Feds table blueprint to aid Canadian mining

Minister of State for Mines Gerald Merrithew has unveiled here a new federal mineral policy, which presents a 6-point program designed generally to help get the mining industry in Canada back on track after some years of hard times.

The Minister presented the new federal blueprint at a Canadian mineral outlook conference in the capital city, hosted by the Mining Association of Canada, and the federal Department of Energy, Mines and Resources.

The conference, fifth of its kind, yearly attracts a strong cross section of mining industry leaders from across the country.

In its objectives and strategies for the minerals and metals sector, the new policy statement (embodied in a 50-page report) “has identified policy responses that take account of the changing and more difficult international trading environment facing the industry.

“It recognizes,” it says, “that fundamental changes in mineral and metal supply demand and technology are taking place worldwide, and that in such a highly competitive world market, decisions must be taken on a sound commercial basis.”

Touching on such vital matters as taxation, international trade, regulation, foreign investment, and technology and research, Mr Merrithew’s policy statement outlines six principal objectives:

* to provide a fair and balanced fiscal and regulatory framework;

* to foster the development of the minerals and metals sector as a foundation for regional economic development;

* to promote improved technological performance and increased international competitiveness in all facets of the industry;

* to assist workers and communities affected by industrial adjustment;

* to facilitate enhanced mineral and metal exports and access to new and traditional markets; and

* to provide timely and accurate economic, technical and scientific information required by the industry and by the federal and provincial governments, labor and the general public.

It will probably come as little surprise to the industry, which is well aware that Finance Minister Michael Wilson will be dealing with the subject in his promised tax reform package due to be revealed toward the end of June, that the mineral policy paper has nothing specific to say in a section on mineral taxation, about the all-important treatment of flow-through financing.

Instead, it contents itself with noting that “reforms in the tax regime will be based on the principle of fairness, simplicity, economic growth, competitiveness and stability of tax revenues.”

The industry will thus still have to wait until June to learn its fate on flow-through, a fate about which much of the industry is still uncertain, and even apprehensive.

Mr Merrithew on the other hand does appear to deal more positively and directly with other issues such as international trade, and foreign investment. Recognizing for instance, the report says, that while the marketing of Canada’s minerals and metals remains a private sector responsibility, the current reality requires that the Canadian industry have strong support from government. The government’s aim, it says, is to co-operate with industry to facilitate enhanced mineral and metal exports and access to new and traditional markets.

It acknowledges for example that a bilateral trade agreement with the United States is important for “sustained and secure access to this market,” and adds that the government will have a key role in organizing technical and marketing missions to open doors “in those countries where government involvement is a prerequisite to market success.” And in foreign investment, where the Investment Canada Act has removed important barriers, (a factor which has played a significant role in developing Canada’s resource potential), the new policy report says the government has set aside the practice of seeking 50% to, 60% Canadian equity in new non-fuel mineral resource projects.

One declaration in the policy statement that could bring an element of relief to the industry is the government’s stated intention that it will limit any new regulation or regulations.

“The government recognizes,” it says, “the vital role for an efficient market place and a dynamic entrepreunerial spirit, and that regulation should not impede these values without the most persuasive justification. The rate, growth and proliferation of new regulation will be limited as much as possible.”

The wide-ranging statement covers other areas of industry/government interaction, or possible interaction, including technology and research and development, both of which it identified as important instruments for enhancing industrial competitiveness.

In an effort for instance, to reinforce the links between the Canada Centre for Mineral and Energy Technology, (canmet) and the minerals and metals industry, the government says it is strengthening the National Advisory Committee on mining and metallurgical research to give it a more direct role in the planning and execution of canmet’s research and development programs.

In a conclusion, the policy report emphasizes, as previously stated, that “it recognizes that fundamental changes in mineral and metal supply, demand and technology are taking place worldwide, and that in such a highly competitive world market, decisions must be taken on a sound commercial basis.

“Strategies that attempt to direct resources towards specific investments and technologies, or to support unproductive activities or those that are not commercially viable, are not appropriate.”

Mr Merrithew introduced the new mineral policy late on the conference day. Earlier, a number of speakers addressed the theme Living in a New Market Environment.

Looking at problems and prospects for metal markets Robert Lesemann, president of CRU, consultant, New York, identified seven universal and fundamental factors that have had a negative impact on the base metal markets.

The seven factors are persistent over-capacity, market resistant rates of production, declining rates of consumption growth, growth in the state-owned production sector, increasing numbers of producers and weakening of the pricing influence of once dominant producers, breakdown of producer pricing and emergence of terminal market pricing, and a reduced commitment by producers to their once core dominant businesses.

Reviewing prospects for the major base metals Mr Lesemann said, for instance that there is no reason to assume that conditions in the copper market, affected by all seven negative factors, will improve.

“We expect lme prices in constant dollar terms to fall back under 60 cents and stay there for the next five years.”

On nickel, he said the industry’s historically remarkable stability and profitability was destroyed when the technology was developed to process laterites. There was a proliferation of new producers and the market disintegrated into a free-for-all. He said his company sees the nickel stock-to-consumption ratio declining quite steadily from current levels over the next five years and constant dollar prices moving up to and then stabilizing around $2.

The prospect for lead, on the other hand, he said, is for a healthy supply-demand balance and for zinc, “a quite good outlook but it may take another year for the strengthening to develop.” Producer prices for zinc will firm over the next five years into the high 40 cents range.

Forecasing a Canadian dollar worth around 77 cents (US) by 1990, Dr Douglas Peters, senior vice- president and chief economist, Toronto Dominion Bank, said that is a forecast which may at first blush not be welcomed by Canadian mining companies.

“But”, he said, “would this necessarily be a bad thing for the industry in Canada? Whatever the outcome of the current Canada-U.S. trade negotiations, an increase in Canadian exports to the United States tends to be accompanied by an upsurge in U.S. protectionism.”

Thus there are in a sense built-in limits to the advantages accruing to Canadian companies from a depreciated Canadian dollar, he said.

C. H. Brehaut, president of Dome Mines, in an address on future technology, said all companies must place a high priority on the development of technology for the simple reason of maximizing profits.

“We must be equally concerned,” he said, “with the development of technology to improve safety and occupational health in the workplace in developing improved environmental control methods and in providing a stimulating work environment”.

Mr Brehaut cited the establishment of the Mining Industry Technology Council of Canada, whose mission is “to improve the competitive position of the Canadian mining industry by optimising the development and use of advanced technology and methods.”