That, in the opinion of this House, the government should consider implementing a new program of mining incentives which would encourage exploration and development in Canada.
Mr. Speaker, I am very happy to introduce in this House today a motion calling on the government to consider a program of mining incentives which would encourage exploration and development in Canada. First of all, allow me to commend the hon. Minister of Natural Resources for officially declaring a national mining week last month.
This shows that the government recognizes the mining sector's important contribution to the Canadian economy and partly fulfils our commitment to promote at the international level Canadian interests in this area.
I believe that the industry has also done a tremendous job in promoting mining through its Keep Mining in Canada campaign. I want to congratulate it on this important initiative.
I would also like to thank the Minister of Finance for implementing in his 1994 budget measures to allow the deductibility of reclamation funds. I recognize there has been a substantial increase in exploration throughout Canada in 1994 and there is a prediction of a further increase in 1995 to a level of approximately $650 million. Despite this, major problems and impediments still exist to a sound and sustainable mining sector in the country.
Some of the impediments that were identified both in the natural resources committee report, the Whitehorse mining initiative report and by the industry are as follows: insecurity of land tenure either because of the creation of new parks or because of native land claims; flight of exploration capital to third world countries, especially South America; complexity, duplication and delays in issuing permits and environmental assessments; and to a lesser degree, the effect of profit and non-profit based taxes and levies.
Canada needs a minimum of $900 million to $1 billion worth of exploration capital annually to rebuild our ore reserves which have been depleted to a dangerous level.
I would like to state a number of statistics which will clearly demonstrate the importance of mining to the Canadian economy. These facts are based on information from Statistics Canada and Natural Resources Canada.
The mining and mineral related industries employ 335,000 Canadians. Of these, roughly 57,000 were employed in mining, including coal mining, 57,000 in smelting and refining, 85,000 in metal semi-fabrication and 129,000 in metal fabrication.
Mining is the mainstay of employment for over 150 communities. Canada is the world's largest mineral exporter. Mining provides 14.6 per cent of total exports and contributes $11.7 billion to the trade balance. Canada produces some 60 commodities, leading the world in the production of uranium, 28 per cent; zinc, 15 per cent and potash, 34 per cent.
Canada is the world's second largest producer of nickel at 22 per cent; cadmium, 11 per cent; asbestos, 17 per cent; elemental sulphur, 22 per cent; and ranks among the top five producers of platinum, group metals, gypsum, aluminium, copper, lead, cobalt, titanium, molybdenum and gold.
Mining, and resource industries generally, lead all other industrial sectors in productivity. During the last decade labour productivity increased by 103 per cent in mining and concentration, by 87 per cent in smelting and refining and by 32 per cent in metal semi-fabrication. In 1993 mining added $20 billion to the Canadian economy, equaling 4.2 per cent of the gross domestic product.
Canada is the third largest mining nation in the world. For every 10 jobs created in the mining industry, eight more spinoff jobs are
created. Almost 80 per cent of Canada's mineral production is exported. Mining provides 14.8 per cent of Canada's total exports, contributing $9.9 billion to the mineral trade balance.
Minerals and metals account for 60 per cent of the material transported in Canada by rail and through our ports. Ontario at 30 per cent; Quebec, 17 per cent and B.C., 16 per cent, account for more than 60 per cent of Canadian mineral production.
Mining stocks make up 55 to 60 per cent of trading on the Vancouver Stock Exchange; 20 to 30 per cent of trading on the Toronto Stock Exchange and 20 per cent of trading on the Montreal Stock Exchange.
The amount of land used for mining in Canada is less than half the size of P.E.I.
Let me now inform the House of the worrisome trends in the mining sector that forebodes a very uncertain future. Since 1991 Canada dropped from first place to fourth place in its ability to attract international investment in new mines according to the Metals Economics Group in Halifax.
Between 1990 and 1993 Canada saw 44 mines close and only 24 mines open. Canada lost 19,579 mining jobs between 1990 and 1993. In 1970 mining contributed 6.4 per cent of the GDP and in 1993 4.2 per cent. In 1992 exploration expenditures were the lowest since 1967. Mine site investment reached $6.7 billion in 1991 and by 1992 that number was cut in half.
In 1988 the amount of exploration and development money spent in Canada was about $800 million, compared to less than $400 million in Chile. These numbers were reversed in 1992. In 1993 Canadian companies spent almost as much if not more in Latin American as did the local companies.
In 1993 employment in the mineral industry was 335,000, about 2.5 per cent of the total national employment. This is a 3.5 per cent drop from the 1992 figure of 347,000. In 1992 mine investment in Canada was about $3.1 billion, down from 1991 figures by 18 per cent. In 1993 Canada's mineral production totalled $14.9 billion, a decline of 10.8 per cent from the 1992 amount of $16.7 billion.
Canadian companies with budgets of more than $1 million spent close to $260 million on exploration outside Canada in 1993, almost half of their total budgets. This is an increase over 1992 when they spent 40 per cent on their exploration budgets abroad.
Since World War II the cost of fine based metal deposits in Canada rose from $6 million to about $150 million, a 25 per cent increase as corrected for inflation in 1989 dollars.
My motion calls on the government to implement a new program of mining incentives which would encourage exploration and development in Canada. What do we mean by mining incentives? Most people would automatically equate incentives with grants or tax based measures but there are incentives that are much more important than that.
The mining industry does not want grants. It wants a level playing field and a tax system which is truly competitive with the rest of the world. It wants security of land tenure and a certainty of continuity in the rules of the game in terms of issuing permits and doing environmental assessments.
How can the mining industry interest investors when the goal posts keep moving all the time? How can it convince investors to spend hundreds of millions of dollars only to have the property declared a park, as it was done recently in British Columbia with the Windy Craggy property?
Although I recognize that most of these rules fall under provincial jurisdiction, I believe the federal government must play a leading role in bringing all parties involved together. If we want to create more parks in the country, let us do it now and declare them off limits. However, let us also ensure the industry that the rest of the country is open for business and that if it spends exploration dollars it will be permitted to develop its discovery and reap the benefits.
The Standing Committee on Natural Resources conducted extensive hearings with all the stakeholders. The result was nine key recommendations on mining incentives which were almost entirely present in the Whitehorse mining initiative report.
I would like at the present time to present the House with those recommendations:
Recommendation 1: That the federal government, in conjunction with its provincial counterparts, work to remove the structural impediments to mineral investment outlined in the Whitehorse mining initiative final report by the year 2000.
Recommendation 2: That, on recognition of the uncertain long term prospects of the mining sector, the need for a more attractive exploration investment regime for junior companies and the positive impact of mineral exploration activity on regional development and job creation, the federal government implement tax measures in its February 1995 budget to encourage Canadian mineral exploration.
Recommendation 3: That, subsequent to recommendation 2, the federal government introduce a mineral exploration incentive by modifying the Income Tax Act to incorporate a change in the adjusted cost base of flow-through shares from a value of zero to the actual cost of the shares-
Recommendation 4: That in order to enhance the effectiveness of exploration work financed by means of flow-through shares, the federal government enable the exploration activity funded through such shares to be carried out over a period of one full year after financing.
Recommendation 5: That, to assist junior and
or single mine companies, the federal government exempt mineral exploration and development companies without revenue from mineral production, from application of the Large Corporations Tax.
Recommendation 6: That in order to enhance the effectiveness of mineral exploration, core geoscientific funding under existing federal-provincial mineral development agreements, MDA, be preserved under alternative programming.
Recommendation 7: That once initial steps have been taken to improve the investment climate in Canadian mining, the federal government, its provincial and territorial counterparts and the domestic mining industry develop, through consultation, an integrated approach to communicate the positive features of the Canadian mining sector to potential investors.
Recommendation 8: That Natural Resources Canada, together with its partners in the provinces and the industry, establish a national database on active and orphaned mining sites and reclamation work that must be undertaken on those sites.
Recommendation 9: That the Minister of Finance amend the Income Tax Act so as to defer taxation of income generated within mine reclamation trusts until the funds within these trusts are finally allocated for reclamation purposes and that the minister make an announcement to that effect in the next federal budget.
The main thrust of the last federal budget was deficit reduction. It was about putting our financial house in order. It was about getting the fundamentals right so that all sectors of the economy including mining could regain confidence in Canada. I agree 100 per cent with the Minister of Finance.
It would have been very difficult to justify tax breaks or expenditures in one sector of the economy while cutting all other sectors dramatically. However, we must look at the next budget and beyond. While I realise it would be next to impossible to implement all the measures recommended in the natural resources committee report in the short term, there is much we can do without breaking the bank.
Some of these measures are included in the keep mining in Canada 10 point program: establish a process for land use planning that respects mineral tenure to ensure both the protection of Canada's natural heritage and access for mineral resource development; streamline federal-provincial environmental regulations to avoid costly duplication and delays; implement an appropriate incentive to stimulate grassroots mineral exploration; change tax laws on mine reclamation funding to encourage investment in new mines; launch a national initiative to build necessary infrastructure for northern Canada's economic self-reliance.
In conclusion, there are still many Hemlos and Boisla Bays in this country. It is up to us as a government, to the mining industry, to the First Nations, and to environmentalists to join forces in a spirit of co-operation and compromise so that mining can become once again the cornerstone of the Canadian economy.