cuts. While we've seen large job losses at places like Xstrata, with 686 permanent job losses; the mothballing of some mines that have lower-grade nickel and other minerals in there; the shutdown, as you mentioned, at Vale Inco for a couple of months; and FNX Mining, First Nickel Inc., and all of these places hit hard by this downturn, we're waiting for that pendulum to come back.

While we're doing that, there are some important things we wanted to maybe get the government to get involved with. I know there was positive support from the METC, the medical expenses tax credit, that was in the budget. I heard that loud and clear from many of the organizations in my community. But while we're on pause and waiting to hit the play button, what other things can we do to support the mining sector? I'll open that up.

[Jon Baird]

I could start on that.

I'll pitch this to you, because you come from Sudbury, which is a totally integrated.... It is one of the four city-states of metal mining in the world. I'll tell you what the others are, if you like.

There's big-time mining and there's big-time mining supply. The Ontario Mining Association did a study, which came out within the last year, where they modelled a mine in Sudbury producing nickel and copper. The revenue of the mine was $270 million per year and it created 480 jobs working for the mine. It also created 1,103 jobs amongst mining suppliers in the upstream supply chain, and another 697 positions in the community around where the people who worked for the mine effectively went out and spent their money after taxes and savings and whatever.

So this mine in your community—it's not a huge mine, and all the assumptions were very conservative—actually employs 2,280 people. This is what happens when we find a new mine. We get that.

You ask what government can do. First of all, we've got to ensure that Canada remains a place where people want to invest in exploration and production in mining. That's a big question. The federal government has its hand in that and the provincial governments have their hands in that.

Second, innovation is extremely important to maintaining the productivity and the health and safety and environmental performance of the industry. As I pointed out in my introduction, the mining suppliers play a big role in that, the mining suppliers in your community.

Now, on top of that we can have the icing on top of the cake, because those suppliers in your community can also export their services and goods, which have been developed because you have this wonderful cluster in Sudbury. They can export to the rest of Canada and they can export to the rest of the world. But most of them are small and medium-sized enterprises. It's very difficult for them to tackle the Chinese market and other markets as traders. They need help, which comes from collective approaches, which this country is lacking. It's not money.

[Glenn Thibeault, NDP, Sudbury, ON]

Yes.

[Paul Stothart]

I'll just add a couple of points to that. We've already talked briefly about the geoscience and the need to invest in that area, and we've talked briefly about innovation and the fact that we will be seeking money for the Canadian Mining Innovation Council.

I think in the general tax area the industry is fairly well positioned internationally. We've talked a bit about the flow-through share provisions, the ability to write off development expenses as a project is being brought along. There are some areas that can still be improved upon. We have an ongoing dialogue under way right now with Natural Resources Canada, and hopefully in the near future with Finance officials, to see if we can make some improvements.

These become very technical areas to do with things like the five-year rule and possible accelerated write-off of modernization of facilities, for example. It wouldn't be easy, but if the government could somehow develop a tax incentive for companies, not just in our sector, to invest in modernizing their facilities and somehow tie this to improved performance in greenhouse gas intensity or whatever, that kind of thing would obviously be well received and would help encourage more investment in modernizing facilities. There are many sectors beyond ours that would welcome that kind of movement.

In general, though, the tax situation is reasonably competitive. We have made some comments in the past about the need to improve the regulatory processes. It still takes too long in this country to wind a project through the regulatory approval process. It doesn't mean we want regulators to say, yes, go ahead, necessarily, but it means that we do want some answers and some direction more quickly than four or five years.

So there is a major project management office. It's a bit early to say whether it will be effective or not. It has some good people, but it's too early to tell whether it's going to be able to ride herd and bring some discipline to this whole process. But certainly that's one area to keep in mind.

Finally, on the infrastructure front, we have suggested three particular projects to the government, one of them in northern Quebec. We appreciate the fact that is going to be moving forward. The Quebec government has also stepped in to support that in their most recent budget. There are still projects in Nunavut and Northwest Territories that we think are worth supporting. We're still working on that. All three of these projects would help companies access areas that are felt to be quite promising, both for exploration and eventually to get products out to the marketplace. So I think there are some suggestions that we have in play on the infrastructure front.

There are a couple of other areas, but I'll stop there.

[Glenn Thibeault, NDP, Sudbury, ON]

Both of you have been talking about something that I think is very important. How we encapsulate the points that you have both brought forward stem to something I believe that you said, Mr. Baird: there is a need for a national mining strategy.

There has been much discussion in my community about it, especially now, when we've seen what has happened with the unfortunate takeover of Canadian jewels by foreign companies. If we have a national mining strategy, will that make a difference to support the mining communities?

[Jon Baird]

The mining industry is quite fragmented in many respects. We don't have a sense of national purpose. I heard this from the other groups talking--I think it was the biotechnology people--and I said to myself, “Gee whiz, it's the same thing”.

We in mining compare ourselves with Australia a lot. There is a country that has probably twice the dependence on the mining industry that we do, but still is able to...and they have the same governance. The control over resources is a state matter, as it is in this country. That's where I think our balkanization starts. We have associations all across the country. Each of these associations is a unifying force in itself, but we don't have a very strong, total networking of all of those associations. Certainly among governments and the various programs that affect our industry, there are lots of differences between the federal government and the provincial governments and so on.

I was saying to Mr. Lake earlier that Australia has a population half our size. They are rugged individualists, these people--and I've lived there--more than Canadians are. Yet when it comes to a national purpose, they seem to be able to get their act together. In everything that affects mining, whether it's education, whether it's innovation or exporting, they're ahead.

In Australia, for the mining suppliers of Australia, they undertook a program starting 10 years ago. They made this a priority to export more of what they call mining technology services, which is what I represent. They had a national goal to bring it from $1 billion to $6 billion. And do you know who was going around talking about that? The industry minister of the country was going around talking about that. So it became a program that was far more successful.

What we have here is a really fragmented approach to this. We have a lot of excellent silos in the thing, but we don't have a sense of national purpose in an industry that is the most dominant sector that Canada has in the world. It could be more dominant.

[The Chair, Conservative, Dave Van Kesteren]

Thank you, Mr. Baird.

[Paul Stothart]

Just to add quickly onto that point, I think a national mining strategy, to the extent that it incorporated R and D components, infrastructure components, and incentives for more value added and for more modern processing facilities, might be worth considering.

Just on the point of the takeovers of Canadian jewels, that was an issue that raises interesting questions for our industry and for our sector association with the Brazilian company Vale buying Inco and Xstrata buying Falconbridge and Noranda in 2006.

I think our position is that we encourage both the inward and outward flow of foreign direct investment. We have very strong stocks of investment ourselves around the world. Both inward and outward flows bring new ideas, new contacts, and new markets and open up those kinds of channels.

It is interesting; even in the case of Inco, with the downturn in the past six months, they are employing about 9% more people today than at the time of the acquisition. In Sudbury, the employment is 4,700 versus 4,400 at the time of the acquisition. I think we were a bit spoiled during the boom of 2000 to 2007 in terms of employment growth. But even in those cases, the employment has increased even since then. They've also had very positive performance in terms of investment in training and social responsibility areas, and they can certainly document all of that.

It raises an issue for sure, but I think it's an investment flow that we view very positively as an industry.

[Jon Baird]

In terms of the taking over of Inco, and Falconbridge, and Noranda, and Alcan, there's something you should know. In 2002...and these are balance sheet numbers now, off Canadian-domiciled mining companies and exploration companies—that is, companies with head offices in Canada. In 2002, the balance sheet value of assets of Canadian companies was $65 billion. Forty percent of that was in Canada.

Now we go to 2007, which is after these big takeovers. The takeovers are worth $65 billion. The value on Canadian company balance sheets of assets around the world was $110 billion. This industry came back and just about got twice the value out of the world, and 25% of those in 2007 were in Canada.

So we went from more Canadian-based to a more global industry. That is what this mining industry is all about. That's the way it performs in the world. It's a real gem for Canada.

[The Chair, Conservative, Dave Van Kesteren]

Okay. Wonderful. I think those were points we needed to hear, too, so I allowed those.

Welcome, Mr. McKay. You have the floor, sir.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you, Mr. Van Kesteren.

Thank you, gentlemen.

As you see, I'm not Mr. Garneau. He's actually left me with the three questions that I should be asking, two of which I don't even understand. But the third question I do understand.

I'll direct my questioning to Mr. Baird, who has said that apparently Bill C-300 should be squashed. Since I'm the sponsor of Bill C-300, that's of some interest to me. I know that some in your group think that if Bill C-300 passes, it will be the end of western civilization as we know it.

I'm interested in your reasons for your view. If you could share those reasons, I'd be interested in hearing them.

[Jon Baird]

Well, I think when you first raised the bill....

Am I correct that it was over two years ago when you first proposed this bill?

[John McKay, Liberal, Scarborough—Guildwood, ON]

No. This bill has only been in the pipeline for three months.

[Jon Baird]

Well, it's in some newer format then.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I think the NDP in particular have put forward a parallel bill for years. The basic concept of all those bills was to incorporate an ombudsman, the concept set out in the 2007 round tables, in which I believe your organization participated.

[Jon Baird]

Yes.