Companies that supply the mining industry, whether they are located in Quebec, the rest of Canada or abroad, should congratulate the Quebec government for its farsighted, 25-year plan to develop the province’s territory that lies north of the 49th parallel and which accounts for 72 per cent of Quebec’s geographic area.
Announced in May 2011, after consultation and consensus with northern peoples, industry and environmentalists, Plan Nord calls for a development project that will be economically, socially and environmentally sound. Listing 11 mine development projects totalling more than $8.4 billion in investment, the plan estimates the creation of approximately 11,000 jobs during construction and 4,000 permanent jobs once production starts. The potential for mining suppliers is substantial.
Mineral exploration alone offers major spinoffs for suppliers that consult in the geosciences and provide services such as geophysical surveys and diamond drilling. Considering the enormous geological potential in Northern Quebec, coupled with the potential for enabling infrastructure under Plan Nord, prospectors have been attracted to the area in growing numbers.
Suppliers that follow project news will be aware of some of the advanced developments that are already offering opportunities, namely: Goldcorp’s Éléonore gold mine will require an investment of $1.4 billion; Stornoway’s Renard project will become Quebec’s first diamond mine at a cost of $450 million; and Xstrata will invest $530 million to develop a new deposit at Raglan.
However, even greater investment will take place in the iron ore industry: ArcelorMittal will invest $2.1 billion expanding its Mont-Wright and Port Cartier operations; New Millenium and Tata Steel have announced an iron ore project valued at $4 billion; and Adriana Resources and China’s Wuhan Iron and Steel (Group) Corporation (WISCO) are contemplating an investment of $10 billion, which would become the largest mining project in Canadian history.
What percentage of the construction and operating expenses of new mines will provide revenues for mining supply companies? It is hard to estimate, since there is no quantitative study of the indirect benefits created by the mining industry. Qualitative evidence would, however, indicate that big benefits will accrue to suppliers.
Mining supply has been described by the Conference Board of Canada as a “hidden sector.” This is because supplier firms are considered to be consultants, manufacturers and others that statisticians classify as being outside of the mining industry. Further, even if all such firms were identified, it would be difficult to integrate their data, since some of their revenues may also come from sectors outside of the minerals industry.
Published by the Quebec Mining Association and the Quebec Mineral Exploration Association in 2010, Quebec’s Mineral Industry Cluster identified 3,800 firms in the province that supply the mining industry, of which 1,800 are located in the Montreal region. Acknowledging “major hurdles when it comes to measuring their level of activity,” the report falls short of delivering a quantitative estimate of the impact of mining supply on the economy.
In 2010, a study based on an interview methodology carried out for the Ontario North Economic Development Corporation estimated the total value of the mining supply sector in Northern Ontario at $5.6 billion in annual revenue, employing 23,000 people.
In 2007, a study carried out for the Ontario Mining Association attempted to measure the economic contribution of a “representative” mine to the Ontario economy, in both the construction and operation phases. In addition to the direct economic impact of the mine, the study delved into the “inputs” of the mine and the “inputs into the inputs,” many of which come from mining suppliers. Briefly, if the mine employs 480 workers, the total employment generated is estimated at 2,300 jobs, of which some 1,100 could be in mining supply firms.
Much of the generated economic impact is local to the representative mine; however, in an open economy like Canada’s, the inputs imported from other provinces and abroad can be quite substantial. This is why Quebec’s Plan Nord should be celebrated by mining suppliers, not only in Quebec itself, but around the world.
Jon Baird, managing director of CAMESE and the immediate past president of PDAC, is interested in collective approaches to enhancing the Canadian brand in the world of mining.