Mr. Speaker, I am pleased this evening to intervene in this debate, which gives us an opportunity to put the natural resource industry in Quebec and in Canada into perspective and to set the record straight, because in recent years it was fashionable to speak of the new economy and of the high tech sectors.
We have forgotten that natural resources are one of our economic forces and they are great consumers of technology. They require very specific industrial applications. The mining sector, for example, is a great consumer of technology. At home, for example, we are working to develop underground communications. These are very specific applications of research in the communications sector that find uses in the traditional sectors, which buy these technologies.
In recent years, because it is less fashionable, the technologies sector, rightly so, because the development there is fascinating, has attracted a lot of attention. However, a lot of private investment has gone into this sector as well.
We need only to look briefly at the changes in the stock markets to see how the businesses in these sectors attracted substantial capital, while it was very difficult for natural resources sectors, such as mining, to attract capital to do the research vital to ensuring sufficient reserves in the coming years.
Before going any further in connection with the mining sector, which is one of the subjects I want to speak more about today, I have a few comments about the remarks by my colleague, the hon. member for Joliette, on softwood lumber.
I found it a bit strange and surrealistic on the weekend to see the American president come to Quebec City and boast of the virtues of free trade, when his government is denying us free access to the American market in a sector such as that of softwood lumber.
I know that Canada was the host country. One does not want to start arguments when one is receiving guests, but I would have expected a little more firmness toward the U.S. president. When he was on the platform beside the Prime Minister of Canada, he was singing the praises of free trade, and everyone knew perfectly well that a few days later he was going to give us a good swift kick with respect to the American investigations into our industry.
Americans must be made to face their own contradictions. Free trade is not a one-way street. It is not because we are better than them in this sector that we should do nothing.
That said, in the coming years there will be something extremely important in the softwood lumber sector. It is a rare and limited resource, which we have probably overexploited in recent decades. To succeed, therefore, our companies will have to provide even more added value and processing of our products. This will require more investment to improve research and development in natural resource market niches, particularly in forest products.
I remember one frustration I experienced as an MP in recent years. A program such as technology partnerships Canada was not accessible to businesses in traditional sectors, or was accessible with great difficulty.
We need a bit more flexibility in the tools available to us, while complying with the constraints of international agreements we have signed, so that the capital we put into developing technology partnerships, or doing more research, is a little better targeted and more suited to the reality of the natural resources sector.
I have been through this a few times in the lumber sector. It was very difficult to get approval for proposals to invest or improve infrastructures, one reason at the time being that they had to meet very high environmental standards. The pulp and paper industry, for instance, had to invest heavily and it was very difficult to get support from the federal government because the tools were not very well suited to this reality.
All this must be taken into consideration. These companies will have to make massive investments in the coming years to maintain their sales and their growth, because they will have to further process the wood products they already have. If they do not do that, they will have problems. Everyone agrees on that. They will not experience shortages, but natural resources in the forestry sector will become rarer.
I now go back to the mining industry. The crisis is very serious. Back home, in the Abitibi—Témiscamingue region, it is one of the most serious crises ever. There are a number of reasons for that. For example, gold was used as a hedge against inflation for a long time. A lot of gold was bought up by central banks and accumulated in reserves. This is a thing of the past and we should not be nostalgic but face the fact that gold is no longer the hedge against inflation that it once was.
This means that gold may not fetch the prices it did in the past. We have a situation where small mining companies produce gold at a cost of $200 to $300 per ounce and sell it for $260. And I am not including financial costs, which means that they lose money in the process. This situation cannot go on for very long. This is not social economy and I have nothing against the social economy, but the mining industry must be profitable. So our production costs will have to come down.
We will also have to invest to develop new ways of doing things, new technologies, and in a big way. We will also have to invest in exploration, otherwise we will have a problem.
Exploring abroad used to be the thing to do. I will spare hon. members the figures, but I have here a document that was given to me by the hon. member for Abitibi—Baie-James—Nunavik. Everyone knows that generally speaking we are not close allies but political rivals, but I believe we both agreed that the crisis has made it urgent to develop common ways to help people of our region.
I am grateful to the hon. member because I think he showed a sense of fair play when he gave me this very well written document, which shows among other things the increase in production in developing countries, in South America and elsewhere. It can been seen that there has been no growth in our production and that we have not invested much in exploration.
It becomes rapidly apparent that we are beginning to face a problem. I fear that we have not yet reached the worst of it in the mining industry, and in particular in gold mining. About three years ago, the price of gold dropped under $300 and it has stayed under that level since.
I recall having read the financial reports of mining companies, which always said “We anticipate that, next year, the price of gold will be around $330”. This did not happen. It did not happen then and it is not happening now. We must admit that it will not occur next year either.
We must look at our industry in a different way. The government will have a major role to play in the short and long terms. We will have to be creative. I do not have the monopoly on solutions, but I am convinced that if we try we will find solutions.
We will have to increase support for exploration. We need to be realistic as well and to realize that the traditional vehicle of flow-through shares is perhaps no longer the way of the future.
Investors have been stung. I will give members a picture of what it is like in our area. Investors who put money into this have been burned more than once. Very few projects have seen any cost effectiveness, because exploration is very high risk. Second, in past audits Revenue Canada has set new assessments, saying that certain work had not been done or was not up to standard.
So if somebody put $10,000, $15,000 or $20,000 into projects and then got hit with another assessment four years down the line, on the grounds that the standards were not met, he or she would have to get up really early in the morning to convince him to reinvest in the same company.
This has been an area where a lot of people have been burned. Investors put money into the technology sector of the stock market. Two or three years ago, a person could invest in just about anything and prices went up. This led to a considerable drain on capital. The situation has corrected itself a bit, but investment in this sector was far less attractive, with little spinoff, but with the risk and uncertainty of potential reassessment and with less attractive tax credits than earlier.
As a result, today the mining industry perhaps needs a different kind of support. The pre-election budget improved things a little. It will not be enough, however.
My colleague from the other side of the lake, from the other Témiscamingue, the Ontario one, said yes there was an improvement over last year, but still far from enough. The level of exploration still remains far from sufficient, if we are to have the reserves required for the future.
All the better. Many of the reserves identified in the development countries are used up, and that is a good thing. Perhaps that will bring investors back here. New metals are being discovered, including palladium and diamonds, and these attract investors. This is interesting, yet not everywhere has been explored.
I know that I am nearing the end of my speech. I would like to add only one thing. When we talk about northern Quebec or northern Ontario, and I mention those regions because they are the ones I know best, people often feel these regions have been thoroughly explored.
When exploring, one makes a very small and very deep hole in various locations. Very often something could have been found only a few feet away. It is far from obvious that the exploration process can reveal all that. We have not yet explored everything that there is to be explored in Canada; far from it.
The Noranda mine in our region operated for years. A mining potential was later discovered close nearby. This shows how difficult it can be to find the deposits and to identify them.
Technologies are now getting better and research can yield maximum results, but we still have to go further.
I therefore really hope that this debate will not end with the speeches. I look forward to real action. We certainly will contribute to that. We will stimulate the debate and will be full of determination, but money will have to be spent. There is a lot of money around these days. There are large surpluses.
The natural resources sector, and I have talked about mines but the same holds true for all the other natural resources, will have to be considered carefully if we want to put a major sector of the development of our economy back on track, particularly in the resource regions, one of them being the one I represent, the Abitibi—Temiscamingue.