August 2008

MAC Economic Commentary

iPods, environmental groups and you

By P. Stothart

Few industry sectors are subject to as much scrutiny from environmental and social groups as the mining industry. Mineral extraction and processing, virtually by definition, involve intrusion upon the landscape — whether to conduct open pit or underground mining, to build access roads and power lines, to remove exploration samples, or to treat and manage waste products. These actions represent encounters between humans and the surrounding environment — and the attendant need to manage and minimize the risk that accompanies these encounters.

In the Canadian context, mining can invlove accessing lands situated within the Boreal Forest. Accessing land and resources in northern Canada can frequently raise issues of aboriginal rights and relationships. Comparable issues, though on a greater scale, face the mining industry in its international operations, which often occur in countries with less developed infrastructure and with thinner environmental protection and community consultation capacities.

In response to these challenges, one notable mining NGO actively examines the industry’s mining practices in all Canadian regions and in some 40 countries, ranging from the Democratic Republic of Congo and Tanzania to Guyana and Ecuador. A host of other social-environmental groups provides a level of scrutiny and oversight, ranging from aggressive and confrontational to cooperative and constructive, covering everything from human and indigenous rights to community benefits and environmental performance.

It is also evident that the industry is improving its performance in the social and environmental sphere through commitments to programs such as TSM, the ICMM Guiding Principles and GRI Reporting. Access to financing is being increasingly tied to a range of evolving CSR standards.

In the face of this NGO scrutiny, and in light of the numerous social-environmental challenges that will always face the industry, it is sometimes also worth highlighting the positive attributes of the mining industry. In this regard, it is important to not lose sight of the fact that modern society is integrally dependent upon metals and minerals.

Today’s iPod generation could not make do without the gold, copper, lithium, aluminum, titanium, silver, cobalt and zinc that comprise the circuitry and components of modern communications and entertainment products. Our plasma televisions and personal computers are dependent upon a range of metals and rare earth elements. Our medical instruments are made of copper, silver, nickel, cobalt and brass, among other metals and minerals.

The cleaner society that we all desire is also not possible without metals and minerals. Hybrid vehicles, for example, draw upon nickel hydride batteries. Catalytic converters require cerium. Water purification systems rely on nickel and a host of rare earth elements. Cleaner energy sources, whether nuclear, solar, wind or hydrogen-based, draw upon a range of minerals and metals. And this list goes on, encompassing virtually all facets of our residential, municipal, communications and transportation infrastructure.

Beyond the everyday applicability of its products, the industry also makes a significant contribution to the Canadian and global economy. It employs some 370,000 workers in all Canadian regions and, beyond this, provides benefit to an estimated 2,400 companies that supply goods and services such as environmental and engineering expertise.

While mines and processing facilities can be located in remote or rural regions, there are also urban benefits. Much of the world’s mining finance expertise is centred in Toronto, while Vancouver is a world hub in mineral exploration, Edmonton in oil sands knowledge, Saskatoon in uranium and Montreal in aluminum and iron ore. The industry spent some $2.6 billion on mineral exploration in Canada in 2007 and, including the oil sands, invested $21 billion in capital spending. Exports of metals and minerals amounted to $83 billion in 2007 — fully 19 per cent of Canadian merchandise exports — with the related benefit accruing to our railroads, ports and shippers.

Significantly, the industry also paid an estimated $10 billion to Canadian governments in 2006, the most recent year for which data is available. It must be noted that these very substantial taxes and royalties, paid by oil sands companies and base metal smelters among other segments, and their tens of thousands of employees, are used to fund the education, health and social priorities of our federal and
provincial/territorial governments.

The environmental and social groups that keep a vigilant eye on the industry, for the most part, play a constructive and useful role — and there will never be a shortage of challenges for the mining industry to confront in these areas. However, we should not lose sight of the broader context that surrounds these issues. Nor should we forget that to the extent that all segments of our society — from left to right on the political spectrum — draw benefit from the industry’s products, services and tax payments, we are similarly all implicated in finding responsible ways to mitigate the environmental and social issues that arise.


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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