Evidence of meeting #23 for Natural Resources in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was process.
A recording is available from Parliament.
8:50 a.m.
Liberal
The Chair Liberal James Maloney
Good morning, everybody. I apologize for starting a few minutes late, but we had some geographical challenges to deal with this morning. Here we are.
Mr. Austin and Mr. Beaty, thank you very much for joining us today.
We'll give each of you up to 10 minutes for a presentation and then turn it over to the committee members for questioning.
I'll turn it over to the two of you. You can decide who will go first, if you haven't already.
8:50 a.m.
Chairman, Pan American Silver Corp.
Thank you very much, Mr. Chairman.
Good morning, and thank you for giving me the opportunity to make these comments today.
By way of background, I have personally worked in the minerals industry both in Canada and internationally for nearly 47 years now, since my very first job exploring for copper and gold in northern British Columbia in 1970. Along the way, I have founded 14 Canadian mineral resource companies and one clean energy company. Four of these companies exist today, all public companies on the TSX, and 10 have been sold off to larger resource companies.
My career has taken me across Canada and around the world. I've worked in over 50 countries and have current projects in 18 countries. For example, one of my companies, Pan American Silver, which I founded in 1994, is now the world's second largest primary silver mining company, with 7,000 workers employed at seven operations in Mexico, Peru, Bolivia, and Argentina. Our head office is in Vancouver.
For some context in discussing government involvement in our business, here are a few things. I guess it's kind of motherhood, but I thought I'd start with reminding us all about those.
The first is that mining is a cyclical industry. It is governed by global turns in business cycles. There is nothing government can do about that, but companies know this. Well-managed companies know that cycles exist and plan accordingly. Poorly managed companies don't, so when markets turn and they get into trouble, governments should be loath to step in. Markets do this well.
Second, mining companies are price-takers. Revenues are set by world markets and global demand. Government policies typically cannot improve gross revenues, but they can hurt gross revenues when, for example, applying taxes like royalties that are revenue-based. These kinds of taxes are regressive and decrease production and mine life. Everybody loses.
Third, mining companies can typically do little about costs as well. Mining costs are largely set by the unique nature of every mineral deposit: its grade, tonnage, location—deep or shallow, for example—geometry, and complexity. It's true that a great management team can make a mine more profitable than a bad team can. It's also true that enlightened fiscal and regulatory conditions in one jurisdiction can make a mineral deposit profitable, while less attractive conditions in another jurisdiction will make the identical deposit unprofitable.
Canada has world-class mining and exploration industries. These are different businesses. Exploration, although it's part of mining, is quite different from mining. They are run differently, by different people with different kinds of agendas, typically.
Both of these industries, though, are thriving, and Canadians should be really proud of what we have today. In both of these industries, we are world leaders. Canada and Canadian companies have an outstanding reputation globally for best-practice environmental standards, technology, health and safety programs, corporate social responsibility practices, and honest dealings.
Mining is one of Canada's centres of excellence. This expertise includes mature and deep capital markets that supply risk capital to Canadian companies, healthy and well-regulated public markets, engineering and technology leadership to world projects, strong accounting and legal support teams across Canada, and, increasingly, expertise in corporate social responsibility programs. We are good at this because we have had great government support to all these programs for many decades, and because government has largely let the mineral resource industry look after itself within societal norms, which of course change over time.
I am not a big fan of government trying to do things that aren't needed. Our industry is not broken, and it does not need fixing. We don't need the endless bureaucracy and obstacles to fix non-problems. For example, a few years ago there was a ridiculous debate here in Ottawa about Canadian mining companies working overseas doing allegedly unethical activities. I know what's going on internationally. I have been doing that most of my career. The problem was minuscule—high-profile, but minuscule in actuality—but the proposed solution in that bill would have created all kinds of wasteful and unnecessary procedures that simply would have hurt the good players, which most companies are, while doing very little to solve the problem. I'm very glad it was defeated, and I hope that kind of ignorant action doesn't resurface any time soon.
Having said that, there are some areas the government can help with, and one of them is education and training. Obviously, Canadian industry benefits from a well-trained workforce, and this needs to be given constant attention. Great graduates create great companies.
Government support for new technology and innovation should continue; it's critical to helping our industry survive the future. Weirdly, the mining industry in Canada has not innovated nearly as thoroughly as many other industries have. Exploration and mining technology is little changed from that of about 50 years ago, even 100 years ago, other than in certain areas like heap leaching, for example. But future mines will be deeper and lower grade and therefore higher cost, unless we are able to reduce costs through innovation. For example, remote mining methods, robotics, more digital technology, better waste management, and more efficient energy sources and uses are needed.
Now I'll say a few words about first nations, and generally speaking, gender and ethnic diversity in our industry. This is motherhood, but I think it is important for you to understand my perspective on this.
The problem in our first nations communities in Canada is profound, but I think the mining industry is helping to improve things in this area. Every single mine in Canada, and many exploration projects, active or proposed, has a program to involve local first nations communities. This doesn't need to be forced on industry by government; it's happening because it's good business. Government should focus on helping with basic education and health initiatives, and not get involved in creating the specific programs that burden the minerals industry with unnecessary regulations.
The same can be said for gender diversity and ethnic inclusion. It's true that mining has been a male domain for many decades, but things are changing quickly today. You will see a very different mix of gender and ethnic diversity in just a few years as young women and people of different ethnic origins enter the mining workforce in Canada from universities, where they are so well represented.
Regarding the environment, environmental protection is an area that obviously does require strong government oversight. Waste management, land use, protection of biodiversity, reclamation practices, and energy use are all important areas where government review is essential. It cannot be left to mining companies. Tailings dams in particular are the Achilles heel of the mining industry and need strong government involvement to ensure proper design, proper operation, and proper decommissioning. In the rare event that tailings dams fail, it creates Herculean problems for absolutely everybody. We have to be more and more attentive to this; we cannot afford a single.... For me it's like an airplane crash: it's such a disaster, and it's typically something that can be prevented. This is one area where I encourage more government scrutiny.
Another area is sustainability. Sustainable mining, of course, is an oxymoron. Mining is non-renewable; sustainability implies something permanent. But mines can create more sustainable communities in creating safe and clean working practices, maintaining as healthy a natural environment as possible, and partnering successfully with employees, contractors, communities, and governments. Properly done, these will create a stronger educational, economic, social, and natural environment that will persist long after mining ceases.
This needs plenty of government support, especially in ensuring mine reclamation is properly bonded and executed. For example, I see worrisome reclamation practices in the oil sands, which is fundamentally Canada's largest mining operation. I fear that a big mess will be left there if oil companies are unable financially to reclaim the vast areas impacted by mining. We can do better there, but you cannot rely on companies to do it without big involvement from government.
There are some areas of special concern to me. One is water extraction, use, and recycling. Another is attention to loss of biodiversity at mine sites. Applying an economic value to natural capital in assessing the impact of mining will help quantify the loss of natural lands and the mitigation needs.
With liquid, gas, and solid-waste management, a stronger focus is needed on creating less waste and ensuring zero discharge.
For energy use and intensity, the use of renewable energy needs to be a priority where possible, especially when alternative energy sources are fossil fuel based. To support this, a cost must be applied to mine emissions that harm society at large, and the best example is carbon pollution. Carbon pricing is the best and most transparent way of applying a price on pollution and encouraging innovation to reduce emissions.
To conclude, I support government action in maintaining the building blocks that have made our industry strong and that will keep Canada's minerals industry strong well into the future. Our world-class education facilities, capital markets, fiscal policies, and environmental health and safety policies will ensure we remain world leaders in this business sector. We're world leaders respected not just for our technical expertise and market strength, but also because we're doing the right thing for humanity and for the myriad creatures on earth that give us fresh water and clean air. If we do that, we can build a sustainable industry and a greater country.
Thank you.
9 a.m.
Manager, Government Relations, Cameco Corporation
Thank you.
Good morning, Mr. Chair and members of the committee. It's my pleasure to appear here this morning on behalf of Cameco Corporation. My name is Dale Austin. I am Cameco's manager of government relations.
In my remarks this morning, I'd like to provide a brief overview of, first, Cameco and our operations; second, our successful and long-standing relationship with the indigenous and northern Saskatchewan partner communities that support our operations; and finally, the role of innovation and trade in the success of our business.
Headquartered in Saskatoon, Saskatchewan, Cameco is one of the world's largest producers of uranium for nuclear energy, accounting for roughly 18% of total global production. The vast majority of that production comes from our extensive mining and milling operations in northern Saskatchewan. We also maintain production sites in the United States and Kazakhstan. In addition, we own uranium refining, conversion, and fuel fabrication facilities in Blind River, Port Hope, and Cobourg, Ontario. We are the sole provider of these conversion facilities for Canadian CANDU reactors.
Through these activities, Cameco employs a total Canadian workforce of about 4,000 direct employees and long-term contractors, a significant number of whom are indigenous residents of northern Saskatchewan. I'll expand on that a little more in a moment.
Cameco's vision is to energize the world as a global leader of fuel supply for clean air nuclear power. Our mission is to bring the multiple benefits of nuclear energy to the world. We play a big part in the energy equations of many countries, including here in North America, where Cameco uranium powers roughly one in every 10 homes in Canada and one in every 19 homes in the United States.
Now that you know a little bit more about Cameco, I'd like to spend a few minutes discussing our indigenous partnerships and the role they play in the success of our company.
Indigenous engagement and employment have been a priority for Cameco since our company was formed in 1988. Our success depends on the long-term, positive partnerships we have built with first nations and Métis communities where we operate, particularly in northern Saskatchewan. We are proud to be Canada's largest industrial employer of indigenous people, with nearly one-third of our total Canadian workforce being composed of individuals of first nations or Métis heritage.
Cameco's indigenous partnerships are a leading example of how the private sector can engage directly with local stakeholders to ensure that a company's success and a community's success are intertwined.
These partnerships have led to over 70% of all of the goods and services we use at our operations in northern Saskatchewan being procured from northern or aboriginal-owned businesses, totalling more than $3 billion over the past decade.
Resource development is often cited as the best way to improve the socio-economic situation for indigenous Canadians, yet project approvals are becoming more difficult to obtain. New projects in Canada's north, where they have the support of local communities and can tap into the expertise of indigenous Canadians, in our view are the most direct way to long-term improvements. Cameco supports further investments, both public and private, in Canada's north that will increase opportunities for indigenous Canadians to live in their home communities and access educational and economic opportunities.
Moving on to a new topic, if committee members are looking for suggestions as to what government and industry can do today to create a strong foundation for future growth, then Cameco would recommend infrastructure investments in remote northern communities, rational regulatory processes that facilitate development, and finally, trade promotion in emerging markets.
As I stated, the majority of Cameco's mining and milling operations are situated in northern Saskatchewan. Because of the remote location of these facilities and the general lack of supporting infrastructure—transportation, aviation, electricity, telephony, broadband—our cost of doing business is considerably higher than that of our competitors, putting Cameco at a disadvantage. This situation is similar for other companies operating at remote sites.
Improved infrastructure would increase the global competitiveness of our industry and open opportunities for development in the north, resulting in significant economic and social benefits for all Canadians.
Canada's resource wealth has long been a major driver of the country's financial health, socio-economic well-being, and job creation efforts. Canada's present fiscal challenges serve as a reminder of the important impact on Canadians when the natural resource sector is not firing on all cylinders.
The current depressed state of the uranium market mirrors the situation for most other commodities. The spot price of uranium today has sunk to roughly $25 a pound, about half of what it was five years ago. While the uranium industry does not garner as much attention as the oil and gas sector, the impact of lower prices for a longer period of time similarly results in reduced employment, investment, and exploration.
Canadians must also have confidence that economic factors do not trump environmental or social considerations when it comes to development. With a foot in both the mining sector and the nuclear energy sector, Cameco operates under an extremely robust and thorough regulatory regime that is based on scientific evidence. We welcome this high degree of regulatory oversight, since it helps to assure the communities where we operate that our operations are both safe and responsible.
Canada's economic prosperity is, to a significant extent, linked to our ability to responsibly and sustainably develop and export our abundant natural resources and value-added products. Canada's regulatory and environmental assessment processes should ensure that resource projects proceed safely and with minimal impact on the environment, rather than being used as an instrument to delay or cancel projects.
Canada's uranium mining industry, and the nuclear industry as a whole, is positioned to be a world leader for decades to come in both domestic and international markets.
In recent years, Cameco has finalized sizable uranium supply agreements with two Chinese utilities and our first ever sales contract with India. Commercial trade with China and India, as with many developing countries, is considerably different from what it is with Canada's traditional export markets, like the United States and western Europe. Government-to-government relationships are incredibly important to getting business done in these countries.
A targeted strategy focused on Canada's nuclear industry to promote nuclear trade and investment with developing nations, particularly China and India, given their ambitious plans to build new reactors and meet their growing electricity demand, would be extremely beneficial.
Even though this portion of the committee's work is focused on the mining sector, I would be remiss if I did not spend a couple of minutes discussing the nuclear sector as well.
As a company that mines uranium, we have our feet firmly planted in the mining, energy, and nuclear sectors. Canada's nuclear sector remains a global leader in uranium production, technological innovation, and electricity generation. Nuclear energy has a significant role to play in addressing global climate change. Current use of nuclear energy worldwide helps the planet avoid some 2.5 billion tonnes of carbon dioxide emissions every year, if the same amount of electricity were produced using fossil fuels.
In Canada, roughly 60% of Ontario's electricity mix comes from nuclear power, enabling the province to become the first jurisdiction in North America to successfully phase out coal-fired power, using strictly Canadian reactor technology.
This is a major contribution to global greenhouse gas reduction efforts, of which our company is extremely proud, facilitating the generation of clean, carbon-free baseload electricity that in most instances would otherwise be produced using greenhouse gas-emitting sources.
Cameco's leadership position in this industry is even more noteworthy, considering the bulk of our competitors are either state-owned enterprises or backstopped by the public treasury, or are multinational mining conglomerates for which uranium comprises only a small fraction of their balance sheets.
As the committee considers input to its report on the future of Canada's oil and gas, mining and nuclear sectors, we would ask that it continue to recognize the contribution that nuclear energy and all products along the nuclear value chain make toward our goal of cleaner air and a low-carbon economy.
Thank you for listening. I look forward to your questions.
9:10 a.m.
Liberal
The Chair Liberal James Maloney
Thank you very much, Mr. Austin.
I'll turn it over to Mr. Lemieux for the first round of questions.
9:10 a.m.
Liberal
Denis Lemieux Liberal Chicoutimi—Le Fjord, QC
Thank you, Mr. Chair.
Thank you, of course, to the two witnesses.
My first questions are for Mr. Austin.
Last week, the president of the mining association of Canada explained to our committee how the 39 members of the association adhere to four principles. The first principle is sustainable mining. The second principle is the commitment to maintaining a good relationship with the first nations. The third principle is biodiversity protection and conservation. Lastly, the fourth principle is the implementation of an exemplary energy and greenhouse gas reduction management system.
Is the Cameco Corporation inspired by those principles?
9:10 a.m.
Manager, Government Relations, Cameco Corporation
Thank you very much for the question.
Yes, I would say that we are inspired by those four principles. They align very closely with the principles of how we operate, including safety, workforce development, community engagement, and respect for the environment. We are members of the Mining Association of Canada, and we support their activities in these areas. Yes, we are inspired by the work the Mining Association of Canada is doing, and support them in their efforts.
9:10 a.m.
Liberal
Denis Lemieux Liberal Chicoutimi—Le Fjord, QC
Can you tell us how the Canadian government could help you improve those four principles?
9:10 a.m.
Manager, Government Relations, Cameco Corporation
As Mr. Beaty said in his remarks, we believe there is not that much wrong in the mining sector in Canada. In many ways, we have a long-standing, good relationship with our indigenous communities on environmental approaches. We believe that, as the current government has stated, environmental processes based on scientific evidence and results of those processes—decisions are taken based on the result of scientific evidence—would go a long way to improving the certainty of outcomes.
In many cases, it is the uncertainty of the outcome that is the challenge for us. We are in one of the most heavily regulated sectors in the economy. We appreciate the need for that regulation. We are looking, as are many other companies, for certainty with respect to process. With that certainty in respect to process, we believe there will be certainty with respect to outcomes, as well.
9:10 a.m.
Liberal
Denis Lemieux Liberal Chicoutimi—Le Fjord, QC
Mr. Austin, I have another question for you.
Last week, the president of the mining association of Canada explained that the Canadian mining industry is no longer as competitive as it used to be. Do you share this concern? If so, why?
9:10 a.m.
Manager, Government Relations, Cameco Corporation
That's an interesting question.
I would say that we are as competitive as we can be, given the circumstances. Commodity prices in our industry have taken a toll on our ability to explore and look at new contracting opportunities. All of that is to say that it has focused our need to look at cost savings and to look at the efficiency in our processes.
Are we as competitive as we could be? I would say, no. There is always room for improvement, but we see our industry on sound footing compared with our global competitors. That would be my answer. Is there room for improvement? Yes, I believe there is, always. If we are, as Monsieur Gratton says, less competitive, I would say it is a minor issue.
9:15 a.m.
Liberal
Denis Lemieux Liberal Chicoutimi—Le Fjord, QC
You said that Canada's regulatory and environmental assessment processes should ensure that resource projects proceed safely and with minimal impact on the environment rather than being used as an instrument to delay or cancel projects. Can you elaborate on that last point?
9:15 a.m.
Manager, Government Relations, Cameco Corporation
Certainly. We believe the regulatory system in Canada is one of the strongest in the world. It provides certainty for citizens and for companies that the process will be based on scientific evidence.
What we are seeing not only in our sector, but also in other sectors of the economy is the ability for information and groups that have a particular point of view to usurp the process and extend the timelines beyond what we believe are feasible.
There is an opportunity, and there should be an opportunity, for all Canadians to have input into the regulatory process. We would like the decisions to be made on scientific fact and a process that is bound by timelines. We are looking for certainty in the regulatory process. It allows us to make capital decisions with the knowledge of timelines we are going to work to, and that is the point. Oftentimes we see—and certainly I believe—that the processes are becoming drawn out, and a number of factors other than scientific evidence are being taken into account.
9:15 a.m.
Liberal
Denis Lemieux Liberal Chicoutimi—Le Fjord, QC
I would like both witnesses to answer my next question.
What priority decision should the Canadian government make to help the mining industry maximize the benefits of the next economic upturn in the mining sector, or, in Pan American Silver's case, to help it invest in Canada?
9:15 a.m.
Chairman, Pan American Silver Corp.
We're not in a bear market anymore. The mining industry went four or almost five years in a downturn, and that pretty much ended in January this year. Certainly gold and silver prices have gone up 30%, and most precious metals companies have raised a lot of capital that they needed to, and they're making money again.
I think this is going to be another long-term trend. This is, again, one of these cyclical turns that we see. This is a fact of our industry, and it has been forever. Some members of the base metal industry and the ferrous metal industry are in trouble. Iron ore is in trouble, and coal is in trouble; at least thermal coal, which makes electricity, is pretty much a dead business now. On coking coal, prices have doubled or tripled in the last few months, so all of a sudden the companies like Teck that were in trouble are now really doing well. This is how quickly things change.
As I said, I think that's just a natural part of our business. Good companies manage their business accordingly, and bad companies don't, and that presents opportunities, challenges, and advantages.
These are things that government really can't do much about.
9:15 a.m.
Liberal
The Chair Liberal James Maloney
I'm going to have to stop you there because there are time restraints.
Ms. Stubbs.
9:15 a.m.
Conservative
Shannon Stubbs Conservative Lakeland, AB
Thanks to both of the witnesses for taking the time to be here and for the presentations.
We heard earlier in the committee that Saskatchewan is the best place in Canada in which to invest in mining and mining development, so I'll focus my questions with you, Mr. Austin, since your operations are headquartered and primarily in Saskatchewan.
I would like to get a little more into this issue around certainty in the regulatory process. You've articulated and echoed commentary from other representatives about how important it is for capital planning, and I have noted your comments about the need for a rational regulatory process that facilitates development. I also note that, in your view, the regulatory system in Canada is the best in the world and is robust, thorough, and based on scientific evidence.
I know my colleagues believe that these processes shouldn't be used as an instrument to delay or to cancel projects. I think that, as members of this committee, we're all seeking ways that government can either streamline or improve fiscal and regulatory policies to help facilitate development because of the prosperity and the jobs that responsible natural resources provide.
The Liberal government does continue to talk about launching a review of the Canadian Environmental Assessment Agency. That was said as recently as Tuesday by the Parliamentary Secretary to the Minister of Environment in the House of Commons. I wonder if you've heard anything about that or if your association has heard anything about that. The comments that we've heard publicly are that the public consultations of the review process were supposed to start in September, and the new process is supposed to be in place by January. I don't know if you or the association to which you belong have heard anything about that from the government or have been in consultations on that review.
I wonder if you might talk about the repercussions if, in your view, there are any, on the signals that there are impending changes, and what government really should be doing to instill confidence in the investment environment to signal to investors that Canada is open for business.
September 29th, 2016 / 9:20 a.m.
Manager, Government Relations, Cameco Corporation
With respect to the environmental assessment review, Cameco is part of the Canadian Nuclear Association as well as the Mining Association of Canada. We have direct representation on the multi-interest advisory committee, which is providing advice to the expert panel on the EA review, so we have been directly engaged in that process.
The timelines are extremely tight; there's no doubt about that. But we have been engaged at the multi-interest advisory committee table, and with the expert panel as it goes across the country hearing from witnesses. We made presentations in Saskatoon, I believe, last week, and some of our indigenous community leaders were involved in that process. The process is certainly under way.
I will echo what I said earlier in that we would support any changes to the EA process that focus on the use of scientific evidence for decision-making and certainty in terms of process, timing, and the type of research that is required to make decisions.
In terms of what we can do to ensure investment certainty, as Mr. Beaty said, there are certain things governments can do and certain things they cannot do. Investor certainty is something we need to do as a company.
Our Millennium mine in northern Saskatchewan is an example. Using the evidence that was available at the time, it was determined that there were no environmental impact issues where our Millennium mine site would be. Environment Canada decided that there could, in fact, be issues down the road based on research that may be conducted in the future. As a result of that idea that there could be environmental impacts in the future, they were not prepared to give us a no adverse impacts ruling that would allow our mine to proceed.
What Environment Canada told us was that we could go ahead and build our Millennium mine, but they reserved the right to come back years down the road, looking at future evidence, and potentially impose operating conditions on our mine site. Not surprisingly, given our responsibility to shareholders and our capital investments, those were not conditions under which we could build a mine. The idea that we would build it, and then at some future date there would be conditions imposed on how we might operate that mine, made it extremely challenging.
As a result of that uncertainty, that $2-billion mine project in northern Saskatchewan that would have employed somewhere in the neighbourhood of 300 people, along with opportunities for other indigenous business, did not go ahead. And you know how capital investment works. It's not as if we're holding on to that money and waiting for the right time. That capital was deployed elsewhere in our operations around the world.
It is that type of uncertainty we're trying to deal with. The scientific evidence was there. I won't say it was ignored, but there were other options that were considered that made the decision one where we could not proceed.
9:25 a.m.
Conservative
Shannon Stubbs Conservative Lakeland, AB
Would you like to expand very quickly on some of your work with first nations communities and any specific successes?
9:25 a.m.
A voice
I'll follow up with you, Dale.