Remote and northern Canada is rich in mineral resources and the minerals industry is a proven key private sector driver of economic activity in these areas. The industry accounts directly for 20-25% of territorial GDP and has paid roughly $800 million in taxes and royalties to governments over the last ten years. The mining industry is also the largest private sector employer of Aboriginal peoples in Canada. These economic and social contributions are even more significant when the remote areas of provinces are included.
Mineral exploration involves a high degree of uncertainty and risk. The probability that an exploration project will result in a mine is roughly 1 in 1,000. Despite these odds, there are approximately 192 identified mineral discoveries in the Canada’s three territories. However, a recent industry study revealed that a high percentage of these discoveries remain undeveloped. In Nunavut, the NWT and the Yukon a staggering 85%, 69% and 77% of mineral discoveries (respectively) await development.
While there are many factors that affect a company’s decision on whether or not to develop a mineral deposit into a mine (grade, commodity prices, fiscal regime, corporate strategy), costs are a primary driver. Costs, in turn, are largely a function of remoteness, which in turn is a function of the availability of transportation and energy infrastructure. Remote deposits cost significantly more to find, develop and mine.
- Exploration projects more than 50 km from a supply route have average all-in costs 2.27 times higher than non-remote projects (up to 50 km away).
- Projects in the most remote regions of the country have average all in costs 3 times more than non-remote projects.
- Capital costs for producing mines are up to 2.5 times more in remote areas. Operating costs are as much as 60% higher.
These additional costs impact the competitiveness of remote and northern Canada mining projects and their ability to attract investment. Exploration investment in the three territories is estimated by Natural Resources Canada to have fallen almost 75% between 2011 and 2015, significantly higher than the average decline in exploration investment nation-wide over the same period.
The federal government has the ability to level the playing field for an industry that has proven it can create considerable economic growth and sustained employment opportunities for people living in remote and northern communities.
To capitalize on the economic potential of remote and northern Canada, PDAC recommends that the Government of Canada expedite the creation of the promised infrastructure investment bank and provide dedicated funds to long-term financing for resource-development-related infrastructure projects in remote and northern Canada.
If fiscal policy can facilitate infrastructure investments that reduce costs by 10%, a recent PDAC study suggests this could result in half a dozen additional precious/base metal mines in remote areas, with significant impacts on northern employment, business development and revenue generation for governments.