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

[The Chair, Conservative, Dave Van Kesteren]

Okay. I know that Mr. Garneau has some questions.

[Jon Baird]

Okay.

Mining supply is the upstream part of the mining industry. It's a very different case from that in most other industries. It's a great strength of the industy. It's something that creates more jobs than mining itself—in fact, far more jobs. I can give you some statistics on it. It's made up of SMEs. These companies have a very high propensity for exploration. We have no national strategy or program to help these companies to export.

None of them need bailouts; that's not the answer. The answer is better organization within the country on a sectoral basis.

I'll leave you with that.

[The Chair, Conservative, Dave Van Kesteren]

Thank you, sir.

Mr. Garneau.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you, Mr. Chair.

Replacing me here very shortly is the sponsor of Bill C-300; that should be very interesting.

The mining sector is not generally known very much by the public, but it's clear that you're a big player on the world stage. It's probably also not known as a hotbed of R and D, but it probably is. I'd like to hear in your words how you view R and D in your sector—either of you.

[Jon Baird]

I'll lead off, and Paul no doubt has some comments.

In 2004 a report was published by the government indicating that 1.9% of GDP in Canada is spent on R and D; 50% of it comes from government. The numbers in the mining industry are that the industry does its part: $40 million or $50 million or whatever is invested by industry, and yet government is in there for about $5 million. So government is far under the $40 million or so that is needed to get mining up to 1.9%. This is not the case in other countries. In Australia and other places, governments are investing like mad.

Secondly, on the part of mining suppliers, I would like to say that they are very innovative. Surveys by our association indicate that 15% of the employees of the SMEs who work to supply the mining industry are innovators, and another 10% of them are, perhaps more importantly, commercializers—the people who actually sell these things around the world. It's a very strong, innovating force for Canada and for the industry.

[Paul Stothart]

I think Statistics Canada indicates that the industry, defined as they define it, spends about $550 million a year or so on R and D. It's not in the same category as your previous speakers, but it is on a par with sectors such as the auto sector, etc.

I think there is an effort on the industry's part. Mr. Baird mentioned the Canadian Mining Innovation Council, or CMIC, which is a new undertaking. The government is just now searching for an executive director for it, and I think the industry will be coming, in the lead-up to the next budget cycle, to seek money to support CMIC. There are a number of kinds of projects that could be supported through CMIC: carbon capture and storage; some geothermal—there is potential for geothermal energy in underground mines to be used more effectively—potentially the use of waste products in place of cement, etc.; non-cyanide processes for gold.

So there are areas for more research to take place. A lot of these tend to be of benefit to the broader industry and so tend to be joint research efforts, which is partly why we're coming in through the hat of CMIC. I think we will be seeking money and working with Finance over the coming budget cycle to try to get support for that effort.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

CMIC stands for what, again?

[Paul Stothart]

It's the Canadian Mining Innovation Council.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you very much.

We hear a lot about China being a country that is not only perhaps importing Canadian minerals, but also developing its own mining industry. How is it affecting you on world markets? Is it undercutting you because of cheaper labour? I'd be interested in knowing.

[Paul Stothart]

I guess it affects us in a couple of ways. The main effect of China is as a driver of mineral prices. Most of our mineral exports still go to the U.S., but the prices are driven globally by Chinese demand. That is to our benefit. Obviously with higher prices, everybody from companies to employees makes more money. That's the main driver from China.

They are certainly trying to produce more of their own minerals and metals. They still have enormous needs in most areas. Just looking at the growth going forward, the World Economic Forum has projected that even in the years 2020 to 2025, and thus 15 or 20 years from now, their annual growth is still going to be in the 7% to 9% range. That will be on the base of a very large economy at that time. And in India, obviously on the heels of China, there's going to be tremendous growth. I mentioned in my remarks the growth that will take place in consumer product areas—computers, iPods, etc—which all contain minerals and metals. Obviously the growth they aim to continue to have as the world's manufacturer will drive a big demand for minerals and metals.

A final area in which China is going to be more noticeable in the coming years is as an acquirer. That may raise some public policy issues, if it is state-controlled enterprises that are making large bids for companies. Those kinds of issues will have to be dealt with at the time, I suppose. I think we anticipate China's having the capital to make acquisitions in these areas, because it's critically important for them and their economy to have supply of these raw materials.

[Jon Baird]

Perhaps I can add just quickly to the exploration and trade issue.

In exploration, there's not a level playing field with China. Canadian junior companies, as they go around the world, are getting turned off on China, because the rules are not fair. It's the same, by the way, in India.

On trade, it is extremely difficult for Canadian companies to get into supplying the Chinese market, for all kinds of reasons. So yes, China is extremely important as a producer and as a consumer to our industry, but in terms of the fringes I represent, it's hardly a fair game.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you.

I'm afraid I didn't quite understand it, since I'm not an economist, but you mention in your global outlook that a sticky supply could lead to spiking in global mineral prices. What does a “sticky supply” mean?

[Paul Stothart]

I think it means that prices are driven partly by the demand side, which we just talked about with respect to China, and partly by the availability. There are large projects projected internationally. It's going to be more difficult to bring these projects into production, in terms of companies needing to invest a lot in infrastructure to get the products to the marketplace.

There is a sense that a lot of the low-hanging fruit around the world has been found, so companies are looking in more remote regions—areas such as Africa, Mongolia, Tanzania—where the infrastructure is not what we're used to here. It's going to be more difficult to bring these projects on cost-effectively and in a timely manner.

Those are the kinds of issues we would classify under “sticky supply”. That situation may be seen more in the coming years as demand turns up and people start to look at where all this stuff is going to come from.

[The Chair, Conservative, Dave Van Kesteren]

Monsieur Bouchard.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you, Mr. Chairman. Thank you also to both of you for joining us this morning.

My first question is directed to the representative of the Mining Association of Canada. Do we know what mineral reserves exist in Canada? How large are they? Are they huge or do we know very little about where mineral reserves might be located in Canada?

[Paul Stothart]

There is good detailed information on Canada's supply of mineral reserves. We have it provided in a table in this document, which we can give you, called Facts & Figures, or Faits et chiffres. This information is produced by Natural Resources Canada and it shows proven and probable reserves of copper, nickel, zinc, uranium, etc.

The story of the past 25 years is that these reserves have been going down. Part of the solution to that, as we see it, and I think as the government sees it, is the point Mr. Baird mentioned, which is a need for the government to invest more in geoscience, geological mapping. One example we would use is that 73% of Nunavut remains unmapped, or poorly mapped, from a geological perspective. It's that kind of data that companies need and that explorers need to try to find the needle in the haystack. So that's a very important key to trying to turn up these reserve figures.

It is felt that there is a lot of potential, especially in northern Canada and northern parts of the provinces as well, to find more reserves. It's our sense that investing more in geoscience, in mapping, and in even more that can be done is a key part of the solution.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Mr. Baird, do you have additional information?

[Jon Baird]

I might answer from the perspective of a geophysicist. I am an “explorer“ by profession. Canada is a major prospecting country. We have a huge land mass and our geology is conducive to mineral deposits. We only have to find them. Canada is among the five or ten largest producers of many of the 60 minerals we mine. There is no doubt that this is one of our strengths. The fact that we attract every year 20% of the world's investment in exploration means that the world recognizes the future of mining in Canada and Quebec. In yearly surveys, Quebec is viewed as the best area in the world in terms of exploration.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

So if I understand correctly, we can be optimistic about the future of the mining sector.

[Jon Baird]

There is definitely a future. I have lived through the cycles since the 70s. In almost 40 years, there have been four cycles. This is standard in my industry. As mining suppliers and as mining companies, we know how to survive such downturns. The issue is what will be our capacity once the good times return. There is no doubt that they will return.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Mr. Baird, from your presentation I identified a number of issues. There are tax credit and manpower issues. The young generation does not seem very interested or attracted to the mining industry. You mentioned a number of solutions, including asking the government to provide risk capital and loan guarantees. One tax credit has been extended for another year and you ask for it to be made permanent. Furthermore, you want Bill C-300 defeated.

Did I get the thrust of your presentation right?

[Jon Baird]

I am happy you understood so well what I said. Your list is exactly what I said in English.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

What issues does Bill C-300 raise for your companies to make you want it to be quashed?

[Jon Baird]

It deals with corporate social responsibility, CSR in English. In terms of oil and gas extraction and mining, Canada has a presence throughout the world, in over 100 countries. As a government and as an industry, we must ensure that Canadian companies respect the local people, their government and the environment.

According to all quantitative surveys, there is no problem. Canadian companies are working on over 10,000 projects, half of which are in Canada and the other half elsewhere in the world and they behave appropriately. However, I should note that we are working under some very difficult circumstances in countries where there are no laws, where the customs and the language are very different. Problems do arise but very few that are caused by our companies.

Bill C-300 was introduced in good faith two or three years ago. Things have changed quite a lot since then. There has been a series of roundtables throughout the country where industry, government and all stakeholders came together to discuss. A report was produced that expressed a wide consensus. It took the government two years to respond to this report. We just received its response, two months ago. The industry is satisfied, even though a number of recommendations were not accepted by the government.

Industry has developed programs to ensure that our practices conform to reasonable standards. None of this was anticipated by the member who introduced this bill. So I would be happy to discuss it with him. Mr. Garneau said he would come. At any rate, this bill will not be beneficial to Canada, to the mining industry nor to other industries that are active throughout the world.

[The Chair, Conservative, Dave Van Kesteren]

Mr. Lake.