Natural Resources Committee on Oct. 18th, 2016

[The Chair, Liberal, James Maloney]

Good morning, everybody.

Thank you for being here bright and early on a Tuesday morning.

I have a couple of things before we get going.

Two members of our committee were otherwise occupied today, so we've called in reinforcements from northern Ontario and Quebec. Mr. Massé and Mr. Rusnak, thank you very much for joining us today.

We have two one-hour segments today. In the first hour we're joined by the Canadian Mining Innovation Council, Carl Weatherell and Jean Robitaille. Gentlemen, thank you very much for being here this morning. In the second hour we have representatives from the University of Toronto and Unifor.

Without any further ado, I will open the floor to you, gentlemen. You have up to 10 minutes to make a presentation, and then I'll open the floor to questions from the committee members.

Thank you again for being here.

[Carl Weatherell, Executive Director and Chief Executive Officer, Canada Mining Innovation Council]

Thank you, Mr. Chair.

First, let me thank you and the committee members for the opportunity to address you today. I'm joined by Jean Robitaille, who's the senior vice-president of business strategy and technical services for Agnico Eagle Mines Limited. Jean is here today as the chair of the Canada Mining Innovation Council.

Our opening comments are going to focus on innovation, what is possible, and what needs to be done to fundamentally transform the minerals industry and the mineral sector in Canada.

Many of your witnesses have been, or are going to be, speaking about research and the need for research in the industry. We need to be very clear that there is a significant difference between research and innovation. Simply stated, research is the creation and dissemination of new knowledge, while innovation is the creation of value. Canada needs to commit to funding both activities, but we need to recognize their differences and not promote one under the semblance of the other.

The mining industry in Canada is foundational to Canada's economy by providing the raw materials that enable other sectors of our economy to flourish, including high-tech, transportation, aerospace, manufacturing, and clean tech. As we move toward a clean economy, the need for raw materials produced by mining will only increase. As an example, it is estimated that Tesla alone will consume 5% of copper production, or 900,000 tonnes of copper, for its electric motors by 2030. This is one example from one company for one technology.

Innovation is not new to the mining industry. Our innovations include highly complex industrial processes that have required billions of dollars of investment to technology incorporated into the lunar lander. Much of the technology development and associated investment occurs in metropolitan centres, such as southwestern Ontario, Vancouver, Saskatoon, Calgary, and Ottawa.

The industry desperately needs innovation, but adoption is hindered by its capital-intensive nature and the current stress related to volatile commodity markets, increased costs, and significant competition from other jurisdictions. For example, in 2015, the global mining industry experienced record impairments of $53 billion, far outstripping similar losses in the oil and gas industry for the same time period.

CMIC was created with the endorsement of the federal, provincial, and territorial ministers of energy and mines to create a long-term vision, strategy, and approach; to encourage the mineral industry to support more focused and coordinated research, development, and innovation; to better use the network of Canadian university and government expertise; and to address the large-scale competitive challenges faced by the industry. Government and industry recognize that CMIC, as an arm's-length, non-profit organization, has greater flexibility in coordinating and implementing this type of change required by the industry, which will maintain and increase its global competitiveness.

CMIC is to mining and minerals what COSIA is to oil and gas and what FPlnnovations is to forestry. CMIC has a strategic partnership in place with FPlnnovations, and we're discussing opportunities with COSIA. For our partners in the mining industry and the Mining Association of Canada, CMIC created an innovation strategy for the industry called Towards Zero Waste Mining. Towards Zero Waste Mining defines the future of the industry in 10-plus years by focusing on the grand challenges common to the industry related to energy, environment, and productivity.

Towards Zero Waste Mining includes a business case, transformational targets, technology road maps, and projects in various stages of execution. We have a copy of the business case and the integrated Towards Zero Waste Mining technology road map with us today. They can be made available to the clerk for dissemination to the panel. I should mention that this technology road map to the best of our knowledge has never been created for the mining industry in Canada. It's the first of its kind.

CMIC incorporates an open innovation business model that comprises all members of the supply chain, including academia, government and other laboratories, start-ups, small to medium-sized enterprises, Fortune 500 companies, companies operated by indigenous peoples, and mining companies co-operatively focused on solving specific industry-defined challenges. Technologies such as information communication technology, genomics, aerospace, and defence have all been identified as potential solutions.

This highly collaborative innovation model accelerates technology development, deployment, and wide-scale adoption, and reduces the financial risk for all collaborators. For example, one start-up company we're working with currently has developed a genomics-based sensor for water quality monitoring. It is one of six technologies identified globally by our environmental technology group. This same group is meeting next week to finalize a project charter aimed at further developing this technology into a real-time, remote sensor platform and deploying it in the mining sector.

As a second example, the process of crushing and grinding rocks consumes approximately 3% of the world's electricity—enough electricity to power all of Germany—of which 90% to 95% of this energy is lost as waste. Our energy processing technology group, composed of senior volunteers from mining and engineering companies, a federal government laboratory, small to medium-sized enterprise, and original equipment manufacturers, have identified a technology that has the potential to reduce this energy consumption by 50%. We're launching the first phase of a project to move this to a commercial product on November 1.

Our greatest challenge is the immense complexity of the innovation system in Canada. The existing funding mechanisms to support research, development, and innovation—over 7,000—are generally focused on research in academia, restricted to select regions of Canada, and are generally incompatible with the requirements of mining-related innovation projects. As a result, innovation investment and technology development in Canada is significantly impeded. The end result is that a number of Canadian mining companies are placing innovation-related investments in foreign jurisdictions.

As a nation, our international rankings in innovation have been dropping steadily for over a decade. These results clearly show that our traditional approach to funding innovation through this myriad of complex and disconnected programs is broken. Thus, the Government of Canada needs to make strategic and focused investment that is common in other countries, such as Australia.

Our proposal is modest. We are seeking a direct investment from the Government of Canada of $50 million over five years. This investment will result in the development of technologies that will significantly reduce energy consumption, greenhouse gas emissions, tailings discharge, and water use. These new technologies will be deployed in Canadian mines and globally. This will increase foreign direct investment in Canada by international technology companies, make Canada a global centre of mining innovation, and increase Canada's export market share for new and cleaner mining technologies.

The Mining Association of Canada has identified up to $145 billion in potential new mine investment in Canada over the next 10 years. Through the work of CMIC, we can help ensure that this investment represents the most energy-efficient, low-waste mines that the country has ever seen. Zero-emissions, fully electric mines are possible within the next five years, but it will require concerted effort to make it happen.

The Canada Mining Innovation Council has been identified as the umbrella organization to coordinate innovation in the mining industry. We have a proven track record, and we are the ideal arm's-length organization to manage such a direct investment and implement this visionary strategy.

Ladies and gentlemen, Mr. Chair, thank you for your time, and we welcome your questions.

[The Chair, Liberal, James Maloney]

Thank you very much, Mr. Weatherell.

Mr. Lemieux, I believe you're first up.

[Denis Lemieux, Liberal, Chicoutimi—Le Fjord, QC]

Thank you, Mr. Chair.

I'd like to thank the two witnesses for their presentations.

I'm quite interested in the fact that the Canada Mining Innovation Council wants to put in place a clean mining strategy.

As you said earlier, you submitted an application for financial aid to the federal government worth $50 million over five years. Could you tell me how much the industry is investing in this research and development project?

[Carl Weatherell]

This is a difficult question to answer. If you look at the mining industry today, it's been in significant challenges for the last decade, with volatile commodity markets, depressed markets, etc. The cash flows for the mining industry have been very significantly impaired. If you compare it to the oil and gas industry, for example, the margins are very slim. It's been very challenging. That being said, the industry is starting on an upswing. It is just starting to come back.

In our experience with CMIC and existing projects, we start with very small investments, and the industry comes to the table and increases those investments. For example, in our exploration consortium, we started with a matching investment of only $300,000, and that grew to $7 million in a very short period.

Number one, it's a bit of a challenge to say how much exact financial support will be there today. Number two, we have to understand, as well, the value of the collaboration and the input of the mining industry right now, with very senior people, such as Jean Robitaille, his collaborators, his counterparts in other sectors, other industries—chief operating officers, and CEOs even. They are sitting around the table at CMIC defining technology road maps, defining targets, planning projects, and investing their time and energy. We've estimated that that investment is between $5 million and $10 million a year, which is a real value to the activities of CMIC. They simply would not be at the table if this were not of value, if that were not significant.

The industry will match it. We just can't say specifically today how much matching funding we have on the table.

[Jean Robitaille, Chair, Canada Mining Innovation Council]

The industry participates at two levels: a contribution of money invested directly and in-kind contributions. More often than not, we overlook the latter kind of contribution. When we give presentations on innovation in the industry, we must remember that we need electricity and access to equipment. We also have to disrupt operations during test periods. If we're talking about $50 million for the two levels combined, this in-kind contribution from the industry represents close to $40 million.

As Mr. Weatherell mentioned, efforts are currently being made to draft a roadmap, align all companies to a common goal, rather than let them disperse among the various research levels in Canada and to ensure everyone has the same goals. We expect to have results shortly, and then we will be able to have a contribution. Our premise is that the industry will participate more and more in terms of the contribution, but we must first be sure to get results. That is what we plan to do with the financial assistance of $50 million and the industry's contribution.

In addition, one of the differences is that the industry is involved in the management board and the various technical committees. The industry provides a very strong presence to ensure that the project is really geared to the needs that may have an impact and bring the Canadian mining industry to another level. We have declined in recent years, but we need to get back to it and once again become a leader in the mining industry. We were before and we need to be again.

[Denis Lemieux, Liberal, Chicoutimi—Le Fjord, QC]

Thank you for the clarifications.

In addition to eventual financial assistance from the federal government to the tune of $50 million over five years, what could the federal government do to encourage innovation in technology and mining practices in Canada?

[Jean Robitaille]

There are different aspects to consider.

Overall, the council is working with other organizations. We must ensure that different organizations—and you are speaking to me directly about the government—are all aligned in the same direction. In Canada, we have very good research centres and very good groups, including the NRC, CanmetENERGY, COREM and others. It's important to ensure we aim for a common goal to align our efforts in the same direction and not to scatter them. I'm sort of going back to the answer I gave earlier, but it is crucial if we want to bring the industry to a new level. We seriously need it. In the current context, with the decline in metal prices, something really needs to be done. I don't think that this is the government's mandate currently.

Part of the mining industry is in remote areas where there are also indigenous communities. Several deposits are in remote areas, and we are seeing a glaring lack of infrastructure as is the case in some communities. The company I represent is in Nunavut, and the mining industry helps a lot of communities. In relation to the infrastructure, there is a lack in terms of routes and energy. The diesel plants do not meet the new standards related to the carbon tax. Through the mining industry and innovation, there is a way to bring in more green energy and make progress. This is something else we are considering at the Canadian Mining Innovation Council.

[Denis Lemieux, Liberal, Chicoutimi—Le Fjord, QC]

As you and the Mining Association of Canada mentioned, the value of new mining investments in Canada could reach close to $145 billion in the next 10 years. How will the new government policy on carbon tax help or motivate your organization in the pursuit of its objectives?

[Jean Robitaille]

Clearly, the Mining Association of Canada is in favour of the carbon tax. In the short term, this tax will certainly not encourage the development of certain projects. However, we do not view this tax with suspicion because it will force the industry to develop new technologies and new ways of operating to reduce the use of vast quantities of fossil fuels.

[The Chair, Liberal, James Maloney]

Mr. Robitaille, my apologies, I'm going to have to cut you off there. Maybe you can pick up a bit later on.

Mr. Barlow, go ahead.

[John Barlow, Conservative, Foothills, AB]

Thank you very much, Mr. Chair.

I'll let Mr. Robitaille continue with that in a second.

I'm going to ask some questions about the carbon tax. Did the federal government, the environment minister, or the industry minister consult with the Canada Mining Innovation Council or any associations or companies that you may be associated with? Was there any consultation with you whatsoever before announcing this carbon tax a couple of weeks ago?

[Carl Weatherell]

We are a member of the Mining Association of Canada. The Mining Association of Canada is the one that is typically consulted on policy issues, and they have endorsed a carbon tax policy.

I would like to mention that a lot of the work we are focused on in innovation is targeted directly at reducing energy consumption and eliminating diesel, things that will have implications for the carbon footprints of Canadian mines, for example in underground operations or surface operations.

In our opening statement, I mentioned the processing challenge that would significantly reduce energy consumption. In underground, we are looking at producing smart, continuous, all-electric underground operations in Canada, essentially eliminating diesel and moving the platform from carbon to electricity.

Again, our activities are focused on the innovation side of things, and there is a direct impact.

[John Barlow, Conservative, Foothills, AB]

I appreciate that. I am looking at your zero waste mining strategy, and it looks very ambitious to have zero waste over the next 10 or 20 years.

I'm going to say that the answer, then, is no, that they didn't consult with you on the $50 per tonne.

I understand that's your goal, and that's outstanding, but they didn't consult with you before coming up with this $50 a tonne or making the announcement a couple of weeks ago.

[Carl Weatherell]

Again, as far as we are concerned, they consulted with the Mining Association of Canada, which represents our interests and the interests of its members.

[John Barlow, Conservative, Foothills, AB]

Thank you.

[Jean Robitaille]

We are working closely with the Canadian mining association, and one objective was—again, the same thing—to make sure that we will not have multiple groups in mining doing innovation. We are working very closely with MAC. As Carl mentioned, the tax is not a huge surprise at all for us.

[John Barlow, Conservative, Foothills, AB]

Thank you.

Well, it's interesting that you are saying it's not a huge surprise, but it is going to hurt in the short term. We'll see how that goes.

To get back to your zero waste mining strategy, I just want to talk a bit about that. I think it's great that you have taken that on as an initiative and a very ambitious goal.

Mr. Robitaille, you said that a lot of the new mines that we are finding are in the territories or remote areas. I'm just wondering if you or Mr. Weatherell can talk about what sort of advancements have been made in terms of getting electricity to some of those more remote locations where you do have to rely on diesel, and how much that's going to impact the goal to get to zero waste over the next decade or two, when many of the new mines are located in remote areas where, as you said, it is very difficult even getting roads, let alone electricity to eliminate diesel.

[Jean Robitaille]

Energy is one of the key elements of mining. To be able to operate a mine...it's a substantial consumer.

Diesel is the easy way. It's a proven technology. However, there are other technologies used in other industries that we just have to adapt. This is part of the mandate of innovation.

Liquefied natural gas can be used, and it will reduce carbon emissions. The run-of-river turbine has to be adapted. However, like centrale, you don't need to submerge a territory. You can generate electricity, and in excess of this.

There is a project in our company. If this project goes ahead, one day we will probably be able to supply the electricity for all of the region. This is substantial. It is innovation, investment, and development, and it is going to the aboriginal community. I see it as a win-win-win. The carbon tax will push, to some extent, the urgency to create the needs to move forward in that direction, because it will eventually be more costly.

[John Barlow, Conservative, Foothills, AB]

Would some of the $50 million over five years that you are asking for be allocated to building infrastructure, building power lines to some of these?

To reframe the question, would it be more beneficial, in terms of reaching your zero waste management goals, to invest funds in building infrastructure to some of these remote mines, either roads or, more likely, electric power supply?

[Jean Robitaille]

It will not be used for infrastructure. We need to be able to do the demonstration to integrate new technology into the mining space, to make sure we'll have a business case that the different companies can go on. The different mining companies will not be reluctant to invest in projects in which they see a return. Where there's a bit of difficulty presently is joining everyone in while the market is in a downturn. We will be able to make them collaborate, but presently it's really not the time to be injecting a substantial amount of money. We'll see it after we do the demonstration.

To go back to your point, we have to do a demonstration on a small scale and eventually be able to prove that it will be applicable on the large scale, and we will see the different companies, the different members of the organization, the different mining companies in Canada, jumping on board.

[John Barlow, Conservative, Foothills, AB]

Thank you.

[Carl Weatherell]

I would like to add to that. To your question, as Jean alluded to, if you're looking at infrastructure investment for electricity, for example, $50 million is insignificant because the infrastructure requirements are of an order of magnitude at least above that. It's essentially not relevant, and as Jean said, we have no intention of investing in infrastructure like that with $50 million.

[Jean Robitaille]

I'd maybe just add that Carl's point is valid. In the scoping study we did, we speak about $1 billion to $1.5 billion investment to be able to generate the electricity at something below five cents per kilowatt. It will be a 3P project potentially if one day we go with this project. However, in the meantime, for some technology, you have to do the demonstration. When the demonstration is done, you will see the partnership going forward.

[The Chair, Liberal, James Maloney]

Thank you.

Mr. Cannings, the floor is yours.