June/July 2009

MAC Economic Commentary

Industry issues and priorities: A discussion with Gord Peeling

By P. Stothart

MAC’s president, Gord Peeling, has occupied the national association’s corner office for almost a dozen years. During this period, the chairmanship has moved through Walter Segsworth of Westmin, John Carrington of Barrick, Jim Carter of Syncrude, Guy Dufresne of Quebec Cartier Mines, Richard Ross of Inmet, Peter Jones of HudBay Minerals, and Jim Gowans of De Beers Canada. Drawing on years of experience both as a senior government official and in industry, his knowledge of the Canadian mining industry and surrounding public policy is encyclopedic. I took the opportunity recently to talk with Gord about a range of issues faced by the Canadian industry.

Stothart: The industry always seems to face an array of interesting challenges relating to the economy and the environment, as well as the social sphere. What do you see as the key issues facing the industry today?

Peeling: Surviving the recessionary period is the key issue at present. In our industry, there is not a whole lot that the government can do on this front. The mineral price rebound, when it comes, will be global and will be driven by developments in China, then the United States, Europe and elsewhere. Government stimulus spending, particularly investment in infrastructure, will help. In Canada, we need infrastructure investment both to improve access to resources and access to markets. Beyond toughing out the recession, industry needs to remain cognizant of where its future workforce will come from. This will be an increasingly important challenge over the coming decade. For their part, governments must improve the project review and permitting processes. At the federal level, there remains a need for timelines and more efficient oversight of each department’s responsibility, as well as better harmonization with provincial processes.

Stothart: Towards Sustainable Mining (TSM) is an important branding initiative for MAC and for the broader industry. How can it stay relevant to the industry of tomorrow?

Peeling: TSM is a living tool; it is constantly evolving and its progress is driven by the active engagement of the Community of Interest Advisory Panel and company management committees. Guidance protocols are now being developed in areas relating to mine closure, biodiversity and Aboriginal relations. TSM remains the only management tool in the global mining industry that is facility-based — it helps to drive performance improvements at the mine and smelter level. This is an important advantage. Before the end of 2009, members will have some decisions to make with respect to TSM’s applicability to our Canadian members’ international operations.

Stothart: Companies, including many MAC members, are presently in a “batten down the hatches” mode of operation. How do you see prices evolving over the coming year? Is there light at the end of the tunnel?

Peeling: The cyclical nature of our industry presents unique challenges. In an ideal world, companies would invest in a downturn when costs are lower as it takes many years to move resource projects through the permitting and construction stages. Unfortunately the financial sector woes and depth of the global recession make this a very difficult challenge that only companies with excellent projects and adequate cash reserves can meet. I believe there is light at the end of this tunnel. Industry has had a difficult 2008 fourth quarter and first quarter of 2009. Prices are weak, yes, though not at historical lows. However, volumes are also soft, reflecting the global recession, and it is the combination of weak prices and low volumes that is causing liquidity challenges for industry. My view is that the global demand situation is taking a pause from what remains a longer-term period of growth. This will be seen through increased consumer demand from China. Modest growth in the United States and Europe in 2010, and sharper recoveries in 2011, will also contribute to improved conditions for our industry.

Stothart: The government recently released its position paper on the international corporate social responsibility issue. Was MAC pleased with the government response? Are there any hidden pitfalls awaiting companies in this area?

Peeling: We are pleased that the government has finally responded, as this particular issue has dragged on for over two years. The response reflects much of what the stakeholders sought but takes a different approach with respect to the roundtable recommendation of an ombudsman function. Certainly the international sphere will remain an important focus of non-government organizations in the years to come. NGOs will monitor the performance of global mining and exploration companies and they will critique how this performance is affecting the environment and human rights in foreign countries. As I mentioned earlier, we will have some decisions to make regarding the appropriate role that TSM should play alongside the range of international social-license tools that have emerged in recent years.

Paul Stothart
Paul Stothart is vice-president, economic affairs, at the Mining Association of Canada. He is responsible for advancing the industry’s interests regarding federal tax, trade, investment, transport and energy issues.

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