Letters to the Editor Ontario government counters CEIP cuts

I read with great interest your editorial in the Feb. 26 issue “Exploration could use more support.” I agree with the overall thrust of your remarks that Ontario’s mining industry is such an important contributor to the economy of both Ontario and Canada that we must ensure that it has a healthy future. Of course, the mineral exploration and development industries, and the producing mines, are particularly important for northern Ontario where many communities are dependent on the economic spinoffs of this activity. I am very much aware that exploration risk capital is in short supply and that Ontario must compete with the rest of the world to attract its fair share to our province. We are fortunate in having some of the best geology in the world, with a proven track record of discoveries, including such world-class deposits as Hemlo, Sudbury and Kidd Creek.

Regarding your comments on the drafting of the regulations to accompany the Mining Act legislation, you should be aware that we are working very closely with representatives of the Ontario Mineral Exploration Federation, the Prospectors and Developers Association and the Ontario Mining Association to ensure that these new regulations make good practical sense. We want the regulations to be able to procure a healthy environment for individual prospectors and junior companies.

I am very concerned, however, about two developments from the federal scene which will have a major impact on Ontario. These are the cancellation of the Canadian Exploration Incentive Program (CEIP) after Feb. 19 and the termination of our Mineral Development Agreement (MDA) on March 31. My ministry is actively seeking ways to reach agreement on a new MDA and I am hopeful that my federal colleagues will recognize the importance of maintaining the momentum of the useful work accomplished under this program.

Last year, two new programs, OPAP (Ontario Prospectors Assistance Program) and the Ontario Mineral Incentive Program (OMIP), were introduced by my ministry to “plug the gaps” in the federal CEIP incentives. Under OPAP, we were able to give grubstake grants, of up to $10,000, to over 200 prospectors, and grants to reimburse 30% of eligible expenditures, to over 50 junior companies under the OMIP. The OMIP was specifically designed to help companies not using the flow- through share mechanism and, therefore, not eligible for a CEIP grant.

You quote our statistics, which indicate a decline in exploration activity. However, most of this decline is in part due to the change in the federal incentive from a tax- based Mineral Exploration Depletion Allowance to the CEIP grant system. Now the federal government has eliminated CEIP as well. With the stock market crash of late 1987 and the changes in federal tax treatment of capital gains, it is not surprising that Canadian investors are reluctant to maintain their earlier levels of investment support for exploration.

The costs of environmental responsibility are indeed adding to the financial pressures on the industry. I am pleased that the Mining Association of Canada, Ontario Mining Association and Prospectors and Developers Association of Canada have all announced “environmental codes of ethics” that they expect their membership to follow.

One final word about declining base metal prices and what this implies for the future. I believe that our industry in Ontario has become a world leader in technological innovation. Productivity per employee has increased dramatically at the same time as accident rates have declined. I have every confidence that our new “leading edge” producers will be able to survive in an increasingly competitive market. Their much stronger debt/ equity ratios and reduced inventory position also position them well to face the rough weather ahead.

While I continue to be optimistic about the future of Ontario’s mining industry, I am always ready to listen to ideas and suggestions about ways that we could do things better. I invite your readers to contact me so that we can continue to forge a lasting partnership with this aim in view. Hugh O’Neil Minister of Mines, Ontario