Unlocking Canada’s Resource Potential (Potential Area of Focus)

The mineral and metals industry contributes to prosperity for Canadians whether it be through mineral exploration in northern areas, mines that act as the economic engines for communities, or mineral processing facilities (smelters and refineries) that add value to mine production and provide socio-economic benefits for the communities in which they operate. That said, its full potential has not been realized. Large areas, particularly in the North, contain a diverse range of mineral deposits, but these areas are under-explored and under-developed.

Exploration is key to sustaining current and future mineral production. This activity: discovers new deposits; identifies areas for further exploration; advances existing projects; creates jobs; supports the development of communities and regions; and attracts partners, investors or buyers that enable projects to move towards production.

Mineral exploration is often conducted by small firms called “junior mining companies.” In fact, Canada hosts the largest junior mining sector in the world. These companies act as project generators for larger producing companies and help fill the pipeline of future mineral production.

Governments in Canada support programs and policies that promote a competitive exploration sector. Public geoscience provides information that is made widely available for the exploration industry and others. Investments in public geoscience reduce investment risk by allowing explorers to focus their work on the areas with the highest probability of success. Federal, provincial and territorial governments invest in geoscience in their respective jurisdictions and work together to increase the overall effectiveness of geological survey efforts.

Land access for mining-related activities is an issue that directly relates to Canada’s competitive position, as the availability of prospective land influences investment decisions by private companies. However, governments may decide to withdraw areas from potential mining activity for reasons related to ecological and cultural protection, or Indigenous land claim negotiations.

Federal, provincial and territorial governments leverage financial mechanisms to further support the competitiveness of the exploration industry. For example, junior mining companies do not have internally generated revenue and must rely on equity markets to raise funds. Governments provide tax credits and tax deductions to help them attract investment to finance their activities.

Infrastructure is a key element of a vibrant mining industry. It allows workers and supplies to reach production sites, delivers products to market (road, rail, port), enables communications (high-speed telecommunications), powers mines and other facilities (transmission lines), and supports local communities (all of the above).

Infrastructure also brings other socio-economic benefits, particularly in remote, isolated and northern areas.

These include reducing the costs of delivering supplies, improving the viability of local businesses, strengthening partnerships with Indigenous groups, and attracting other natural resource development opportunities. However, there is a lack of infrastructure, particularly in northern, remote and isolated communities, that could enable further mineral development. This is sometimes referred to as an “infrastructure gap,” and it is seen as a drag on Canada’s competitiveness as a mining nation.

Closures of Canadian smelting and refining facilities over the past decades has meant that much of the value created from processing Canadian products is being captured by other economies. Further, decreased domestic processing capacity can place additional pressure on Canadian mining operations, who would benefit from a domestic processing facility purchasing its products. This may impact the business case for mining in Canada.

Challenges

Government programs and policies that support the competitiveness of mining require public funds. These resources are scarce and there are competing priorities.

Canada’s mineral development potential can be dampened if promising areas are withdrawn from the land available for possible development. Clarity with regard to land access and land tenure is needed to reduce risk to investment.

Infrastructure is a high-cost asset with a lengthy return on investment. Infrastructure projects also face challenges such as securing land access, addressing stakeholder concerns, mitigating environmental impacts, and access to skilled labour—all of which can act as a disincentive to public and private investment. Increasingly, different orders of government (including Indigenous) and the private sector are pursuing public-private partnerships to share risk and the cost of infrastructure development.

Canada’s mineral processing industry operates in a globally competitive market that is largely driven by Asian metal consumption. Proximity to domestic mines, access to scrap materials, efficient infrastructure and access to competitively priced energy sources are competitive advantages for such plants. But challenges exist. These include: changes in global demand patterns; fluctuating commodity prices; long distances and high transportation costs; and increased smelting and refining capacity by Asian and other countries who also compete for sources of mineral concentrates and scrap for recycling.

Discussion questions

  • How can we close the “infrastructure gap” and support mineral development projects?
  • What are the biggest challenges facing the exploration industry?

Yukon Resource Gateway Project

On September 2, 2017, the Government of Canada and the Yukon Government announced joint funding of $360 million for the Yukon Resource Gateway Project ($247.4 million in federal funds and $112.8 in territorial funds), with industry expected to contribute up to $108.6 million.

The Yukon Resource Gateway Project proposes upgrades to existing infrastructure in two areas of high mineral potential and active mining in Yukon.

The Dawson Range component of the project would include upgrades to four separate road systems. This will provide access to a significant area of mineralization in the central Yukon.

The Nahanni Range component involves upgrades to the existing Nahanni Range Road from its junction with the Campbell Highway to the Yukon/Northwest Territories border.