Madam Speaker, it is a pleasure to rise to speak today to Motion No. 295 put forward by the member for Abitibi—Baie-James—Nunavik. It reads as follows:
That, in the opinion of this House, the government should table emergency legislation regarding operating assistance for gold mines in Canada, in order to help gold mine operators cope with the rapid increase in production costs, and at the same time guaranteeing a fixed price for the gold they produce.
I should tell the hon. member who put forward the motion that this is not a motion the Progressive Conservative Party would tend to support. However it certainly needs to be noted that the member put the motion forth in good conscience. He put it forth with the intention of trying to help a beleaguered industry which needs some type of assistance and perhaps some innovative policies from the government that do not seem to be forthcoming.
I have worked with the member on a number of committees. I have always found him to be a progressive and forward thinking member of parliament. Therefore I will speak to his motion, although I am disappointed to say I cannot agree with him.
Mining is an extremely important industry in Canada, specifically gold mining. Canada is the fourth largest gold producer in the world.
Gold is mined in six provinces and three territories. In the previous parliament I had the opportunity to travel to many of those areas, specifically Timmins, Ontario, the largest gold mining municipality in Canada. As part of my visit I spoke with gold mining representatives. Gold prices were low at that time due to the general decline in prices since 1997.
The average price of gold has gone from $294 in 1998 to $274 in 1999, with a slight rebound to $279 in 2000. It hovered between $257 and $262 an ounce for the early part of this year. This was after an average of $385 an ounce from 1993 to 1996. Those were certainly good days for the gold mining industry in Canada.
There is reason to believe the price will recover. The gold industry has always faced cyclical variations in price. Although the recent downturn has been significant, the CEO and president of Placer Dome, the fifth or sixth largest gold mining company in the world, was quoted in today's newspapers as saying current market conditions are making gold an attractive long term alternative to investors who are tired of weakening foreign currencies and plummeting high tech stocks.
While Mr. Taylor has said he does not expect the price of gold to advance beyond $300 in the next five years, that is the benchmark at which most gold mining companies can operate productively and profitably. One Canadian gold mining company, Goldcorp Inc., has indicated that by mining very rich grades of gold it can produce gold at $90 an ounce and provide a 66% profit margin even at today's low prices.
What this means is that some companies have adapted to current market prices and conditions and that it is therefore unnecessary to table emergency legislation to provide operating assistance to Canada's gold mines.
I realize this places a strain on a number of gold mining companies. However as Ed Huebert of the Mining Association of Manitoba has pointed out, most mining operations are facing tough times. Only in specific resources such as platinum, which is currently trading at $660 U.S. per ounce, are prices soaring and attracting new investment.
One of the reasons mining companies are experiencing high production costs is the rising price of energy, an issue which has been discussed in recent weeks. U.S. President Bush has made it clear that one of his priorities is to establish an international energy plan involving Canada, the United States and Mexico.
President Bush has been vocal about his desire to see more energy flow from Canada to the United States. He has encouraged Canada to develop the resources of its high north, east coast and Alberta tar sands. That could be good news not only for the exploration, development and processing of oil and gas reserves but for the provision of cheap energy to more remote areas of the country for exploration, mining and mineral processing.
At the same time it raises fundamental questions about renewable energy development and the environment. Renewable energy sources such as hydro electric power are being considered because of the decline of fossil fuels. While the cost of many renewable energy sources makes them less attractive than traditional fossil fuels, all sources should be examined closely with an eye to both their short term and long term consequences.
Environmental issues have a role to play in decisions about energy use. Sometimes the total cost of production, when taking environmental factors into consideration, is much more attractive and comparable at first appearance. The point is that high energy costs are a fact of doing business and they affect everyone in some way.
They do not justify financial assistance for one sector of the mining industry any more than another sector, whether it be in coal, zinc, copper, platinum or any of the diverse range of minerals found and mined in Canada. That is why it is difficult to single out one sector of the mining industry and offer financial aid.
The industry has faced tough economic times as the downturn in gold prices continues, and it has done so for the past few years. It is particularly evident when we compare gold prices to what they were in the late 1970s and 1980s when gold averaged somewhere in the $400 range and even went as high as $800.
Instead of direct financial assistance for gold mines, we need to look at other means of increasing value and investment in the mining industry. Value added initiatives would be one way of helping mining companies improve profit. That is evident in the gold industry where intermediate gold stocks have performed well while gold bullion has declined.
Barrick Gold Corporation, the world's leading gold producer and Canada's number one gold mining company, had high quality gold reserves that in combination with low production costs resulted in record production and cash flow in 2000. This was despite low gold prices. Barrick's first quarter report issued today states:
Once again, we have shown we can generate strong earnings and cash flow...in a low gold price environment.
At the same time Placer Dome, Canada's second largest gold mining company, reported reduced profits as a result of diminished sales and poor gold prices.
It shows that some gold mining companies are posting smaller financial profits as a result of low gold prices. However, to offer across the board financial assistance to all gold mine operators is clearly out of the question.
There are other means of helping mining companies, and that is through flow through shares. Gold mining companies, like any type of mining operation, need to search for new resources. Flow through shares represent one of the most cost effective aspects of the industry. With flow through shares people investing in companies for exploration purposes can realize a tax deduction while the company reaps the benefits from its investment.
The federal government recently introduced flow through shares, providing a 15% tax deduction for individuals on top of the current 100% tax write-off, making investment in junior mining companies attractive for investors. This is something that should assist gold mining companies in Canada, and it is a type of assistance that the PC Party of Canada supports.
Initiatives such as flow through shares and different ways of doing business, along with issues of recognizing the additional cost put upon exploration companies, mining companies and processing companies as a result of energy costs, are the types of issues we need to deal with. Those are the types of issues the government should be dealing with on a one at a time basis.
If the government took a look at the macro picture and solved some of the micro problems in it, it would soon find that the macro picture was a lot smaller and perhaps much more manageable for not only the mining sector but for all other sectors in the country.