Fraser Institute: Quebec loses limelight

After being named the world’s best place to mine for three consecutive years, Quebec falls to third spot, according to the recent Fraser Institute’s Survey of Mining Companies: 2010 Mid-year Update.

Respondents included more than 400 high-level managers of mining-related companies, who were asked about 13 policy-related issues and the relative attractiveness of 51 mining jurisdictions worldwide.

Quebec was bested by Alberta and Finland which finished first and second, respectively, and there are three main reasons for the dip in ranking, says Fred McMahon, who coordinated the survey.

“There’s a sense in the mining community that mining is under attack in Quebec,” McMahon says, adding that negative media coverage, fuelled by anti-mining nongovernmental organizations and urban ignorance is pushing hostility towards the industry.

“While the importance of mining is recognized in northern, rural and Cree communities, the cities just don’t get it. And it’s the cities where the politicians play.”

McMahon says that the rise in commodity prices is leading governments like Quebec’s to feel free to “tighten the screws” on mining with taxes and regulations.

Quebec received its worst result in the survey in regards to general attitudes towards the industry. The province ranked 30th, as 8% of respondents say attitudes are getting “considerably more hostile” and 36% say “somewhat more hostile.” Increased hostility towards mining was perceived in 41 of the 51 global regions considered in the survey.

Another factor knocking Quebec down in the rankings is tax policy in the province. In March, the min- ing tax was raised two points to 14%, and it will reach 16% by 2011.

McMahon says it’s not so much the increase itself, but rather the way the news was delivered that is most troubling and breeds uncertainty. “There is a great deal of concern about the tax being announced with no forewarning or no consultation within the industry.”

In addition, Quebec’s Mining Act is currently under review which adds even more uncertainty to mining operations in the province, McMahon says. Bill 79 is making its way through the legislature, which, among other things, proposes making mining companies pay 100% of restoration costs within the first five years of operation, to ensure projects are completely closed and cleaned up when the time comes.

The tax increase and amendments to the Mining Act are all part of the Quebec Mineral Strategy, launched in June 2009 to “guarantee the future of the mining sector from the standpoint of sustainable development and collective wealth,” the Quebec government says.

Serge Simard, Quebec’s Minister for Natural Resources and Wildlife, reacted positively when he learned the province had been ranked third, despite dropping two places. “We are still one of the most attractive jurisdictions in the world for mining exploration and development,” says Simard in a press release. “In a context of major change, as proposed in the Quebec Mineral Strategy, with the tabling of a draft bill and the reform of the mining royalty regime proposed last spring, being ranked third in the world is great news!”

McMahon agrees. “Quebec didn’t go down that far in score or in rank. So miners regard Quebec as still a good place to mine,” he says. But he cautions that the province could slip further down the rankings if hostility and uncertainty regarding taxes and regulations continue, for instance, if the amendments to the Mining Act produces more surprises for miners.

Some other areas where Quebec fared relatively poorly include: uncertainty over which areas will be protected as wilderness, parks or archeological sites (17th); labour relations and employment agreements (14th); uncertainty over the tax regime and future tax levels (9th); and uncertainty concerning disputed land claims (9th).