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

[Paul Stothart]

Sure.

This is an important area, especially for an industry like ours where there is a lot of international trading and a lot of international investment.

One area we pay attention to, although not as high-profile an area as free trade agreements, involves FIPAs, foreign investment protection agreements. These are useful even if they're not used that much. They provide some guidance to foreign countries and they provide some comfort to companies that are investing in these countries. If there is a dispute, they will have some independent arbitrator and some independent rules through which they can regulate that dispute.

We welcome more FIPAs. Canada should have more of them. I think other countries have more of them. Other countries call them bilateral investment treaties. I know there's one in play with China that's been dragging on for a while. There was one signed with Peru, which was rolled into a free trade agreement eventually. We certainly welcome any government action on these kinds of FIPAs. If the one with China can be moved along, then that would be good as well.

There is also Export Development Canada, or EDC. I used to work there for several years; I'm quite familiar with the organization. It's an important organization. It's getting a bit more attention now and it has a bit more of a domestic mandate added to it. Its main mandate is still international in supporting foreign trade and foreign investment.

It's our sense, in talking to some of our members, that they can take on more risk. They have a very large balance sheet. They have their own treasury. They're a very healthy organization. They have the ability to take on more risk when working with companies; they're a bit too cozy.

One of our companies has criticized a bit the fact that they tend to reorganize too much, or their people tend to move around. So if you meet some people one day, a year from then it may be different people. I don't know if there's a way to bring a bit more transparency to their organization chart.

You can't access them, for example, through the gc.ca website, in terms of seeing their organization structure and which people are in which areas. You can't see which people are in which sector teams. It's a fairly simple suggestion, but it might be interesting to try to bring a bit more of that openness to EDC so people can get a sense of how they're organized and who's serving which sector.

Those would be a couple of comments. It's an important area, and the more effort that can be made towards FIPAs and the more impetus that can be given to EDC to take on more risk, those two things would be well received by our industry.

[Jon Baird]

I agree fully on the importance of FIPAs and on EDC, which has been given an importantly improved mandate in this recent budget. I think that's all very good.

You mentioned free trade agreements. These things take an awful lot of time, but they're worthwhile when we get them. In terms of mining supply and the need for free trade agreements, it's not a very important matter. Canada has very few tariff barriers to the importation of goods and there's a high degree of import penetration into this country of mining equipment and so on.

When we go around the world trying to sell, yes, there are tariff barriers and non-tariff barriers that we would like to see reduced. Generally speaking, Canadians are pretty competitive in most of these things, and I can't claim that it's a great barrier.

There is a more important thing, and I think the government is overlooking it in terms of cutting its budgets at the Department of Foreign Affairs and International Trade, where it seems budgetary compressions are going on continually. The Canadian Trade Commissioner Service around the world is understaffed. They're underfunded. We don't have a sectoral approach to try to get companies out and about around the world in a sector where we are very well known.

The Americans are the world's policemen. Canadians are the world's miners. We should have a better national approach to export marketing in this sector.

[The Chair, Conservative, Dave Van Kesteren]

Mr. Bouchard.

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

Thank you, Mr. Chairman.

Mr. Baird, the Exploration Tax Credit, that you would like to see become permanent, has been extended for one year. If this credit does not become permanent, what will the consequences be for the companies you represent?

[Jon Baird]

Firstly, there will be a reduction in mineral exploration investment in Canada and in Quebec. This investment amounted to $2.5 billion last year and it will drop off over the coming years if this credit is no longer.

I mentioned the need for junior companies to survive. If this source of funding is eliminated, we will witness the disappearance of half of the companies, as I have predicted, if the situation were to last two or three years, but there will be many more. This would lead to less investment in exploration and the loss of our ability to raise funds and to carry out those exploration projects that are necessary in order to find the resources of tomorrow. This assistance is really important for our industry and it must be permanent.

[Paul Stothart]

Sir, just to add a bit onto that, some of the larger companies have significant exploration programs as well. This is certainly an incentive that we fully support. In a sense, exploration can be viewed a bit like the R and D for our industry. It's helping to find the products that will bring future prosperity. There is a synergy between the larger companies and the exploration companies in terms of buying their properties or buying the companies, and this has been going on for the better part of a century in Canada. We fully support any kind of extension, or making permanent, this kind of incentive that Mr. Baird is proposing.

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

Mr. Baird, with regard to the Exploration Tax Credit, I presume that you have made representations to the government.

[Jon Baird]

Yes.

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

Were you told that there was any hope, or that you should simply forget about it? What arguments were you given, whether the response was favourable or not?

[Jon Baird]

We began by having discussions with officials from Natural Resources Canada and then with officials from the Department of Finance. Given that I did not attend those meetings, I am unable to give you a precise answer. Nevertheless, overall, the government considers that this tax credit must be reviewed from time to time. It therefore regularly grants extensions to us. That is all very well, but when an extension only lasts one year, that does not provide you with much time. The funds must be drawn and expended in Canada within a limited time frame. If this program were to be permanently established... These things never last forever, but this nevertheless is one of the bases that are very important for our industry, and I cannot accept the need for it to be reviewed at the present level. The present percentage, 15%, could be increased. That is another issue and I could provide arguments in favour of such a move. Were it permanent, the present 15% tax credit would serve Canada well.

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

Yes, all the more so that a mineral exploration company must establish multi-year plans. If the program is renewed year by year, this is very unreassuring, to my mind, for a company. It is unable to do long-term planning.

This leads me to the following question. Talking about the future, you stated that young people are not very interested in the mining sector. Have you undertaken any initiatives? What do you suggest to remedy the problem?

[Jon Baird]

The Department of Human Resources has a program aimed at assisting all sectors in the area of labour. It helped us create the Mining Industry Human Resources Council or MIHR. This council has been in place for a long time, but it was restructured some two or three years ago. According to a study carried out by the Council, we will be lacking between 60,000 and 90,000 employees in the coming years, perhaps within five years, as Mr. Stothart stated.

What do we do now? The Council launched several marketing programs in order to alert Canadians to career possibilities in our industry. Given that the system varies from province to province, the Council has begun to standardize job descriptions in the industry.

MIHR is working in collaboration with the government. The various associations are moving in the same direction. For example, the Prospectors and Developers Association of Canada has a program entitled Mining Matters aimed at elementary school children. The Quebec Mining Association and the Association de l'exploration minière du Québec both have programs aimed at raising awareness among young people regarding careers in the mining sector. Both the government and industry are taking steps. Unfortunately, lay-offs are part of the current picture and the problem is not going to disappear.

[The Chair, Conservative, Dave Van Kesteren]

Thank you, Mr. Baird.

[Paul Stothart]

Can I add quickly to that point?

[The Chair, Conservative, Dave Van Kesteren]

Very quickly, please.

[Paul Stothart]

The other dimension of this issue that is important is the aboriginal area. Certainly that's a component of the population that is younger than average. Over 50 impact benefit agreements, IBAs, are signed between mining companies and aboriginal groups in Canada. Those agreements typically include investments by companies in areas such as aboriginal training, jobs, contracts, etc.

Those are a very important part of the future. There are a number of companies, such as Cameco in Saskatchewan, where a majority of their workforce in the coming years will be aboriginal, so that's an important part of this solution as well. And activities such as these IBA agreements between companies and aboriginal groups, I think, are also an important part of the solution.

[The Chair, Conservative, Dave Van Kesteren]

Thank you, Mr. Stothart. I'm glad you brought that up. That's very important.

Mr. Lake.

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

Thanks, Mr. Chair.

There was some discussion a little bit earlier about this corporate social responsibility strategy the government launched in March. Just for clarification, there are many facets of it, but one was the creation of a new Office of the Extractive Sector Corporate Social Responsibility Counsellor. That's a long title. It may not have been the title Mr. McKay wanted to put forward in his bill, but the role will be to assist in resolving social and environmental issues related to Canadian companies operating abroad. And, of course, there was also the establishment of a new centre of excellence as a one-stop shop for NGOs, companies, and others.

In that vein, I'm thinking about responsible mining practices. I think the world is demanding evidence and action on responsibility when it comes to the environment, and not just greenhouse gases, but other things. I'm interested in knowing what your organization is doing—probably this question is directed more toward Mr. Stothart—in the area of protecting Canada's reputation as it relates to that, both in terms of actions, obviously the most important piece, but also communicating those actions.

Recently we saw in a National Geographic article on the oil sands, a before-and-after portrayal of the land use, having to do with the oil sands. But what they didn't show in that article was the after, the reclamation of the land. As you're driving through into the area where the oil sands are developed, you drive through a place that looks totally undeveloped, a place where you would anticipate development. What you don't know is that it was already developed, reclaimed, and it looks as it looked before all the work was done. That wasn't portrayed, and I think that's important.

In addition to the action that's needed, which I want to hear about, I also want to hear about the communication plan for those actions so that we can make sure incorrect information isn't being sent around.

[Paul Stothart]

Our industry and our association confronted these issues fairly head-on about five, six, seven years ago. There were a number of accidents and so on internationally that didn't reflect positively on the industry.

We introduced at that time something called Towards Sustainable Mining, and we certainly have a lot of information, which we include in our annual report, that we could provide to you on that.

The TSM initiative is a mandatory requirement for our members. They have to adhere to the principles laid out in it and they have to provide information every year against the criteria in TSM. As of last year, they also have to have independent verification of that information. That independent verification is typically done by accounting firms, engineering firms, and so on. The criteria in those areas include energy, greenhouse gas management, tailings management, and emergency preparedness. It's a living initiative. We are now developing new protocols in areas to do with mine closures and community consultation. So these are important areas, and companies have to report against those areas each year.

As I mentioned, we try to make this initiative known internationally in the dialogue we have, for example, with the ICMM, which is the global equivalent of our association. So we're trying to encourage these organizations to look at TSM and consider to what extent it could be applied globally. Over the next few months we will have to think about and have discussion with our board on the extent to which TSM should be applied to the international operations of companies.

I should say that we also have a community of interest advisory panel that provides advice on the TSM initiative. It includes representatives from aboriginal groups, environmental groups, the Sierra Club, and so on, and some mining people as well. That provides an outside check on community interests.

That's our central initiative towards sustainable mining, and we have a significant communications plan associated with it. It's never easy to get these messages out. I think there's always a preference for the more negative stories, but there's certainly a very aggressive effort on our part and on the part of our companies to make progress in these areas.

It's called Towards Sustainable Mining because we're not there. There's always room for improvement. There's always room to move towards more sustainable practices. And certainly those are the principles that are laid out in TSM.

[Jon Baird]

From the prospectors' point of view, there's a similar program. I won't go into it because of the lack of time.

On the communications side, it's hard for industry to communicate these things. You can spend a massive amount of money and not get very much in return. However, at the last mines ministers conference, which was held in Saskatoon in September of last year, the ministers determined that the theme of this year's conference, which will take place in St. John's on the last day of August, will be the industry's image.

I participated here about two or three weeks ago in a working group of civil servants from federal and provincial governments who are looking deeply into this issue. They are preparing all kinds of materials and so on. It's a very interesting study. I'm hopeful that there is something in terms of coordinated communication. Again, it's this balkanization I'm always fighting against, this fragmentation. Hopefully, after the ministers consider this, there will be some form of government and industry coordinated communications plan.

The brand is strong. We are strong. There are some warts on the hog, but generally speaking, Canadian mining....

Did I say a bad word?

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

No, no, it's a great phrase.

[Jon Baird]

All right.

The brand is strong, but our branding, our communicating about it in the world and in Canada, is not sufficient.

[The Chair, Conservative, Dave Van Kesteren]

Thank you.

Mr. Thibeault.

[Glenn Thibeault, NDP, Sudbury, ON]

Mr. Lake, when you talk about regreening, you're welcome to come to Sudbury and see innovation at its finest. We went from a city that once had NASA come to our community to check out how you can drive around on the moon to having regreening.

You know, from playing in pits, one of the first things I recognized, the first time I went out west, was that not all rock was black. Growing up in a mining community, that's what we saw. That's all changing.

With that, I'm going to focus a little bit on innovation. We have mining and supply services. SAMSSA is the Sudbury Area Mining Supply and Service Association. As we like to call it, it's the Silicon Valley of the mining world. Hundreds and hundreds of great companies in Sudbury have the expertise: great companies like, off the top of my head, Herold Supply, Fuller Industrial, and Cast Resource.

And one of the concerns we have with Vale Inco and Xstrata being foreign-owned is that we've just heard recently, yes, they've hired more people, but right now we're losing some of their jobs, especially the buying power, if that's going to Brazil. How is that going to affect the mining and supply sectors in Sudbury and right across the country?

But going to that, I've mentioned before Dr. Greg Baiden from Penguin Automated Systems. He's creating technology that will not only help the oil and gas sector; he's creating technology so we can mine on the moon. There was just an article in the Ottawa Citizen—I would encourage everyone to read that—about his creating technology for remote controls using digital light. It's way beyond my comprehension, but it's great to watch.

So that's what I think is important for us to understand about mining. Innovation will only enhance it. It'll make it greener.

You talk about climate change and innovation in your report here. Companies like Vale Inco and Xstrata and the SAMSSA organizations recognize the importance of innovation, and Xstrata and Vale Inco so much so that they invested, I believe, $5 million apiece into CEMI, the Centre for Excellence in Mining Innovation, in Sudbury. The Ontario government has invested in this initiative as well, to the same tune. Unfortunately, we haven't been able to convince the federal government yet to invest in CEMI or organizations like CEMI—or I believe you have SMIC, if I have your anagram correct.

[Paul Stothart]

CMIC.