Mining 2.5 times more expensive up North
New report says continued high costs and lack of infrastructure inhibit development
Karen K. Ho
Northern News Services
Saturday, May 9, 2015
NORTHWEST TERRITORIES
A new study says the cost to explore and develop new mines in Canada can be up to 2.5 times greater in the Northwest Territories.
An aerial view of the Diavik Diamond Mine, located 300 km northeast of Yellowknife. A new report from five mining industry groups said lack of infrastructure is one of the biggest reasons why mines in Northern Canada are much more expensive to explore and build compared to southern mineral and metal projects. - photo courtesy Diavik Diamond Mines Inc.
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The study, produced by five industry groups and titled Levelling the Playing Field, cited a lack of infrastructure as the main reason for these higher costs.
Pierre Gratton, president and CEO of the Mining Association of Canada, told News/North the point of the report was to prompt a serious conversation about the need to invest in infrastructure in the territories. He said despite repeated acknowledgement of these challenges and yearly visits by the prime minister, "nothing has really changed to improve the overall economic investment climate in the North," he said. "We're really at the point where you need to have a world-class discovery or be on tide water or something like that to make a go of it."
In the report, lack of access to the grid, dependence on diesel for energy, the need to construct ports, power plants, winter and permanent roads, plus accommodation facilities as well as the sheer level of isolation in the location of these mines and deposits all drove up costs.
Gratton cited the NWT's continued dependence on an ice road each winter for mines like Ekati.
Higher operation, exploration and development costs also depended on the type of commodity being mined. The report said it was 2.5 times higher for base metal mines, approximately double for gold mines and 15 to 20 per cent higher for diamond mines in the territories.
"Without mines, the territory would be in terrible shape," he said in regard to the territory's diamond mining industry and its contribution to NWT's overall economy. He estimated that at their peak, those mines contributed 40 per cent of the GDP.
"But the reality is, no mine lasts forever."
Gratton said the NWT's recent devolution also gives the territory more responsibility for its economic future, rather than be determined by decisions made by the federal government.
However, unlike Alberta, the Northern territories don't really have other contributing industries like forestry to depend on.
"It's really mining and oil and gas," Gratton said. "They really have to think about how they're going to maintain and grow those industries."
While governments may be intimidated by the costs of increasing infrastructure in the territory, Gratton pointed to the history and impact of transportation routes like the Trans-Canada railroad on the mining industry.
However, he acknowledged that current governments tend to be much more risk-averse to this kind of level of investment.
"No one wants to build the road to nowhere," Gratton said. "And governments have tough choices."
The report's several policy recommendations include a new and enhanced federal tax credit specifically for mineral exploration projects in remote and Northern parts of Canada at 25 per cent versus the current 15 cent. The industry groups also recommend financial incentives help with the costs of drilling for early-stage exploration projects, a base 10 per cent investment tax credit and the establishment of a Northern infrastructure investment bank in the territories for mine-related infrastructure.
When it comes to the larger picture, Gratton said the bigger challenge was the large populations in areas like India and China with high demands for minerals and metals.
"That has to be supplied from somewhere, he said. "The door won't be open forever."
The study was produced by the NWT & Nunavut Chamber of Mines, the Mining Association of Canada, the Prospectors & Developers Association of Canada, the Canadian branch of the Association of Consulting Engineering Companies and the Yukon Chamber of Mines.
