Innovation augurs well for Canadian mining

If I had to pick just one word to describe the Canadian mining industry in recent years, it would be “innovative.” Innovation now defines our industry. In fact, the mining industry spends some $370 million annually on research and development.

Statistics Canada recently ranked the metal mining sector as number-one in the use of machinery to improve industrial processes. Sixty-eight per cent of mining companies used new technology to increase production, 60% wanted to reduce labour costs, another 52% saw it as key to more flexible production, and 51% sought more energy efficiency.

Together, these findings provide a snapshot of attitudes within today’s industry. For example, our strong desire to improve productivity strengthens our competitiveness in global markets, enhances workplace health and safety, and reduces our environmental footprint.

Largely because our industry has embraced technological advances quickly and effectively, our productivity rose by an annual average of 3.1% from 1984 to 1998, or three times Canada’s overall productivity rate and almost twice that of the manufacturing sector (1.7%).

Technological innovation brings other important benefits. For example, the fine tailings from Syncrude’s oil projects in northern Alberta are difficult to manage because they take a long time to settle in a storage pond. In response, the company has developed prototype “water capping ponds” in which fresh water is layered over a deposit of fine tailings to form a lake. In as few as two to three years after deposition is complete, the lake evolves into a healthy, natural eco-system. This project demonstrates how Syncrude is satisfying the expectations of neighbours who want sensitive and productive landscape reclamation.

Important innovations have occurred in the areas of information and communication, as well. For instance, companies are now able to disseminate technological and environmental solutions across all of its global operations, and those operations are using standardized equipment obtained through centralized procurement channels. Our industry is much better off, much more competitive, for that type of internal investment.

Consider also the innovation in our executive suites. One topical example is the zeal with which the mining industry embraced the Voluntary Challenge and Registry program to reduce greenhouse gas (GHG) emissions.

Between 1990 and 2000, the metal mining industry improved the efficiency of its operations so much that it reduced its GHG emissions by 19.2%. Members of the Mining Association of Canada (MAC) have pledged to reduce energy consumption per unit of output by 1% each year between 1995 and 2005.

Recently, the MAC launched an initiative called Towards Sustainable Mining, designed to align the needs of industry with the values and priorities of our communities through greater dialogue. By talking with everyone who has a legitimate interest in our activities, we are identifying areas for improvement, exploring workable, mutually satisfactory solutions, and earning the positive reputation from society that we need to operate successfully over the long term.

BHP Billiton and Diavik Diamond Mines in the Northwest Territories, Barrick Gold in northern British Columbia, and Noranda and Falconbridge at their Raglan operation in Quebec have all developed innovative partnerships with their local Aboriginal communities. And at Voisey’s Bay, in Labrador, Inco is offering new hope to the Innu and Inuit.

The Canadian mining industry continues to help shape government policies that foster a strong, globally competitive mining sector.

For example, proposed amendments to the Canadian Environmental Assessment Act, currently before Parliament, promise to make federal assessment of proposed mining projects more efficient, more effective and less costly.

Another example that underscores the need for regulatory reform lies in the fact that metal recycling has the potential to deliver substantial environmental, social and economic benefits. It conserves natural resources, takes the pressure off overcrowded landfills, and lessens the impact of primary extraction. Recycling is also an excellent way of reducing GHG emissions. As a bonus, the process would enable Canadian producers to meet the increasing market demand for recycled content in manufactured goods.

Yet our industry cannot fully seize this competitive advantage because current federal regulations constrain the shipment of metal-bearing recyclable materials, much as they control the movement of hazardous wastes destined for landfill. As a result, industrial processors cannot secure recyclable materials from their point of use in volumes sufficient to support economic recovery at distant smelters. Environmentally conscientious countries such as Sweden and Belgium have shown that such materials can be managed safely for recovery. Canada must do the same.

I want to reassure those who might interpret such remarks as a call for deregulation. They are not, but rather are a plea for smarter regulation of our industry.

To compete successfully on a global scale, to boost our national trade surplus, and to encourage additional investment in our sector, Canada needs to provide an attractive tax environment.

Many provinces and territories have already adjusted corporate tax rates downward, sometimes with specific reductions for the mining industry. Yet, we continue to request that our federal partners include our sector in the 7% corporate income tax rate reduction that was announced in the 2000 federal budget. This is not simply in the interest of equity; it is a matter of competitiveness.

According to a recent study by the Toronto-based C.D. Howe Institute, mining’s effective tax rate, net of subsidies, is higher than most Canadian sectors, including public utilities, forestry and construction. In fact, with our effective tax rate at well over 40%, we have one of the largest tax differentials of any economic sector in Canada and the U.S.

Canada’s effective tax rate for our industry places us in the upper quartile of all mineral-producing nations. Simply put, we are overtaxed, and this diminishes our competitiveness, our attractiveness to investors, and our ability to create jobs.

Moreover, government must introduce forward-looking policies that encourage investment. But Canada has yet to capitalize, as it must, on Canadian companies implementing innovations in Canada. I would argue that we need incentives that reward those with the uncommon ability to commercialize their progressive thinking. We need to expand the role of public agencies such as the National Research Council and the Canada Centre for Mineral & Energy Technology so that their scientific prowess can be translated into new products and services.

Both the performance and the attitude of the Canadian mining industry have changed for the better in recent years. We now have the track record and the prospects to inspire confidence among global investors. Our industry is resource-rich, highly successful and well-respected. Yet, as far as we’ve come, we have still only scratched the surface of our extraordinary natural resource base.

Here in Canada, mining accounts for one direct job in 40, and our annual exports are worth $50 billion. Every billion dollars’ worth of mining output increases direct demand for goods and services by roughly $655 million. Beyond this, we invest heavily in research and technology, adopt best environmental practices, and increasingly embrace socially responsible attitudes towards the communities in which we work. Still, Canada has not done enough to assure investors that the Canadian resource base offers high potential returns with comparatively low risk. Other countries have been quicker to recognize and respond to the needs of those with capital. As a result, countries with significant mining potential, low production costs and highly competitive regulatory policies continue to attract money away from Canada’s mining sector.

As we all know, investment dollars have no national loyalties. So, we must reposition ourselves i
n the eyes of capital markets.

— The preceding is an edited version of a speech presented to the Empire Club in Toronto in January 2003. The author is the chairman of the Mining Association of Canada, and is president and COO of Syncrude Canada.