A new study has found that the high cost to explore and build new mines in remote and northern regions of Canada, largely as a result of a lack of critical infrastructure, is holding back exploration and mining development in Canada's territories and northern regions of the provinces.
"What this study makes clear is that strategic investments and good public policy are needed to open up Canada's remote and northern regions to responsible mineral development and for Canadian governments to achieve their social and economic development goals for those regions," said Pierre Gratton, president and CEO, the Mining Association of Canada.
"Smart investments and a positive tax regime to overcome the unique obstacles of these regions will be the best way to catalyze more mineral investments."
The study, entitled Levelling the Playing Field, was produced by the Mining Association of Canada, the Prospectors & Developers Association of Canada, the Association of Consulting Engineering Companies - Canada, the NWT & Nunavut Chamber of Mines, and the Yukon Chamber of Mines.
The study examines the cost differential between projects and mines in northern regions to comparable operations in more centrally-located areas, and recommends policy changes to encourage responsible mineral growth in Canada's North.
"Creating opportunity and prosperity in Canada's northern and remote regions requires significant investment. We believe that the recommendations in this report will allow both the private and public sectors to contribute to much needed opportunities and prosperity for Canadians in the North and across the country," said John Gamble, president and CEO of the Association of Consulting Engineering Companies (ACEC) – Canada.
According to the ACEC, the study reinforces the importance of infrastructure as the key to opening up regions to mineral exploration and mining development. To operate, mines need ports, power, permanent roads, people, and more. Unlike many of their southern counterparts, companies looking to invest in these remote areas need to factor in costly, but essential infrastructure.
The study shows that for base metal mines, capital costs were 2.5 times higher compared to an equivalent mine in a centrally-located jurisdiction.
For gold mines, capital costs were doubly more expensive and for diamond mines in the territories, capital costs were 15-20 per cent higher.
Researchers found 70 per cent of the cost increase is directly related to the lack of infrastructure.
Exploration costs varied directly with distance from transportation infrastructure, with the most remote project costing six times that of the least remote project.
According to the study, there is significant promise for responsible mineral development in the territories and northern parts of our provinces. In many instances, mining offers the only meaningful opportunity for jobs and revenues for governments.
It concluded that infrastructure investment or the tax system, are a prerequisite to stimulating any meaningful increase in new investment.
To support exploration, the study's supporters advocate for a new and enhanced federal Mineral Exploration Tax Credit (METC) for projects in remote and northern parts of Canada at 25 per cent versus the current 15 per cent, as well as financial incentives to make the costs of drilling for early-stage exploration projects more economically feasible.
To support mining companies to build and operate in remote and northern areas, the group recommends a base 10 per cent investment tax credit, in addition to either a 15 per cent investment tax credit for eligible infrastructure, or a pardonable 25 per cent conditionally repayable contribution for infrastructure investments.
With infrastructure being a critical need, the group also recommends the establishment of a northern infrastructure investment bank in the territories for mine-related infrastructure that generate public benefits, but do not meet the public use criterion of existing federal programs.
Gamble said these would be some ways to help level the playing field for northern development. How government responds remains to be seen but he is optimistic.
"I think they are aligned with the government's long term goals," he said.
He noted that currently it is often cheaper for a Canadian mining company to explore and develop a site in South America rather than in Canada.
"Certainly that is a missed opportunity," he said.
Gamble added that it was a pleasure to work and collaborate with the various mining industry groups on the project. He called it a very important industry that represents the future of the country.