MAC focuses on transparency, free trade

VANCOUVER — For Mining Association of Canada (MAC) president and CEO Pierre Gratton, the future of the nation’s mining industry lies in clear-cut regulatory reform and the cultivation of global free trade arrangements geared towards expediting the flow of goods and capital across international borders. In a speech at a Vancouver Board of Trade luncheon on Sept. 7, Gratton outlined his vision of a unified Canadian resource sector operating under clearly defined regulatory legislation.

One of the perceived problems with the current Canadian regulatory model lays in layers of reviews that criss-cross over provincial and federal jurisdictions. Gratton is quick to point out that when Canada first initiated its Environmental Review Act in 1993 the majority of provinces did not have comparable pieces of legislation,

“If you clear away the rhetoric with what is going on, and focus on the dual [provincial-federal] review regulations, I think it will make things better. As proponents of the industry we hear from communities expressing frustration they experience by being consulted twice on the same project,” Gratton explained during a question period. “What we’re doing 20 years later is taking a step back and saying ‘Do we really need these two systems doing this in parallel? Does that benefit governments and communities?’ I don’t think so. We feel the measures will result in better outcomes from a social acceptability view point because it will be more focused and more coordinated.”

Another consideration for MAC is the implementation in the U.S. of the Dodd-Frank Act. Any Canadian mining company listed in the U.S. will be familiar with the requirement for resource companies to annually report all payments to governments on a project-by-project basis, and Gratton says it is important for the industry to get “out ahead” of any government imposed reporting requirements and start to address concerns of transparency internally.

MAC announced the signing of an agreement with the Prospectors and Developers Association of Canada (PDAC) and two advocacy groups in early Sept. that would see the development of mandatory reporting rules that could be legislated or incorporated by security commissions across Canada

“If it comes to pass and we’re successful it will be public reporting through the Toronto Stock Exchange, so there will be those reporting requirements, but we’re used to that,” Gratton said during an interview. “We looked at this issue and knew it was coming, so we could either allow it to be done to us or we could get ahead of it and design something that’s consistent with the United States and Europe.”

When asked about the potential impact on junior explorers, which often complain of being bogged down by excess regulation and associated costs, Gratton acknowledged it was a concern, but said he would work closely with the PDAC to assure its members had adequate input on any new regulatory proposals. In addition, MAC is holding a workshop in Vancouver for exploration-stage companies in a bid to alleviate any concerns.

The MAC and PDAC are hoping to develop a series of reporting rules that would complement voluntary efforts currently undertaken through the Extractive Industries Transparency Initiative. The new regulations would include major producers and exploration outfits working in foreign districts to improve the industries accountability both at home and abroad. Gratton stressed the need for Canada to continue to emerge as a leader on a global stage.

“There are a number of things [Canada] is known for, it isn’t limited to mining technologies. Our legal and financial expertise is becoming dominant around the world, and we have some of the best environmental engineering firms and accountants,” he explained. “Our industry is so complex that we have a need for such an incredible amount of brain power across a wide spectrum.”

Tying into regulatory discussions is an emerging commentary on Canada’s willingness to embrace growing inflows of foreign direct investment (FDI) and how potential foreign ownership of some of the country’s major companies and assets might affect economic sovereignty over the long term.

According to a MAC report released Sept. 10 total mining industry payments to the Canadian government reached $9 billion in 2011, with royalty and mining tax revenues increasing by $700 million over the past year.

There remains a sour taste around the industry in Canada from the acquisition of Canadian-based Falconbridge and Inco by foreign mega-corporations Xstrata (XTL-L) and Vale (VALE-N) in the mid-2000s. The federal government has since rejected BHP Billiton‘s (BHP-N, BLT-L) attempt to takeover Potash Corp. of Saskatchewan (POT-T, POT-N) and is currently reviewing China-based CNOOC‘s bid for Calgary-based energy company Nexen (NXY-T, NXY-N). With Canada’s national identity so closely tied to natural resources, Gratton explained it can often complicate the issues.

“I go back to the fundamental principle that the mining industry believes in the free flow of goods and capital, we invest abroad and acquire assets and we have to be open to being acquired,” Gratton said. “I think sometimes we can let our personal feelings as Canadians get in the way of the long-term views and beliefs on what are good for the industry and the country. We want to make sure that in other parts of the world allow us to do the same thing. What is damaging is when there is political intervention, and it becomes a political issue. That isn’t the message Canada should be sending.”

During his speech, Gratton outlined how the mining super cycle is not over, but “taking a break”, and that developing reciprocal trading relationship with emerging mega-economies like China was integral to Canada’s long-term economic health.

The comments mirror those made by Prime Minister Stephen Harper during a Canada-Asia dialogue hosted by Bloomberg in Vancouver on Sept. 6. Harper has focused on deeper trade relations with the Chinese, and finalized an “Investment Protection and Promotion Agreement” with the Asian power on Sept. 9.

“What Canadian businesses are looking for is an equal opportunity to go in and invest, and potentially acquire,” Gratton said when asked about the current Canadian government efforts in China. “But given the importance of this relationship we can’t afford to wait until all the issues are settled before we allow Chinese money into Canada.”