Natural Resources Committee on June 1st, 2006

[Gary Nash]

A tax shelter? I'm not sure I can answer that.

Gord, can you?

[Gordon Peeling]

Certainly not in the sense of tax shelters. If you're looking at the cost of the enhanced flow-through share program--and Tony, you might have more information on this--the actual cost of those programs has been quite minimal in terms of tax revenues foregone by the federal government--maybe $40 million to $60 million at best. But I'm not in that particular end of the business, so maybe Tony can bring greater clarity to it.

Is that the tax shelter you're talking about? It's not a tax shelter; it's an incentive to encourage investment in a high-risk area. Since those companies have no taxable income because they are not producing companies, the investor gets the flow-through to other income sources.

[The Chair, Conservative, Lee Richardson]

Mr. Andrews.

[Anthony Andrews]

Mr. Cardin, are you referring to flow-through shares?

[Serge Cardin, Bloc, Sherbrooke, QC]

I'm talking about government interventions as a whole, whether it is in terms of tax benefits, direct investments in various programs, or other activities. Is it also involved in research and development? What is the total federal budget for all the areas affecting the mining industry? I would even go so far as to ask you what kind of taxes and/or royalties are being paid by the mining industry.

I thought that departmental officials would automatically tell us there is money coming in and going out and that they are promoting the mining industry in such and such a fashion. Maybe this is confirmation, in a way, of the notion that the mining industry is almost the poor cousin of both the natural resources industry and the government itself, because you have made it clear today that reserves are declining.

A little earlier, someone said that at the Department of Natural Resources, sustainable development and protection of natural resources are discussed from every angle. That includes mining resources. For all intents and purposes, the goal is to accelerate development.

In the mining industry, what do sustainable development and resource protection mean, both for the government and for the associations?

[Gary Nash]

Ever since the concept evolved, many mining companies have moved into the field of trying to develop guidelines for their own behaviour. They have policies in place now. They have environmental audits. They have what I would call occasional external people doing audits of their environmental performance.

When it comes to the social side, personally I'm not sure how well equipped they are. I'm not that close to it. But I do know of some companies that have become, shall we say, a lot more sensitive to the social aspects. We have a long way to go. In this context, I would tend to agree with some of the comments of our friend from Minewatch, that there needs to be a lot more effort, particularly in developing countries, with some of the companies. They tend to be the smaller companies that don't necessarily have the resources or the wherewithal to be able to do things.

[The Chair, Conservative, Lee Richardson]

Thank you.

Ms. Kuyek, would you like to comment on that?

I'm going to have to wrap it up now.

[Joan Kuyek]

I wanted to respond to the question about taxes and incentives. We did undertake a study with the Pembina Institute in 2001, called Looking Beneath the Surface: An Assessment of the Value of Public Support for the Metal Mining Industry in Canada. It includes a section on certain provinces, including Quebec.

We looked only at metal mining. It was before diamonds were a major factor. We separated it out, looking at various departments and so on. Pembina did the part that they thought would be...particularly metal mining. The subsidy annually was about $561 million.

It's available on our website, if you want to look at it en français aussi.

In terms of sustainable development, we've argued for a long time that any subsidy should be tied to the ability of the industry to deliver environmental and social sustainability indicators and that those should be monitored and enforced from outside the industry. We have a real concern about self-regulation. That's our position on that.

[The Chair, Conservative, Lee Richardson]

It is a study that comes up frequently, the study you did with the Pembina Institute. It's perhaps one we should direct around to the committee, so they can be aware of it, because there are often a lot of questions about it.

[Joan Kuyek]

It is slightly out of date because it was before the commodity boom.

[The Chair, Conservative, Lee Richardson]

Yes. Thank you for that.

I'd like to proceed now to.... I'm sorry, Monsieur Cardin, maybe we can catch you on the next round.

Mr. Bevington of the NDP.

[Dennis Bevington, NDP, Western Arctic, NT]

Thank you, Mr. Chairman.

[Serge Cardin, Bloc, Sherbrooke, QC]

I just want to mention, Mr. Chairman, that my colleague will be taking over for me, because unfortunately, I have to leave now.

[Dennis Bevington, NDP, Western Arctic, NT]

Thank you, Mr. Chair.

I'm interested in the issues surrounding human resource development at the mines, because it is becoming clear in western Canada, now that we do have a serious situation and a shortage of labour throughout the country, that it's impacting on various things.

I note that in your presentation you didn't mention organized labour as a partner with the mining industry in achieving some of the goals of human resource development. I would like you to comment on that and to give me a sense of where the mining industry is going in that regard.

[Gordon Peeling]

Yes, I'd quite happy to.

Labour is a direct participant in the management of the Mining Industry Human Resource Council. They have been a partner in research on the future labour needs, including skilled labour needs, of the industry. They are certainly a partner with us, as we go forward in looking at an expansion of apprenticeship programs and training within the context of mine site and project development and operation.

Even within our sustainability initiative at the Mining Association of Canada, labour is a key participant; they have two seats on our community of interest advisory panel. Most of the issues we deal with have a labour component as a partner in our multi-stakeholder discussions. They are an absolutely key partner going forward, so we can bring to bear a voice from the industry. We look to organized labour to bring forward the organized voice of labour on many of our issues.

[Dennis Bevington, NDP, Western Arctic, NT]

What percentage of mine workers are unionized?

[Gordon Peeling]

I probably can't tell you, off the top of my head, exactly what percentage that would be.

If you look to the two new operations, I know that Voisey’s Bay, owned by Inco, is going to a union operation. I think they're in final negotiations at BHP Billiton Diamonds at the Acadie site. So it may well depend on the particular circumstances of the individual operations.

[The Chair, Conservative, Lee Richardson]

Ms. Kuyek, did you want to comment briefly?

[Joan Kuyek]

Just very briefly, to say that older mines historically tend to be unionized; most of them are. Of the newer miners, there's a huge fight going on in two places right now over the first contract, and it's certainly a very difficult issue. One is with a Canadian company and another with a company from outside Canada. In terms of the junior sector, I don't think there's any unionization because the operations, as Mr. Andrews said, are small.

[The Chair, Conservative, Lee Richardson]

Thank you.

Mr. Bevington.

[Dennis Bevington, NDP, Western Arctic, NT]

On that topic, do you want me to move on, or should we continue the round?

[The Chair, Conservative, Lee Richardson]

No, you've got another couple of minutes, if you want.

[Dennis Bevington, NDP, Western Arctic, NT]

I would like to touch on the diamond industry. My concern, as with a colleague here, is with the ability to maximize return to the Canadian economy from the diamond industry. I see your chart here, where it's 4%. Of course, in this chart you include the oil sands. I think if you take them out of the equation, the diamond mines right now, in the traditional mineral sense, with two more mines coming on stream in the Northwest Territories and one in Ontario, are going to be a very large chunk of the mining sector in Canada. We had the previous Liberal government working on a national strategy for diamonds, which really didn't amount to much.

You mentioned Aber Resources. Yes, they're in a good position, because they negotiated their arrangement and ownership in terms of supply of diamonds. We also have Tiffany up there, which is more advanced in terms of bringing on a jewellery industry.

So I think there is a real need to re-examine the national strategy on diamonds. I don't think it went anywhere, and it needs to be carried forward.

Perhaps you want to comment on that.

[Gordon Peeling]

Certainly that's a live issue, as Mr. Nash has indicated, that we expect a number of provinces, particularly Quebec, will be bringing back to the discussion at the mines ministers conference.

It's a bit unfortunate that the previous effort to develop a national strategy was done first in isolation of the federal government, and you may recall that such issues as the Kimberley Process are a federal government responsibility for ensuring that we don't contribute to the blood diamond process, etc. So there are certain global initiatives that go to the heart of the responsibilities of the federal government. Consequently, in any re-examination of a national strategy, the federal government, in our view, has to be an equal partner in that process.

That being said, the real opportunity is in the future, because we will indeed have more diamond production in this country. We're already the third largest by value in terms of production. The ability to achieve further value-added is probably down in the jewellery end of things. We do have some cutting and polishing in Vancouver and we do note the Tiffany connection and Aber Resources' success in this area, and perhaps less success on the part of some of the operations in the Northwest Territories supported by the NWT government, at least to date.

The difficulty in all of this is how you do this without disrupting the normal customer connections that companies have, and how you manage this in a manner that will create the economic efficiencies and opportunities that are going to be sustainable, as opposed to subsidized and unsustainable. That's the key to this, and I'm sure those will be key questions in front of any future national diamond strategy discussion.

[The Chair, Conservative, Lee Richardson]

Thank you for that, and thank you, Mr. Bevington.

Maybe that's a policy question we may want to direct to the minster when we have the minister appear before the committee a week from today.

I'm going to move on now to Mr. Allen.