Chapter Eleven: Shifting Foundations: a Political History of Canadian Mineral Policy

Competitive Pressures on the Resource Industry

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Competitive Pressures on the Resource Industry:

Industry representatives state that the “object of any mining enterprise is to produce a product that someone wants to buy, at a price that can satisfy all the stakeholders. A modern mine in Canada often requires an investment of $200 million or more (large mines might cost $1 billion) before producing any income”(Canadian Institute of Mining Metallurgy and Petroleum et al, 2004). These companies have a responsibility to their investors, lenders, and shareholders to make a reasonable rate of return. Before that can happen, a company must make a number of expenditures include paying wages for labour, suppliers for goods and services (which constitutes about one-half of a mine income), and taxes for government services. Money is also required for new exploration and development to ensure continued supply of mineral reserves (Canadian Institute of Mining Metalllurgy and Petroleum et al, 2004). A number of pieces of government legislation and regulations are in place to regulate the industry including governing access to land, health and safety guidelines, and environmental requirements.

Determining the economic viability of a deposit is a complex process where each step must be factored into the estimated costs of bringing a mine into production. Uncertainties include the reality that world prices are determined by supply and demand, the changing investment and regulatory climate in the host jurisdiction, and, increasingly, the local reception of the community to mining activities. To survive unpredictable events, an industry must adapt to survive. Such an occurrence hit the mineral industry when a recession in the early 1980s was followed by a subsequent recession in the early 1990s. The mineral industry responded with technological improvements to increase efficiency in the production of minerals. Most recently, the industry received a boost with recent developments in domestic mining such as the rich nickel, copper cobalt deposit in Voisey’s Bay, Labrador and the new diamond industry in northern Canada. Nevertheless, the overall rate of new discoveries has continued to decline, particularly “top-tier” discoveries (i.e. large, mineral-rich, accessible, economic deposits) and reserves are becoming depleted. This situation has continued to stimulate offshore exploration activities and raise questions about domestic exploration potential (Gouveia and Gingerich, 2003: 9). Some argue that Canada is still one of the top targets for exploration dollars as long as world prices are strong and there are continuous discoveries to maintain mineral reserves. (Cranstone, 2003: 3)

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