Positioning for Future Growth – A Brief to the 66th Mines Minister’s Conference – Submitted by the Canadian Mineral Industry Federation, August 2009
The Mining Association of Canada (MAC), the Prospectors and Developers Association of Canada (PDAC) and the fifteen other mining-related associations that are members of the Canadian Mineral Industry Federation (CMIF) appreciate this opportunity to provide federal, provincial and territorial Mines Ministers with views and recommendations regarding policy issues of importance to our industry. The CMIF members represent the majority of companies engaged in mineral exploration, mining, and processing – accounting for most of Canada’s production of base and precious metals, uranium, diamonds, metallurgical coal, mined oil sands and industrial minerals.1.0 OVERVIEW OF CANADA’S MINERALS INDUSTRY
The Canadian Economy
One year ago, the CMIF submission to ministers spoke of high oil and commodity prices, record capital investment and exploration levels, and quarter-century lows in the national unemployment rate. As ministers know well, things have changed in the past year, both in the Canadian and global economy and within the mining industry.
Economic growth came to a halt in the late months of 2008 as the effects of high debt and ineffective regulation in the United States, among other variables, served to trigger a global recession. Mineral prices fell in most commodities in response to declining global demand. In Canada, operations in some 32 mines were closed/suspended over a half-year period and companies are operating at only 66% of full capacity in non-metallic minerals and 71% in fabricated metals. Dramatic effects are also being seen in exploration, where companies’ share prices and ability to raise money for grassroots programs have been sharply curtailed. The IMF forecasts Canadian GDP to decline by 1.2% in 2009 while globally the World Bank recently reduced its 2009 growth forecast to minus 3%.
Economic Impact of the Canadian Mining Industry
The mining industry contributed $40 billion to Canada’s GDP in 2008, employing 351,000 workers in mineral extraction, smelting, fabrication and manufacturing. While the industry is important in remote communities, it also generates prosperity in our larger cities. Toronto is the world’s leading city for mining equity finance and Vancouver is home to the leading cluster of exploration companies. Montreal houses important aluminum and iron ore companies while Edmonton and Calgary have become global centres for oil sands expertise and Saskatoon for uranium and potash. It is estimated that 3140 suppliers provide equipment, consumables and expertise to the industry, including hundreds of manufacturing, engineering, geotechnical, environmental and financial firms.
The mining industry is an important contributor to government coffers. According to a recent study by ENTRANS Consultants, the industry paid a record-high $11.5 billion in taxes and royalties to F/P/T governments in 2008. Oil sands mining operations contribute an estimated $3.1 billion of this figure. The fabricated metal products stage is not included – including this stage would bring the total to around $13.6 billion. These payments will likely decline in 2009 as the effects of the recession become evident.
On the international scene, Canada remained the top destination for global exploration in 2008. Canada received 19% of world spending, followed by Australia at 14% and the United States at 7%. The industry accounts for 19% of Canadian goods exports – key exports include aluminum, nickel, copper, gold, uranium, coal, potash, zinc, diamonds, iron and steel, and iron ore. A consequence of this global reach is that over half of the freight revenues of Canada’s railroads are generated by the mining industry and high portions of Canada’s port and marine revenues are also attributable to the industry.
Canada features world-leading mineral exploration capabilities – there are some 1000 Canadian exploration companies active in over 100 countries. The mining industry accesses new capital, ideas and opportunities through high flows of inward and outward investment. Canadian mining companies have an accumulated stock of $67 billion in investment abroad as of 2008, while there is an accumulated stock of $59 billion in foreign direct investment in Canada. This represents 12% of total foreign direct investment stocks in Canada, double the 6% share of 2005, and reflective of the foreign acquisitions that occurred in the minerals and metals sector in recent years.
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