Mining is Integral to the Northern Economy
Mining is the North’s economic advantage, and is one of the key private sector drivers of employment, business development and revenues. Federal taxation and royalty revenues from mineral development in NWT and Nunavut totaled $57.4 million in 2013 and $132 million the year prior. Mining is one of the few industries that can help the federal government achieve key policy objectives in its Northern Strategy, including socio-economic development and territorial self-sufficiency.
Continued Benefits Challenged by Substantial Infrastructure Deficiencies
The ability of the industry to sustain and enhance the socio-economic benefits generated by mining is hampered by infrastructure gaps, particularly transportation infrastructure deficiencies. Preliminary results from a study conducted by the PDAC and other industry associations indicate that the majority of the cost differential between operating in northern versus southern Canada may be attributed to the lack of infrastructure in the North.
At the exploration stage, infrastructure gaps make accessing potentially prospective lands extremely costly. Exploration projects that are more than 500km from a transportation route or supply center face costs that can be 600% higher than projects that are less remote, according to a recent study done by PDAC and other associations. Even when a discovery has been made in the North, the infrastructure deficit creates a need for very large initial capital investments which makes otherwise economic deposits unviable.
Existing Federal Programs Do Not Fully Address the Northern Infrastructure Challenge
The federal government has consistently pointed to the Building Canada Fund and the P3 Canada Fund as appropriate vehicles for addressing the mining infrastructure challenges facing companies operating in northern Canada. In both cases, a key requirement is that proposed infrastructure projects have a ‘public use’ component, not just a ‘public benefit’ component. Although mining-specific infrastructure development in the North generates numerous public benefits (GDP contribution, employment, business development, tax and royalty revenues), it rarely meets the 'public use' test of existing federal programs.
The sustainability of the northern mineral industry and the northern economy requires innovative financing options to support the development of public benefit infrastructure, aimed at unlocking the mineral potential of Northern Canada. In the absence of creative financing solutions, key infrastructure gap will not be addressed resulting in the following implications:
- Negatively impacts the competitiveness of the territories despite the actual and perceived geological attractiveness of these jurisdictions.
- Negative effects on economic growth and continued socio-economic disparity between northern and southern Canadians.
- Negative impacts on the revenue generation capabilities of host territorial governments, lowering territorial self-sufficiency and continued reliance on substantial federal transfer payments.
- Policy environment, which does not support mineral production, limits the effectiveness of other federal investments to unlock the mineral potential of the North, including the renewal of the GEM program, the Northern Regulatory Improvement Initiative, the Northern Projects Management Office and the establishment and continued financing of the Canadian Northern Economic Development Agency.
Unlocking the North’s Mineral Potential
The PDAC recommends that the current financing gap be addressed through the establishment of a federal Crown corporation, similar to the Alaska Industrial Development and Export Authority, aimed at providing long-term financing (loans, bonds, equity investment) to northern infrastructure projects that generate public benefits but do not meet the ‘public use’ criterion of existing federal programs.
This model is consistent with existing federal institutions, such as the Business Development Bank of Canada and Export Development Canada, aimed at providing financing support to private sector entities to promote economic growth.