Natural Resources Committee on June 6th, 2016

[Michael McLeod, Liberal, Northwest Territories, NT]

This is one way to do it, but at the same time, it really makes me nervous when somebody almost pushes the environmental concerns to the side.

What has been the reaction to your group's work from other governments? I heard you mention Premier Clark. B.C. has an LNG strategy. Have you been in contact with them? Are you working with them? Are you part of the process? I don't see your group in their website anywhere.

[Alan Yu]

No, sir. The only time our paths crossed with the provincial government was when Christy Clark came to us. She joined our people's rally when we were showing support publicly for LNG. She took notice of our organization for that event and she flew in. That was the only time, and I have not been in contact with her. I was hoping she would give a shout-out on our efforts, when we travelled 4,500 kilometres over eight days, but it never did happen, sir.

[Michael McLeod, Liberal, Northwest Territories, NT]

You mentioned that you had 90% support from the aboriginal governments in the area. I've heard that some bands are in favour and some are not. What do you use as a measuring stick to measure that 90%? Do you have band council resolutions that you can point to?

[Alan Yu]

It's the very recent Nation2Nation in the news, sir. It came out, I think, today or yesterday. This is from a meeting that happened June 2, a two-day event in Kitimat. Premier Christy Clark was there, along with several first nations. I'm getting that from the news, sir.

[Michael McLeod, Liberal, Northwest Territories, NT]

You got an indication from the aboriginal governments that were at the meeting. Everybody was there; was everybody represented?

[Alan Yu]

I'm not privy to that information, sir, but when I said 90%, I got that from the news. It's a press release, sir, I think just today. I think I just read it today, sir. It's called Nation2Nation.

[Michael McLeod, Liberal, Northwest Territories, NT]

Okay.

I have one final question.

[The Chair, Liberal, James Maloney]

That's all you have time for.

[Michael McLeod, Liberal, Northwest Territories, NT]

Do you deal directly with any of the first nations? Do you yourself or your organization talk specifically with any of the first nations?

[Alan Yu]

Just with the Haisla Nation and Chief Ellis Ross.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you.

[Alan Yu]

Thank you very much, sir.

[The Chair, Liberal, James Maloney]

Thank you, Mr. Yu, for coming today. We appreciate the time, especially coming all the way to Ottawa to advance your case. We appreciate it.

I'll suspend the meeting for three minutes while we set up for the second session.

[The Chair, Liberal, James Maloney]

Good afternoon.

We're going to get moving on the second hour. We have less than an hour to cover a lot of ground.

I want to thank you all for coming. I was going to make a long introduction, but in the interests of time—we're down to about 50 minutes—I'm going to save the individual introductions, if that's okay with our guests today. I'll just say thank you very much for coming. There's a number of your colleagues who are behind you who are here to answer questions afterwards, and we're very grateful.

I'll turn it over to you. You can have the floor for 10 minutes, in any format or sequence you would like, then I will open the floor to questions.

[Marian Campbell Jarvis, Assistant Deputy Minister, Minerals and Metals Sector, Department of Natural Resources]

Thank you very much, Mr. Chair.

I greatly appreciate the chance to be here. Thank you for allowing me to speak to you.

I will give you a bit of background on the Canadian minerals and metals sector, on some of its challenges, and on the innovation imperative, as I understand the committee's study will focus on innovation in the natural resources sector.

With regard to a bit of context, I'd like to say that mining is a long-term and risk-filled business. From 1,000 exploration projects, it is quite likely that only one discovery will go on to be a constructed and operating mine. The work to get there can take decades and requires significant investments, often in the billions of dollars before any revenue or profit is generated.

If you'd like to turn to slide 2, “ Minerals matter for Canada”, mining is essential for day-to-day living. Minerals and metals are used in everything from toothpaste and face cream, to iPhones and wind turbines, to aerospace and housing. Indeed, beyond the essential day to day, what we are also seeing is that mining's inputs are becoming ever more critical for advanced manufacturing, high technology, and innovation.

Mining has a direct impact on the economy. In 2015, mineral exploration and production generated $60.3 billion for the Canadian economy. That's equivalent to 3.2% of Canada's GDP, and 19.1% of Canadian exports.

In 2014, there were nearly 1,700 exploration and mining companies headquartered in Canada. With global mining assets totalling nearly $260 billion, beyond production, beyond the actual mine site, the ripple effect of mining is considerable. It's significant, from supplies and equipment to services like insurance and finance. For example, in 2015, $15 billion was expended for new capital and equipment. It is said that for every $1 billion of output in the minerals and metal sector, the direct demand for goods and services in Canada increases by $615 million.

More than rocks, mining's impact on communities and jobs, particularly those in rural and remote parts of the country, is considerable. Nearly 380,000 Canadians are employed in the sector, and that includes 10,000 indigenous Canadians, who account for about 8% of the mining industry labour force, more than double the all-industry average representation of 3.4%.

Canada is known globally for its expertise and presence in mining. In 2014, Canadian companies were operating in 105 countries around the world. To put that in context, the United Nations recognizes that there are 193 nations, though Canadian companies have a presence in 105 of those 193.

On slide three, we can see there is most likely activity related to mining in almost every riding and constituency across Canada, in rural and remote areas, but also in urban areas through financing, insurance, and research and development activities.

Now let's look at slide four. It's important to see that mineral development encompasses everything from the geologist with boots on the ground, surveys by helicopter, advanced chemical surveys, and financial and economic analysis, to construction, mining itself, operations, processing, smelting and fabrication, and closure and remediation.

Canada is active across this whole value and supply chain, with individuals and companies providing services, conducting operations, and providing equipment and supplies at each stage.

I would like to touch on some of the challenges facing Canada's minerals and metals sector. The challenges are twofold. The first is the economic competitiveness of Canadian operations and maintaining an attractive investment climate, and the second is one of social acceptance, environmental performance, community involvement, and a sense of shared benefit and risk.

Looking a bit more at the economic competitiveness, I think everyone appreciates that it's a cyclical industry, and right now we're in a low cycle. Since 2011, the price of copper has dropped by 25%, iron ore by 35%, and gold by 11%. Looking more into the future, one of the larger concerns is that of declining ore grade. What this means is that many of the easily accessible reserves have been utilized. For example, over the last three decades, known zinc reserves have fallen by 86%, and known nickel reserves by 63%. Nickel is a key ingredient in stainless steel. Now mining companies need to go deeper, operate more remotely, or mine at lower grades. In other words, they need to compensate for a lower percentage of a valuable commodity by mining a greater tonnage of rock.

All of that increases the costs to operate. In Australia, there was a study on multi-factor mining productivity, and it showed that 40% more input was required to produce the same output as a decade ago. Other countries' mining sectors are maturing, and some competitor countries, for example, Australia again, have lower shipping costs to the closer, fastest-growing economies of China and India.

We can see the impact on mines. Since 2015, 14 mines were suspended or closed in Canada, while five opened. For the long term, in terms of the future pipeline of mines, the grassroots exploration sector has been the hardest hit. Investment declined from a high of $2.8 billion in 2011, at the peak of the super cycle, to an expected $683 million this year, 2016. The number of exploration companies has dropped from a high of 911 companies in 2012, and it's now projected that 431 project operators will have merged, become dormant, or ceased to exist by 2016.

Innovation is critical to the future. Lowering costs, increasing productivity, and strengthening environmental performance are critical to address these challenges. While some see mining as old-fashioned—after all it has been done for the last 3,000 years—and as a bucket and shovel dirt industry, this view misses the continuously evolving high technology nature of the sector. For example, robotics, engineering, and genomics are all under way in mining, but there are challenges, and there are issues.

Over the last decade, most innovation has centred on site-specific challenges, such as processing efficiency, and is undertaken mine project by mine project, rather than as a transformative endeavour across the whole industry. The cyclical nature of mining, the long time frames, and high capital costs—some mines have capital investment of upwards of $5 billion—make the industry risk-averse to adopt unproven technologies or processes. It is often said that in mining you want to be the first to be second.

Research efforts in Canada are currently diffuse and collaboration is not fully mature. The Canadian Chamber of Commerce has estimated there are 4,000 R and D programs and 40 different mining innovation research organizations in Canada that are not necessarily connected. Peer countries are investing more in innovation and in mining innovation. For example, the favourite comparator, Australia, has a centralized funding model leveraging 47% of its $86-million annual program. Australia has invested more than four times as much in research and development than Canadian firms, which has led to a growing gap in research competitiveness and technology uptake over the last decade.

We'll turn to slide 7, “Emerging technologies can have a significant impact”. Energy, water, and waste are the areas of greatest challenge and opportunity to increase competitiveness and to reduce environmental impacts and improve performance. Many mines operate off grid, and renewables and energy efficient technology offer the potential for cost savings, reducing emissions, and improving productivity.

In many cases, the technology exists already. The challenge is in demonstration, verification, and the cost of capital, particularly retrofitting, to support commercialization and adoption.

Mining innovation will not come from developing technology alone but from a broader industry-level systems model and process approach that builds platforms and integrates technology, data, and information—the so-called Internet of things—and has the greatest potential for transforming the mining industry.

Lastly, successful innovation is built on collaboration and partnership. Getting from a project-by-project approach to more of an industry-wide transformative approach and de-risking and accelerating innovation will require governments, universities, and industry—in other words companies, suppliers, associations, and certainly other sectors—to partner and leverage efforts.

Our department, Natural Resources Canada, through our green mining initiative and CanmetMINING laboratory, works in partnership to improve the environmental performance and productivity of mineral development in Canada.

Thank you.

I look forward to your questions, Mr. Chair.

[The Chair, Liberal, James Maloney]

Thank you very much for your presentation.

I'll turn the floor over to Mr. Serré.

[Marc Serré, Liberal, Nickel Belt, ON]

Thank you, Mr. Chair.

Thank you so much for the presentation. It was very insightful and very condensed and to the point. I really appreciate the work you and your staff have done in the mining industry over the last few years, and actually decades.

My first question is more of a comment—you alluded to it earlier—about Australia. We've spent about $500 million in Canada on research and innovation, which is down in the last few years from about $800 million. Australia spends about $2.8 billion, as you mentioned, which is about four times more. You mentioned that already, so I'm going to change my question.

Have you done a report, a matrix? If we were to match Australia's model of investment in innovation and research, what jobs would that produce? What type of industry would change here in Canada if we were to invest as Australia has? Do you have something on that? If you don't, is it something you could produce? That's my first question.

[Marian Campbell Jarvis]

Thank you very much for the question, Mr. Chair.

To respond to that, it has proven to be very complicated to compare apples to apples with Australia. We have not undertaken or been able to do what you're asking, although it's a good question.

The Canada Mining Innovation Council may be a good source of information for that kind of work.

[Marc Serré, Liberal, Nickel Belt, ON]

We could follow up to see if we can get those numbers.

Also, the Ontario government commissioned a report from KPMG that was released to the Ontario government in January 2016. The research study was on innovation and research and how you can build support for the mining industry specifically in Ontario. The Government of Ontario hasn't responded to that report yet.

First, do you have a copy of that report or that study? Is there a way to build upon that study to look at a Canada-Ontario agreement for best practices in innovation and research, so that we could look at sharing collaboration and best practices for all provinces? Moving forward, is there a possibility of taking that report and seeing if we can have a Canada-Ontario agreement on innovation and research in mining?

[Marian Campbell Jarvis]

Mr. Chair, I'm not sure that I have a copy of the report the member is referring to, although I am aware of a study by the Ontario Mining Association. The Government of Ontario is looking at that.

What may be of interest is some work that we do federally and provincially through the intergovernmental working group on mining. We have a subcommittee that works on green mining innovation. This committee has done considerable work in looking at regulatory barriers. We have verified a green mining technology. We've exchanged best practices of efforts under way.

All of that work is actually publicly available on the website that supports the energy and mines ministers meetings through what I believe is called CICS, through that secretariat. There is a website. I'd be happy to provide that link to the committee, if it's of interest.

[Marc Serré, Liberal, Nickel Belt, ON]

It would be great, Mr. Chair, if we could get that link. Thank you very much for that.

The Ontario government, the Ministry of Northern Development and Mines and the Ministry of Aboriginal Affairs, recently funded a study with MIRARCO, $5 million for two years, with first nations communities and the provincial government looking at first nations and mining. Do we have any funding proposals or projects that link our two federal departments, NRCan and Indigenous and Northern Affairs, to look at also funding opportunities for those two federal departments to then help or complement what the Ontario government is doing, related to first nations?

[Marian Campbell Jarvis]

There's an initiative in which we've partnered with Indigenous and Northern Affairs that is supporting the adoption and development of green mining technologies among first nations communities. That effort is really looking at wanting to support indigenous communities in monitoring the environment, developing baseline data, and doing some of the tracking thereafter with technology. That's the program I know of that's under way with the Department of Indigenous and Northern Affairs in partnership with CanmetMining at NRCan.

[Marc Serré, Liberal, Nickel Belt, ON]

Thank you.

You talked about clusters in your presentation, so that's great. Moving forward, when I look at innovation and research in clusters, Professor Potter from Harvard University has talked at great length, especially about the mining and the clusters and having the R and D innovation clusters close to the actual private sector developments, and actually relocating some of those jobs that are in major cities.

When we look at geology jobs and when we look at the jobs in Toronto and in Ottawa on geology, and when we look at the future of clusters and having the clusters close to mining centres, and I'll use the example of my hometown of Sudbury, Ontario, would it make more sense to look at those geology jobs that are in Toronto and Ottawa being closer to the private sector when you look at the clusters and the R and D and the research that is linked to getting the product to market and the private sector and how many jobs that represents?

[Marian Campbell Jarvis]

Mr. Chair, in terms of the question about clusters, the committee may be interested to hear that at CanmetMining, our labs are located in two of the most mining innovation clusters in the country, the first being Sudbury, which has been likened to being the Silicon Valley of mining, and our CanmetMining lab has one location there and is able to partner with MIRARCO and CEMI and Laurentian University.

We also have a lab in Val-d'Or which is known as really the logistic staging ground for mining in Quebec. Also, our Canmet materials lab was recently relocated in the last few years down in Hamilton to be part of that innovation hub anchoring McMaster University, kind of in the steel-making heart of the country. We have been wanting to be part of those clusters and we're very much an established presence there.

On the question about the number of jobs, I would have to access a little more precision and come back to you on that.

[Marc Serré, Liberal, Nickel Belt, ON]

I would appreciate that. Thank you.