Evidence of meeting #29 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 federal.
A recording is available from Parliament.
Liberal
Vice-President, Des Nedhe Development
At the current time, mining companies would absolutely be stupid not to engage indigenous communities. We all know that the legal landscape has been confirmed, and that beyond the regulatory duty to consult there is fast becoming a business rationale to proactively engage indigenous communities. At this time it may be out of the government's control to monitor these bad apples. In reality, the government can only do so much. The regulatory system needs to find the right balance between environment, community input, and the economic benefits created by mining. Federal government investments to support indigenous training have been greatly appreciated and have shown success.
In my experience, and that of Des Nedhe, the province and territorial governments placed percentages around hiring and business contracting spend, which the mining companies needed to meet as part of the permits. Is this the way to go? I would argue that many of the successes we see are because government placed a percentage target on resource companies.
Investment in northern Canada is a must. Yes, it does cost more to build remote infrastructure such as roads, communication, and housing. Yes, the population is small and dispersed compared to southern Canada, but Canada's untapped wealth is located in these remote regions. It is also the home to many indigenous people. This investment would support both the community's needs but also may lower the initial cost to mineral development. If done correctly, it is key that we get this right, as the value created will not only benefit those local to the mining development; it will also add value to Canadians from coast to coast to coast.
Thank you.
Liberal
The Chair Liberal James Maloney
Thank you very much, Mr. Willy.
Mr. Smeenk, I'll turn it over to you for up to 10 minutes.
Frank Smeenk President and Chief Executive Officer, KWG Resources Inc.
Thank you for having me here. I'm the president of KWG Resources, which is one of the two junior exploration companies that are still left trying to develop the Ring of Fire.
Canada's oil sands are located deep inside desolate territories inhabited mainly by indigenous people. The oil sands are valued at better than $2 trillion. When the price of oil collapsed recently, so did the Canadian dollar.
Environmental impacts are a major concern for the development of the oil sands. Industry and governments have spent in excess of $100 billion in developing the oil sands, and they are projected to contribute to the Canadian economy for the next 170 years.
Now, Canada also has the rich mineral reserves of the Ring of Fire, which is similarly located deep inside desolate territories inhabited mainly by indigenous people. They live in isolated communities on the periphery of the uninhabitable James Bay lowlands, which are only accessible by winter roads. The Ring of Fire's development could be the catalyst that invites these first nations to be part of the fabric of our society.
The major mineral in the Ring of Fire is chromite. We estimate that there is as much as $600-billion worth of chromite buried there. Industry and government have thus far spent only about $1 billion in developing the Ring of Fire. However, I believe that development of the Ring of Fire can be the next large and major driver of the Canadian economy. I estimate that it could add 2% to our GDP, or $35 billion annually, for each of the next hundred years and probably beyond. How so? Well, about two-thirds of the world's chrome is sold to the Chinese, who produce about two-thirds of the globe's stainless steel. Only a few months ago, we paid for a contingent of nine Chinese engineers to visit the Ring of Fire for a feasibility study to build and finance, in China, railroad access to the Ring of Fire.
This area of the Canadian north is a large part of a hemispheric ecosystem above the 50th parallel, which contains one third of the planet's trees. They filter our carbon emissions. Peatlands, such as those hosting the Ring of Fire, are in fact the most efficient carbon sinks in the world. On the other hand, China and its steel industries have been acknowledged as major polluters of the atmosphere. However, they are working hard to clean up their act. This past February they signed a joint declaration with Canada on a clean technology co-operation agreement. Canada, mainly in the north, is a generator of substantial carbon credits, and China has an obligation to the world to balance its pollution with carbon credits.
The Ring of Fire can clearly be developed, in co-operation with the 24,000 indigenous people of the northern communities of Hudson Bay, by using clean technology. Alternatively, we can do it like we always have: using old technology and old transportation methods, all of which contribute to global warming, interfering with the delicate ecosystem of what today is pristine topography.
Elon Musk was born to a Regina native mother and attended Queen's University in Kingston before this Canadian export moved to Silicon Valley to eventually found Tesla, and now SpaceX, while continuing to try to make an ecological difference in the world. Our company developed a clean technology for the beneficiation of chromite using natural gas, which is up to 80% more environmentally friendly than current electric arc technology. The CANMET lab of Natural Resources Canada is currently testing our technology and doing excellent work with remarkable results. Commercializing this process will enable Canada to be the world's lowest-cost producer of ferrochrome.
The Ring of Fire needs $3 billion in financing for development, mainly for transportation assets for an ecologically friendly thoroughfare through the tundra to the rail connections in the south. So the stage is set. President Xi of China needs our chrome and he needs our carbon credits. Our Prime Minister and government have obligations to preserve the environment, obligations to our indigenous peoples, and you all are pledged to continue Canada's growth and prosperity.
I ask you, therefore, to entreat Prime Minister Trudeau to present to President Xi an elegant solution, which can impact Canada for the next 100 years. China will buy chrome from the Ring of Fire over a 100-year buying program. Such a commitment from China will thus finance the total development of the Ring of Fire, and we will give China chrome and carbon credits in exchange. China and Canada will win much international attention for such a trade.
Now back to Elon Musk. KWG is working with Elon, through one of his incubators, on a possible ground-breaking solution for transport of the ore and people to and from the Ring of Fire. We call it the Ring of Fire hyperlink project. The Government of Canada is supporting, according to the press, a Hyperloop called TransPod to be built between Toronto and Montreal. Think of the old department store pneumatic vacuum tube that used to deliver invoices, and then instead imagine ore and people in those capsules.
Toronto Life magazine says that in 50 years the city will have 13 million people, and a Hyperloop will deliver them to Montreal in 30 minutes. I would contend, though, that we should look after our obligations to the indigenous people first. Only 36% of them are graduating from high school. We would propose that a most elegant, efficient, cost-effective, and environmentally friendly use of Hyperloop technology is to build a hyperlink from the Ring of Fire to Nakina in northern Ontario.
As an ancillary to bringing out the chromite, it would create jobs and an ecotourism that couldn't possibly exist except for this kind of game-changing infrastructure technology. Of course, this requires a trade-off study as an alternative to our China railway current feasibility study for the building and financing of a traditional railroad.
Ladies and gentlemen, I think I've answered your questions. I've defined for you a growth strategy for 100 years that has the potential of the Alberta oil sands and will contribute at least $35 billion in GDP growth and a cumulative $3.5 trillion in long-term economic activity, in my opinion. I've defined the leverage that we have in controlling the exclusive and giant source of the only chromite in the western hemisphere. And China needs our resource. We believe they are willing and anxious for Canada's co-operation to allow them to buy chrome and so finance it. We believe Prime Minister Trudeau only has to ask for the order.
Mr. Chairman, you and I share a friendship with a stockbroker, and that's their rule number one: you have to ask for the order. I think we are at a situation in the relationship between our countries where Prime Minister Trudeau only has to ask for the order.
I've defined for you two technologies with dramatically positive environmental impacts that will deliver to China and Canada global admiration for using clean technology to develop a new mineral supply source. I've given you a program that will benefit the indigenous people, who we've isolated in these remote territories, and which are now environmentally critical to the survival of the planet.
In closing, I would ask you to perhaps bring me back with all of the scientists, executives, and financiers who would like to participate in this kind of development of the Ring of Fire, together with the leaders of the indigenous communities in the surrounding James Bay lowlands. Then let's have a rendezvous and talk it all out. I can tell you most emphatically that they are all very, very willing. They just need to know that you care. We would hope that the Prime Minister would sit in on our rendezvous. We commit to you to also invite native son Elon Musk.
Thank you.
President and Chief Executive Officer, KWG Resources Inc.
You're seeing here a picture of the hyperlink.
Ryan McEachern Managing Director, Canadian Association of Mining Equipment and Services for Export
Thank you.
Good morning, Mr. Chair and members of the committee. I want to thank you for the opportunity to speak to you today on behalf the members of the Canadian Association of Mining Equipment and Services for Export, or CAMESE. My name is Ryan McEachern. I am the managing director of the association.
In my opening statement today, I would like to first provide a brief overview of our association and its members; second, highlight some key findings from a study we participated in that shows how mining suppliers are an important part of generating employment in the mining ecosystem; and finally, illustrate important areas the government should support so the Canadian mining sector has a strong foundation for future growth and continues to be a world leader in the mining industry.
CAMESE is the national voice for Canada's mining supply and services sector. Over the past 35 years, the association has supported its members in connecting them to opportunities to grow their businesses in the mining industry across Canada and around the world. Our approximately 300 corporate members are located across the country and supply the entire mining industry spectrum—mineral exploration, resource development, mine design and construction, mine operations and refining, and reclamation and closure. Most of these companies are also small to medium-sized enterprises, or SMEs.
I will elaborate more on the demographics of mining suppliers in the second portion of my remarks, but overall it has been estimated that approximately 3,700 companies across Canada consider themselves mining suppliers.
Although I will focus on Canada today, I would like to make note of an important aspect of our efforts as an association, which is export. With Canada representing approximately 0.05% of the global population and 2.5% of the world GDP, we are by all accounts a trading nation. With that perspective, many of our members' activities include an export component, because there is great opportunity for the Canadian mining supplier network in the international market. Aside from the international customers, there is plenty of opportunity just following Canadian exploration and mining activity abroad. Currently, there are over 2,000 Canadian exploration and mining companies operating outside Canada, with projects in 120 different countries.
That said, there is considerable opportunity for significant growth inside Canada, as highlighted by the Mining Association of Canada, which identified about $145 billion of potential new mine investment over the next 10 years.
I now turn to our study. A report by the Conference Board of Canada characterized the mining supply and services sector as “a multi-billion-dollar, widely varied industry in Canada and around the world, yet it is a 'hidden' sector that is not directly measured or tracked”. To help provide a better understanding and clarity of our hidden sector, CAMESE participated in the pan-Ontario mining supply and services sector economic impact study, which was carried out by PricewaterhouseCoopers and supported by the Ontario Ministry of Northern Development and Mines, Natural Resources Canada, and the Mining Association of Canada.
There are a few key findings from the study that I would like to highlight today. The first finding is that the mining supply and services sector is a widely varied group of companies. The study grouped the mining suppliers into three major categories: 58% were categorized as mining equipment, supplies, and services, and 13% were categorized as mining contract services. These two categories are what most people think of as typical mining suppliers. However, it is the remaining 31% that were categorized under “consulting services and other” that typically get overlooked. These are, for example, the financial services, accounting companies, law firms, environmental services, and information technology firms.
The second finding relates to this latter group, which shows that although a third of the mining supply and services are located in northern Ontario, where most of the mines are located, 20% are located in the greater Toronto area. The mining supply and services sector is not just a northern Ontario story. Mines in the north generate economic activity in the south.
The third key finding is that almost 88% of the companies surveyed would be categorized as small or medium-sized enterprises. With that, 70% reported exporting outside of Canada. This is consistent with our membership demographic across Canada.
The final finding I would like to highlight from the study is that in terms of direct employment, the mining supply and services sector represented, at the time of the study, 68,000 employees, or two and a half times as many jobs as mining companies employ themselves, and as a result contributed approximately 77% of the same direct GDP contribution to Ontario as the mining companies.
This is an important point because, as mining is a great economic engine to develop remote areas of our country where many indigenous communities are located, the mining supply and services sector across Canada is and will be an important generator of jobs for these remote areas and, in particular, a generator of employment opportunities for indigenous communities.
Finally, I would like to highlight areas that the federal government should support or should continue to support, which will provide a strong foundation for future growth of the Canadian mining sector and will continue to have Canada as a global leader in the mining industry, because with a strong mining sector, there is a strong mining supply and services sector supporting it.
First, we believe there should be a continuing support of flow-through financing and the mineral exploration tax credit, as highlighted by the Prospectors & Developers Association of Canada. These are key levers to support and encourage early-stage exploration and discovery, which is the front-end driver of mine development. PDAC noted that “Finance Canada has estimated that every dollar of flow-through financing generates $2.60 of exploration related expenditures in Canada, with much of those funds supporting exploration near remote and Aboriginal communities”.
We support the investment in infrastructure to reduce the cost of developing mines in the north. The Mining Association of Canada, in conjunction with PDAC, published a report showing how mines in the north cost two to two-and-a-half times more to develop than a similar mine further south. We also support the idea proposed by MAC of an arm's-length infrastructure investment bank, similar to Alaska's infrastructure bank, which, through its investment in the road and port, was key to getting Canadian miner Teck Resources to build the Red Dog mine.
In addition, we support any efforts to provide certainty of timelines and to reduce process bottlenecks in bringing a mine to production.
Last, to stay a global leader in the industry, we believe the government should support funding proposals such as the industry-led Canada Mining Innovation Council's “Towards Zero Waste Mining” strategy, which is asking for $50 million over the next five years. This proposal will involve close collaboration with mining suppliers, and it will be instrumental in the creation of innovative solutions to improve how we mine deposits and for Canada to continue being a world leader in mining.
Thank you for your time and attention. I look forward to your questions.
Liberal
Liberal
Denis Lemieux Liberal Chicoutimi—Le Fjord, QC
Thank you, Mr. Chair.
My thanks to our three witnesses.
This is one of the rare occasions since I've been on the committee when we are actually running out of time for our witnesses. I usually prepare long questions, but my questions this morning will be short, so that the witnesses have more time to share their experiences with us. Let me start with Mr. Willy.
I am very concerned about the post-secondary education of first nations and first nations youth in Canadian universities.
Can you tell us how the Canadian government could improve the situation so that more indigenous youth pursue higher education in Canada?
Vice-President, Des Nedhe Development
Merci for the question.
The easiest answer is to fund education within on-reserve schooling at the same levels as the provinces. The key to getting into university occurs in early childhood education, and the years from kindergarten to grade 4 supply that base level of knowledge that carries into university.
I would point out that indigenous young people from coast to coast to coast are at the highest levels of post-secondary education right now, and that will only increase with more investment in early childhood and primary school education from the federal government.
Liberal
Denis Lemieux Liberal Chicoutimi—Le Fjord, QC
I am convinced that Canada needs more people like you, people with great ambitions for the country's economic development. Could you elaborate on your project? Your positive comments are like music to my ears.
President and Chief Executive Officer, KWG Resources Inc.
It's the first time in history that chrome, or chromite the mineral, was discovered in the western hemisphere in quantities sufficient to be mined economically, but it goes way beyond that. It is such a large deposit that we can say, even with the little information we have from drilling from surface, that there is a century's worth of mineral there for a large percentage of the world's consumption. You don't want it all, you don't want to be the only supplier, but you want to certainly have a share of the market.
The chromite becomes ferrochrome, and ferrochrome becomes stainless steel. You can't have stainless steel without chrome. There are grades of stainless steel that also have nickel. You can have stainless steel without nickel, but you can't have it without chrome. Stainless steel is about one part chrome and four parts iron.
The world is using ever more stainless steel. For those of you who have had the pleasure of driving on the Gardiner in Toronto, you can see what happens when you use things that do rust, in rebar and.... Our infrastructure just falls apart. Most of the world has gone to a standard of requiring, in new construction of high-rises, bridges, everything, a standard of using stainless steel in reinforcing bar. So it's a metal that will be with us for the foreseeable future.
Traditionally chromite was a byproduct of mining of platinum and palladium in South Africa, so they have huge reserves, but it's different from what we have. They are challenged in that over the last many decades, almost a century, they have invested in a substantial capital plan to refine their chromite into ferrochrome, using electricity. They don't have that electricity to use anymore; they're very challenged. It's an opportunity for Canada to use another method, which that particular part of our industry knew about 50 years ago, and this is what's called “direct reduction”. It doesn't become gas or liquid, it stays in a solid state. The natural gas is the source of heat. Direct reduction of chromite into ferrochrome is a much, much more efficient and environmentally friendly process.
We have a chance here to create an added-value product of ferrochrome. We don't consume it here, but we can export it to where it is consumed. That's tremendously good business for Canada. We would be exporting a small part of our huge blessings of natural gas, and on an annual basis a small part of our huge blessings of chromite.
In mining, as my colleagues can tell you, you can count on the fingers of one hand the mineral occurrences in recorded history that could produce economically beyond a few decades, let alone a century, and perhaps a second century. That's the Ring of Fire. It's phenomenal.
I know, from my time spent in China, that they're very enthusiastic about developing Canada as a source of supply, as an alternative to where the supplies currently come from. They typically buy concentrate or pellets from other places, partly refined material, and then they bring it into China and they use expensive coal, expensive electricity, expensive coal-generated electricity—dirty, dirty processes—to turn it into ferrochrome in China. They're very attracted to the opportunity to participate with us in developing this much better and much cleaner alternative.
I was astonished and very pleased when I saw that at COP21 the leaders of our two countries signed this declaration on using clean technology. That just fit hand in glove for the Ring of Fire opportunity.
I apologize—I can go on for hours, as you can see—but that's it, in a nutshell.
Conservative
John Barlow Conservative Foothills, AB
Thank you very much, Mr. Chair.
Thank you to our witnesses.
Mr. Willy, you talked about some ways to build relationships with first nations communities. We've had a few witnesses and stakeholders in this part of our study but also in the past. Two in particular I've dealt with over the last couple of years are Teck in southern B.C. and southern Alberta and Cameco in northern Saskatchewan. I understand you have some history with Cameco as well.
These two groups, in particular, have had some real success in building relationships with first nations communities. I'm wondering if you could speak a bit on what they are doing that's been successful, and if that is a template other companies can use. Do they share best practices? Is this something that companies hold close to their chest?
Maybe you could talk a bit about what Cameco has done specifically to be successful in its relationships with first nations communities.
Vice-President, Des Nedhe Development
Thanks for the question. It's a very good question indeed.
You can look at Cameco, Teck, Rio Tinto diamond mines, Voisey's Bay, and Musselwhite in northern Ontario. Companies that have been at it a while I think are pushed in this direction initially, but like any good business, they start to find value in their programs.
At Cameco, for instance, one of the values they found about engaging and becoming the number one industrial employer of aboriginal people was that they broke through the myth that aboriginal people quit all the time. They had a 95% employment retention rate in northern Saskatchewan. So it's great value to the business when you have your non-aboriginal people going over to McMurray when McMurray was in its boom, and your local people are staying because they want to work with their cousins and their friends in their traditional territory. I think those companies have seen great value in this. It becomes a business driver.
But for those companies, it's also the way they engage. I mentioned briefly that communities don't want to be a regulatory check box. Some companies still go out and say, “Okay, we have to do our duty and consult. We met with the chief and council: check.” That's the last you'll see of them. I think the progressive mining companies in the country engage the community. They hire local liaison people who speak the language and who are opinion leaders in that community. Decision-makers from the company go out and have coffee, with nothing to talk about other than just “Let's have coffee”, and they set down some objectives and ground rules. It's really about creating a long-term relationship.
Conservative
John Barlow Conservative Foothills, AB
My colleague Mr. Lemieux touched briefly on post-secondary education. I want to talk about a different part of education. I know there's been a pilot project in the oil and gas sector with Cody Snyder of Big Bear Energy. I don't know if you've run into Cody before. They had a pilot project where they worked with a specific first nation in British Columbia. This was for a drilling rig. They brought in a drilling team. They were on reserve, and they taught a dozen men and women how to do it and what to do. Now they are employed with that company that was there. Their idea is to move from first nation community to first nation community, bring experts with them, teach them the skills on reserve, and stay there. The idea is that you leave behind some skilled people who will be able to teach and continue it on.
Is there anything like that in the mining sector? Is this something that would sound appealing? I know they've only done a pilot project in northern B.C., but would like to expand this to other sectors?
Vice-President, Des Nedhe Development
In my opinion, I think the mining sector has led this. One of the early jobs I did was to go out and recruit and train my fellow Dene people in the Northwest Territories. We did that by doing really hands-on, practical, community-based training. Cameco did it in the eighties and nineties to build up their workforce, partnering through multi-party training plans with educational institutions, provincial governments, federal governments, and the companies. Take pre-employment welding as an example. You take welding machines out to the community and maybe you do an aluminum welding...leave some skills for fixing boats. Or there are concrete programs where you lay a slab of concrete by the elders facility.
I think the mining industry has been involved in this a long time, and really it's because you tap into the tactile learning and visual learning that a majority of indigenous people have. I had an instance where I took 12 Dene and Inuit people down to Tucson, Arizona, for three days to learn how to drive a truck. The first day was all book learning, and I thought, oh my God, none of us will pass this at the Caterpillar facility. During the next three days, I had these Texans and southern Americans saying we were the best damn truck drivers they'd ever had.
When I asked my cousins and friends why they thought that was, they said: Well, once you show us once, it's visual. We know how to do it. It's like hunting. It's like being out on the land. Grandpa shows you once and you'd better learn how to dress a moose or you're out of luck.
In training, it's the practical and the tactile that are very important.
Conservative
John Barlow Conservative Foothills, AB
Yes, and that's what they said too, that it's just a different way of learning. They had it there and they were showing them practical things. It wasn't book learning or it wasn't a classroom. They were actually out there and—
Vice-President, Des Nedhe Development
There's dry book learning and then there's the practicalness of, okay, how does this work?
Conservative
John Barlow Conservative Foothills, AB
Yes.
We had the Saskatchewan potash corporation in here a few weeks ago. They were talking about raising some concerns on the carbon tax and the implications it will have on the potash industry in Saskatchewan. You know, it could be the difference between some projects expanding or not, or other projects not going on.
From Creative Fire in Des Nedhe Development, were you consulted at all on a federal carbon tax? I know this is something Saskatchewan is against. Have you had any opportunity to take a look at what this could mean for your company?
Vice-President, Des Nedhe Development
From my knowledge, we weren't consulted, but it's a conversation we're going to have with our home province and with the federal government.
NDP
Richard Cannings NDP South Okanagan—West Kootenay, BC
Thank you.
Again, thanks to all of you for coming here today.
I'd like to start with Mr. Willy again. Thank you for bringing up various myths: the myths of first nations people quitting all the time. I've had the pleasure to hire first nations people on various projects that I've been involved with, and they were always very hard-working. When we had to meet at 5 o'clock in the morning in the bush, they were always the ones waiting for me to show up. So I appreciate that.
Another myth is that first nations people get everything for free, their education and things like that. I'm glad you brought up the underfunding of schools on reserves across Canada. It's something we've been talking a lot about in the House. There's also this myth that post-secondary education is free for first nations people, but there's been a cap on that assistance for years and years.
I know this may not relate to a lot of the employment around mining, but it does to some extent. I'm just wondering if you'd want to comment on whether we should be looking at bumping up that cap or removing it entirely.