Given the challenging economic climate, it was certain that the recently tabled Federal Budget 2009 would come under very close scrutiny. To get our own take on how the budget is expected to impact the mining industry, CIM Magazine spoke with Paul Stothart, vice president, economic affairs at the Mining Association of Canada (MAC). Stothart shared his views on how the government fared, the anticipated implications for the mining industry, and what more he thinks could have been done.
CIM: Given the challenging economic climate, the recent Federal budget certainly drew a lot of scrutiny. In general, how do you think the Tories scored?
Stothart: Our general reaction is that the budget is appropriate for the times. There is considerable investment in infrastructure, as well as significant infusions to enhance capital availability. There are considerable investments in training, Employment Insurance adjustments, aboriginal skills, green energy technologies, northern development, and exploration tax incentives — some aspects of which are of value to the mining industry. The government has also stayed the course in some important areas. Corporate income tax cuts — moving from 21 per cent to 15 per cent by 2012 as announced last year — are unaffected by the budget and proceed on the same timetable, as does the $100 million, five-year investment in Canadian geological mapping, two of the things we have championed in recent years.
CIM: Did they go far enough in assuaging some of the current uncertainties?
Stothart: The main driver of activity and prospects for the Canadian mining industry is the global economy. The downturn in the US housing market and the associated turmoil in financial markets have sparked a collapse of many mineral prices. European demand has also softened. Our industry’s eyes are now upon China — a market that consumes 25 per cent of world metals versus five per cent in the 1980s — to see if it can play a catalytic role. In this global context, there is not much the Canadian government can do about the fact that world nickel prices have fallen from $17 to $5 per pound or copper from $3 to $1.50.
In the big picture items — namely broadening availability of capital and increasing infrastructure spending — our early conclusion is that the budget was positive. One unknown, and obviously serious risk, is the extent to which budget drafters have again set Canada on a path of large deficit spending. The last time we went down this path, it took us 24 years to get off!
CIM: Is any of the projected $12 billion in new infrastructure spending over the next two years going to benefit the mining industry?
Stothart: It is hard to say at this stage. In general, one should expect two types of benefits for our industry. First, more federal spending on infrastructure means more consumption of steel (iron ore), copper and other minerals as buildings go up, wire gets strung, and piping gets laid. As well, some of the federal dollars need to be matched by provincial and/or municipal commitments, which could enhance the impact on raw materials demand. Secondly, there are a number of specific infrastructure projects, especially in northern Canada, that, if built, would ease access to mineral exploration and development in remote areas. It is now up to the relevant stakeholders and governments to drive these projects forward.
CIM: Budget 2009 promised to accelerate the project approval process. What are the implications of this?
Stothart: The budget talks of amending the Navigable Waters Protection Act and of streamlining applicability of the Fisheries Act and Canadian Environmental Assessment Act. We are somewhat skeptical of the government’s ability to make progress at this time. I know from my years on the Hill that it is very difficult to advance sensitive legislative change in a minority Parliament. Plus, if these efforts are perceived as short-circuiting due environmental process, then the public and the opposition parties will oppose them.
Two years ago, the government budgeted money to a Major Projects Management Office and to accelerating project reviews. The MPMO’s mandate was to ride herd on those departments who were laggards and to cut average review times in half. We believe the government should simply continue implementing this action plan — give clout to this office and impose timelines on departments involved in reviewing projects. This doesn’t mean the industry would get the answer it wants on all projects, but at least answers would come on a timely basis.