Consultation questions stem mines
Survey says lack of clarity holds back development
Walter Strong
Northern News Services
Published Monday, March 17, 2014
NUNAVUT
Mining investment in the Northwest Territories and Nunavut face challenges on several fronts.
An Aug. 2012 aerial photo of Agnico-Eagle Mines Ltd.'s Meliadine gold site 25 km north of the hamlet of Rankin Inlet. Remote sites make exploration in Nunavut very expensive as mining companies must rely on seasonal barging or air transportation. - NNSL file photo |
The top three are lack of critical infrastructure, duplication and lack of clarity in regulatory procedures, and challenges surrounding First Nation consultation and land claims, according to the 2013 Survey of Mining Companies conducted and released by B.C. based Fraser Institute earlier this month.
The Fraser Institute has been taking the pulse of the world-wide mining industry since 1997 with its annual Survey of Mining Companies. The report's authors describe it as a report card on the state of public policy's influence on investment decisions and potential.
"The survey is intended to look at public policy and its effect on investment in jurisdictions around the world," said Alana Wilson, Fraser Institute Senior Economist and report joint author.
The survey points to a contradiction between mineral potential in the NWT, and the region's investor attractiveness. Uncertainty surrounding regulatory transparency, infrastructure, and First Nation consultation are listed as among the primary disincentives to investment in the NWT and Nunavut.
According to Wilson, Canada's provinces and territories generally have excellent geological prospects, especially B.C., Yukon, the NWT and Nunavut. At the same time, those geologically rich jurisdictions face policy challenges do not match with their mineral potential from an investor standpoint.
Both the NWT and Nunavut rank among the top 15 of the 112 regions in the world surveyed for their mineral potential. In Canada, only B.C. and the Yukon place ahead of NWT or Nunavut.
But mineral potential is not the final word when it comes to an investment decision.
According to senior mining and mineral exploration managers and executives, policy makes up almost half their investment decisions.
"Policy is part of what mining companies look at, as well as mineral potential," Wilson said. "We ask people in the survey what importance they place on both (policy and mineral potential). Over the years, its consistently been 40 per cent policy, and 60 per cent mineral potential."
Despite the incredible potential for resource development North of 60, both territories rank relatively low in terms of being desirable places to do business, according to the policy perception index (PPI), a key survey indicator.
The PPI consolidates several key data points into a ranking of jurisdictions and countries based on their perceived desirability as a place to make mineral extraction or exploration investments.
"The PPI is the core of our survey," Wilson said.
On that count, NWT and Nunavut are the lowest ranked jurisdictions in Canada for mineral exploration and investment. Nunavut and NWT ranked 44th and 47th respectively out of 112 on the policy perception index. The Yukon placed 19th, B.C. placed 32nd, while Alberta ranked third.
What drives this wedge between Northwest Canada's investment potential and its perceived investment desirability?
"Uncertainty is one of the key deterrents to mining investment overall," Wilson said. "Policy instability and lack of certainty regarding the current regulatory environment and consistent interpretation is a real deterrent to investment."
For Nunavut and the NWT, the weakest areas, according to Wilson, are uncertainty surrounding environmental regulations, regulatory duplication or overlap, and infrastructure challenges.
Close on the tail of these deterrents to investments are uncertainties surrounding First Nation consultation and disputed land claims.
"Mining companies are concerned about a lack of clarity and uncertainty surrounding the Crown's duty to consult," Wilson said. "That's a challenge for the Canadian mining industry right now ... how to work with First Nations."
"It's not that mining companies don't want to work with First nations - mining companies are one of the biggest employers of First Nations in the country.
"It's the uncertainty that comes (with) not being clear on what consultation requirements are, (and) whether land is available to develop a mine should a viable deposit be discovered."
"Mining companies clearly don't mind paying taxes and following sensible regulations," Wilson said. "What alarms them and deters investment is uncertainty."
"Changing rules part way through (a process) can destroy the viability of projects in which miners have already invested millions of dollars."
In B.C., Canadian investors lost more than $150 million in market capitalization when the B.C. government made a ministerial decision to reject the positive conclusion a B.C. environmental assessment office report regarding a copper/gold mine project in north-central B.C.
The company behind the project has since successfully sued the province in provincial supreme court to have the project reconsidered due to what the company described as unfairness in the environmental assessment process. The provincial B.C. government is, by its own admission, mining-friendly.
Yet enough uncertainty exists in that province surrounding regulations, their application, and First Nation consultation, that the province rates only 32nd on the PPI.
Nunavut and the NWT both score worse than B.C. (and the Yukon) on most survey questions, whether they concerned regulatory duplications or inconsistencies between federal and territorial agencies, uncertainty surrounding environmental regulations, or infrastructure.
Uncertainty surrounding the administration, interpretation and enforcement of regulations for the NWT is described by 14 per cent of respondents as being a strong deterrent to investment, and five per cent of respondents said they wouldn't consider investing in NWT for those reasons.
That has the NWT rubbing shoulders with both Nigeria and Sierra Leone, countries which readers may be surprised to discover share a similar ranking to the NWT when it comes to regulatory transparency.
"It's important to keep in mind the results reinforce the importance of having a stable, transparent and predictable mining environment," Wilson said.
On a positive note, fully 58 per cent of survey respondents listed First Nation land claim settlements as either encouraging investment decisions or as not being an issue for mining investment decisions in Nunavut.
The NWT faced more uncertainty on that front than Nunavut. Sixty-two per cent of respondents said uncertainty surrounding disputed land claims were either a mild or strong deterrent to investment decisions in the territory. The biggest issue facing both territories is quality of infrastructure.
Seventy-eight per cent of respondents indicated the absence of reliable industrial infrastructure to be a mild or strong deterrent to investment decisions in the NWT. Eighty-six per cent of mining companies said that inadequate infrastructure was a deterrent to investment in Nunavut.
NWT and Nunavut Chamber of Mines executive director Tom Hoefer agreed with the report's conclusions regarding infrastructure.
"They have that right," said Hoefer. "Since it's a perception survey we need to be actively marketing (the North) as a better investment destination. We have the opportunity and have begun the process in the NWT to improve things."
