Mining helps build prosperous communities. So why do governments embrace anti-mining policies?
Here's news that will cheer many Canadians but alarm others; miners rate Canada at the top of the heap worldwide for having positive mining policies
According to the Fraser Institute's annual survey of mining companies, miners rank Quebec first out of the 72 jurisdictions examined for policies that encourage a strong mining sector while Canadian provinces fill six of the top 10 spots.
Still, dark clouds loom on the horizon for the industry. Both Ontario and British Columbia have tumbled significantly in the survey. Ontario is ranked 22nd overall, down from its 10th place finish last year, while British Columbia is even further back at 38th, dropping 14 places from the 24th spot in 2009.
Anti-mining activists will be alarmed that Canada remains a friendly place for mining despite their best efforts. Many people living in small communities and aboriginals who depend on mining to provide jobs and a better future will cheer.
Resource wealth helped build the economies of some of the world's most prosperous nations, including Canada, New Zealand, Australia, and the United States. It still remains a vital route to prosperity for parts of these nations and for developing nations in general.
Chile, the fastest growing nation in Latin America, ranked seventh in the survey and has one of the world's best records in reducing poverty and creating prosperity. The highest ranked African nation in the survey, Botswana, is in the midst of a similar economic miracle, and has dramatically outpaced other African nations in growth and poverty reduction.
In fact, research from the Fraser Institute and many other sources show that developing nations and their people gain substantially from resource extraction. The handful of exceptions are nations with very weak institutions. Less than 10 per cent of nations fall into this category.
Yet mining is under attack globally. Even in Quebec, miners feel vulnerable. With little if any consultation with the industry, the recent Quebec budget unexpectedly increased taxes on miners and changed deduction rules in a way that will adversely affect the industry.
Miners do not mind paying taxes and following sensible regulations, but they are alarmed when they face uncertainty-and here they had no idea what was coming. They have already sunk millions of dollars into projects using cost calculations based on the old tax rates and rules.
Uncertainty unhinges miners. Miners spend years throwing money into the ground before they start making money. Changing the rules or the costs of game midway through it can destroy the viability of projects in which miners may already have invested millions of dollars.
British Columbia provides an object lesson for Quebec. Its policy environment was hostile to mining in the 1990s. Since then, the BC government has spent many years trying to deal with the bad taste left from that era. Yet today miners still rank British Columbia poorly in the survey. The sense of uncertainty from that earlier period still haunts the mining industry.
Ontario's recent throne speech indicated Dalton McGuinty's government seeks increased mining and development in Northern Ontario. Yet miners are more and more worried about Ontario. Three things motivate this concern: increasing numbers of native demonstrations and lack of certainty in land claims; large parcels of land, particularly in the north, placed under mining moratoriums; and a surprise royalty tax levied on diamonds two years ago, although the tax has since been reduced following protests from rural and mining-friendly aboriginal communities.
Opposition to uncertainty in regulations should unite dedicated but sincere environmentalists and gung-ho miners. Uncertainty opens the regulatory process to political manipulation. Bad projects with powerful sponsors may be approved while good projects, that would produce prosperity and jobs, get tied up in endless paper work.
Tax uncertainty can also kill good projects. A project may be viable under current taxes but if miners face an uncertainty about the tax code, they may simply sit on the project rather than risk sudden and unexpected new taxes, as happened in Quebec and Ontario.
Mining played a key role in the growth of prosperity in Canada. It remains important in many parts of the country and Canadian miners are global leaders. Despite this and Canada's current good record, our governments continue to erect barriers to mining that could reduce prosperity and eliminate jobs in the future, ultimately making all Canadians worse off.