Thank you, Mr. Chair.
On behalf of Northern Graphite, its shareholders and many stakeholders, including the County of Renfrew and the Algonquins of Ontario, I would like to thank the committee for the opportunity to make a presentation today.
We are in an unprecedented period of low interest rates and low oil prices, yet worldwide there is little economic growth. Populations are aging, and birth rates are declining. Japan has had 20-plus years and counting of economic stagnation. Is this the new normal for the western world? It's an extremely important question for governments which almost universally have budget deficits that are adding to already high debt levels. Most forecast that growth is going to skate them onside. Where is this growth going to come from?
I would make the case that the scarce resource worldwide is, in fact, jobs and economic growth, and they have to come first. We all know that wealth must be created before it can be distributed. With it, many things are possible, but it must be achieved within an environmentally sustainable and socially responsible manner. Mega projects, such as pipelines, LNG plants, and the oil sands, get most of the attention, but there are thousands of smaller projects whose collective benefit can be just as significant. Today I want to share some of our experiences and make some constructive suggestions from the perspective of a smaller project.
By way of background, Northern Graphite owns the Bissett Creek graphite deposit, which is located about 250 kilometres west of here, between the towns of Deep River and Mattawa, and about 15 kilometres from the Trans-Canada Highway. Most of you will know graphite as the lead in your pencil, but for many years, its main uses have been in the steel industry and other industrial applications. However, graphite's profile is steadily climbing, because it is a key component in lithium ion batteries and thus the electric vehicle and grid storage markets. It is also a key component in fuel cells, flow batteries, and consumer electronics.
Seventy-five per cent of the world's graphite comes from China, and there are many concerns over environmental practices and resource nationalism. Because of its criticality and security of supply issues, both the United States and the EU have declared graphite a supply critical mineral. So in a few short years, graphite has morphed from being a boring industrial mineral into one that is critical for the green-tech industries.
The lithium ion battery industry, in particular, is already $20 billion in size and growing at over 20% per year. What other industries are doing that in this economic climate? This growth is mainly cellphones, laptops, power tools, etc. Electric vehicles, grid storage, and the replacement of lead starter batteries are far larger markets that are still in their infancy. Substantial new graphite supplies are required, even under the most conservative forecasts, for these markets.
As you can imagine, there are a number of potential new graphite projects competing to supply the western world with this critical raw material. We believe Bissett Creek is the best of these new projects, but that does not necessarily mean it is the one that is going to get built. A new mine requires the support and co-operation of local communities, first nations, provincial and federal governments, and favourable financial and commodity markets. If Canada is to get a share of this exciting growth market, we all need to be on the same team.
Northern Graphite has invested over $20 million in the Bissett Creek project and completed all the required drilling and engineering studies. We have our main environmental approval from the Province of Ontario. This process included extensive first nations and community consultations. We have encountered zero opposition to the project. Construction could start in 2017, subject to financing.
Bissett Creek is about as environmentally benign as a mining project can get. There is nothing hazardous about graphite. We don't use dangerous chemicals, and 97% of the tailings are basically sand. The mine will cost approximately $100 million to build. It will employ about 100 people directly, and there will be another couple hundred jobs in the services and related industries. It will pay approximately $180 million in income taxes to the government over its life, which excludes GST and taxes paid by employees and suppliers.
Northern has also developed two proprietary technologies to manufacture the anode material for lithium ion batteries from the mine concentrates. Much of this is currently done in China because of lax environmental regulations. So you essentially have green batteries, green cars with dirty batteries.
The west not only needs new supplies of graphite, but it also needs alternative technologies to turn the graphite into high-tech products. Testing to date indicates that Northern's technologies are environmentally sustainable and cost competitive. The next step is a pilot plant test to demonstrate them on a more commercial scale, which is about a $2.5-million exercise.
In summary, Bissett Creek does not raise any environmental red flags. There is no opposition. It will create jobs and generate tax revenues producing a mineral critical to the growing green-tech markets. We have developed proprietary technologies to try to bring the value-added processing here to Canada. This should be an easy project, and Northern Graphite is a very good case study with respect to a company negotiating its way through the approval process and trying to get support from various governmental agencies and departments. Unfortunately, our experience in this regard has not been very positive.
I would like to expand on two areas in particular. One is the ability of government agencies and departments to deliver what is being promised at the top, and the second is a lack of financial programs to augment what the private sector can do in terms of financing both the resource and the related technologies.
We experienced a very large disconnect between stated policies and what was being delivered in the field. I cannot emphasize this point enough because it is what we have to deal with on a day-to-day basis. It is what leads to additional costs, expenses, and delays. So if policies and legislation result from the work of committees such as this, it is absolutely critical to develop an action plan that includes a real effort to communicate their intent to the various departments and people in the field and to get their buy-in. Most have been in their departments for years, and they have seen governments and policies come and go.
Bissett Creek is an opportunity to create jobs and generate tax revenues, and it is very disappointing to continually encounter a “prove you are worthy to do this” attitude. Yes, we are trying to make money for our shareholders, but that effort is what starts the whole wealth creation and distribution process. A spirit of co-operation to get the best result for all is needed. This is not a question of legislation but of implementation. There are many situations that are not black and white, and subjective decisions are required. Too often we were forced to take the most complicated, time-consuming, and expensive route for no reasons that were explained to us. We are not trying to take shortcuts. We are not asking for special favours. We simply want a realistic, supportive, and common-sense application of the regulations.
Here are a few examples to give you a flavour of what we experienced. Our property boundaries all follow lot, concession, and township lines, and we have no neighbours. We were ordered to re-survey all of these government-established boundaries in order to get a mining permit. Our project qualifies for a class B level review in Ontario. We were told to do a much more extensive and expensive class C review for no reasons that were explained to us. Urban encroachment on wetlands is an important issue in developed areas, but it's not applicable in the Canadian Shield where we are. We were ordered to do a wetlands management plan even though there is no requirement for one, and all related issues are dealt with through other legislation.
Of all the numerous pronouncements about one window, one lead agency, and defined timelines, none of that happened.
We are continually asked to consult with first nations on routine issues. I am fully supportive of the requirement for consultation, but boundaries and limits are required. Jobs, business opportunities, and effects on traditional lands all require consultation, but the colour of the office door does not. We don't need to create a first nations shadow bureaucracy that vets and approves everything the regular one does. It places a huge burden on first nation organizations who, in many cases, do not have the expertise or the resources to respond, and it creates a very slow, expensive, and inefficient process.
The same problem crops up with environmental legislation. I don't want to spend a lot of time talking about species at risk legislation in Ontario, but will simply say it is a good example of how not to go about this process. There was no industry consultation, no first nations consultation. It is based on weak and incomplete science and is costing governments and industries billions of dollars and countless jobs.
You might be interested in reading “Improving the Endangered Species Act—Impacts on Renfrew County”, a copy of which I have provided to the clerk.